Are you sure you signed a lease? 🔏

Last week I met a boutique owner, and when I told her I worked with retail real estate her face fell. She told me about her terrible landlord who is kicking her business out with basically no notice, and she’s stressed and time-crunched to find a new space.

Abby and I have conversations like this one all the time – it’s part of why we started Pedal in the first place. But when we hear that someone had “basically no notice” that their lease was ending, our antennae go up…because that’s not supposed to happen in a lease. 

When I looked at this boutique owner’s lease, as I had suspected, it wasn’t a lease at all.

It was actually the lease’s second cousin, the license agreement. Oh, you didn’t know that leases had cousins?! Of course they do. I’m not sure of the original parentage that gave way to the documents we’re talking about today, but suffice it to say, they share some great-great-grandcontract that addresses using someone else’s space for your business.

And while they may be at the same summer cookouts, license agreements are very much not leases. And yet, this boutique owner is not alone… we’re guessing there are some of you who get this newsletter who may think you have leases when what you actually have is a license. 

How do you know whether you’ve got a lease or a license agreement? This one is easy – the title of the document will either say “Lease” or “License.” You, or even the property owner, may refer to it colloquially as a “lease,” but if the document is called a “License,” that’s what it is.

Okay, sidebar – you know that this is a judgment-free zone. If you just figured out that you have a license when you thought you had a lease, you are not alone and you are definitely not stupid. However, if your license agreement is for a clown cafe, then you might be stupid, because no one wants to hang out with clowns. Ever.

Anyhow…

Why does it matter whether you’ve got a lease or a license agreement? 

Since we’re not lawyers, and we don’t give legal advice, we called our amazing in-house retail leasing attorney, Nancy Davids. (Okay, yes, she’s Abby’s mom, and she’s not Pedal’s “in-house” attorney, BUT Abby did grow up IN A HOUSE with her for many, many years.) Nancy’s experience as a retail leasing attorney goes back to when Abby was still a star in the sky, so in short, she’s seen more leases and license agreements than any human should. She explained for us the most important distinctions:

⏳ License agreements are used for short-term arrangements.

 • A temporary use license is typically used for an event or pop-up. They are less detailed because the range of things that can go wrong is smaller with a shorter term.


 • Leases are usually longer term arrangements because they are more detailed and contain more protections for both parties – especially the business using the space. Since they’re longer and more detailed, they are more expensive to negotiate.


✖️ License agreements can usually be cancelled by the property owner

 • Temporary use licenses can often be cancelled by the landlord (like if he finds a long-term tenant) and may not survive the sale of a property. 


 • Landlords can’t just cancel leases without cause, unless the lease explicitly gives them permission (which is rare). Even if they sell the property to someone else, the lease – with the terms you negotiated – survives.


⚖️ Leases give you special legal rights and protections

 • A leasehold interest is technically a form of ownership in a piece of property - there is a legal process to throw you out.


 • A license agreement is just a contract where the owner is giving you the right to use the property, but you have no ownership stake or legal claim to the space of any kind. That means it’s much easier to kick you out if the property owner wants to do so.


🔒 Leases give you exclusive use of your space

 • A leased Premises is controlled by you, the lessee - you have 24 hour access, and you control access to the space. Generally, the landlord is allowed to enter ONLY with permission/ notice, or in the event of emergencies.


 • Under a license the owner of the property generally retains the right to access your space throughout the term of the license, and you may not necessarily have 24 hour access.


Don’t get us wrong – one is not better than the other! There is a time and place for each contract. The key is understanding exactly what you intend to do in the space and to make sure you’ve got the right document for the job. 

If you’re not sure, here are the questions to ask yourself:

 • Do I intend to use the space for less than one year?


 • If the property owner kicks me out with 30 days notice, will my upfront investment in the space have been worth it?


 • If I lose access to my space on short notice, will I be able to continue operating my business?


If the answer to any of these questions is “no,” you probably need the protections of a long term lease. Either way, you should have a lawyer representing you. And if you’re staring at a license agreement and you’d rather have a lease, you know where to find us.