If you’re dealing with real property (or even some kinds of intellectual property) you may be confused by some of the terms that pop up. You may have seen an “easement" on the deed for the house you’re about to buy, which lets the power company access your backyard. You might have been told, when moving into a shared office space, that you’ll have to sign a license agreement. Or you may be wondering just what you get when you lease an apartment.
This (short) guide provides a brief overview of the three kinds of property contracts: leases, licenses, and easements.
What They Are
- LEASE: A lease is a contract where a landlord agrees to give a tenant the exclusive right to inhabit or occupy real property, such as a house, apartment or office. A lease usually has a specific term and, like all contracts, the tenant is going to give the landlord some sort of consideration - money, horses, doodads, etc. A lease transfers what is called a "leasehold" interest (this is comes from Merry Olde England and is simply a legal term for your right to exclusive possession of the real property during the term of the lease) in the real property and, unless the lease contract says otherwise, a lease can be transferred and is irrevocable.
- LICENSE: A license is a contract in which a property owner lets an individual or an entity (like a company, government, or a school) use real property for a specific purpose. Licenses can be used for other types of property as well - you've seen a software license or you may have signed a license to be on television. Usually, licenses are personal to the licensee (the individual or entity) and if the licensee attempts to transfer it, licenses usually terminate. They're typically revocable and may be exclusive or non-exclusive.
- EASEMENT: Easements are a little trickier. An easement, like the license, is the owner's permission to use OR prevent the use of the owner's real property. However, the easement holder receive an actual interest in the real property, one that lawyers say "encumbers the title" - more like a lease or ownership of the property. There are two kinds of easements: "appurtenant" (benefiting and transferable with a specific parcel of real property) and "in gross" (personal to the easement holder). Easements can (usually) be transferred and are generally permanent and non-exclusive. To make it a little clearer, here are some example easements:
- Giving permission to your neighbor to plant flowers on a 15-square foot parcel of your property during his lifetime.
- Giving the sewer company the right to come on and run a sewer line to your house and maintain it forever.
Summary of Basic Characteristics While these may not apply to every single lease, license, or easement under the sun, this is a layman's guide to recognizing them on the fly. - Leases are between two parties and convey an interest in real property that is usually not revocable, usually transferrable, and give the lessee/tenant an exclusive right to that property. - Licenses are from the property owner to the licensee, convey no interest in the property, are usually revocable, are usually not transferrable, and may or may not give an exclusive right. - Easements are from the property owner to the easement holder, convey an interest in real property, usually are not revocable, usually are transferrable, and may or may not give an exclusive right.
Which One Should I Choose? If the right to use the property will belong solely and exclusively to the user, even against the property owner, you have a landlord/tenant arrangement and a LEASE is proper. If the use or occupancy of the property will be shared by more than one person or entity, then a LICENSE or an EASEMENT is proper. If the use is long term, like a sewer, cable, flower garden or access road, an EASEMENT is the way to go. If the use is short term, like using a meeting room three times a week from 3-4 PM, a LICENSE is proper. If your neighbor wants a guarantee that there will never be a giant redwood grown on your property, blocking his sunlight, this should be shown by an EASEMENT. (This is also called a NEGATIVE EASEMENT, because the property owner is agreeing NOT to do something on his/her own land).