What are the differences between a licence and a lease?

The Hubble Team
The Hubble Team|Updated October 30th 2018

The average person spends 30% of their life at work. Where we work is part of our everyday, it affects our mood, enjoyment, motivation, productivity and overall happiness. From a business point of view, it also has a big impact on the balance sheet. Finding a new office can be daunting, particularly when we’re busy, as we all are. There is no ‘one size fits all’ formula, so getting to grips with the basics is the best place to start.

Learn the differences between coworking and renting a desk, shared office and private office

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The huge rise in flexible, millennial-friendly workspaces combined with an increased pressure on  businesses to attract and retain the very best talent, how we commit space is more relevant than ever.

Don’t be a commitment-phobe… but commit to space that is right for you

As a tenant rep surveyor, there are three questions which I frequently get asked: What is a licence, what is a lease and why do I want one over the other? These terms are commonly confused and it’s important to understand what means what early on.

What is a Licence?

A licence is an agreement which allows you to occupy space for a flexible amount of time (be it 2 months or 2 years). A licence is short and can be drawn up and committed to quickly. Typically licences are agreed for serviced offices or when renting spare desks or offices within someone else’s space.

The difference between a licence and a lease

The Pros and Cons of a Licence

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Licences mean that you have flexibility to move out quickly. They have short notice periods allowing you to take more or less space as your business needs.

Costs are all inclusive, either on a per desk per month or total cost per month basis. This means the cost is easier to account for.

Often get access to inspiring and collaborative work environments

Short timeline to occupation: Typically  1 – 4 weeks

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Doesn’t give tenants long term security of space. Landlord can also serve notice

Tenant can’t usually make significant changes to the space

What is a Lease?

A lease commits you to space for a specific term, a rent is payable and it gives you exclusive occupation. A lease cannot easily be terminated until it expires (unless there is a break clause). Usually, specialist advice is needed throughout the process to ensure that the best terms are negotiated for the tenant. Leases are a good medium to longer term solution.

Signing a lease

The Pros and Cons of a Lease

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Gives tenant future security of space at an agreed rent.

The tenant can negotiate favourable terms and usually assign or sublet the space.

Sometimes overall costs are better, particularly if you commit to a longer term

The tenant has exclusive occupation. They can often make significant changes to the space and make it feel fully on brand.

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Often significant up-front and back-end costs that need to be accounted for (agent’s fees, fit-out costs and dilapidations)

Longer timeline to occupation: Typically 3-12 months

The Differences Between a License and a Lease

As discussed above, the main differences between a licence and lease are security of space, timing and costs.

Licences tend to be most suitable for companies that have foresight of where they, or a particular team within the company, will be in the short to medium term. They are quick and easy to commit to and the costs are very transparent. They allow teams of people to easily grow, contract and even try out new locations.

Leases are most suitable for companies with a medium to long-term strategy or those that have unique requirements for their space. The lead time to occupation is longer, but you benefit from exclusive occupation, client specific terms and security of space in the future.

Lease & licence - what's the difference?

What Hubble can offer

You can browse over 1000 flexible spaces on Hubble’s website and it’s totally free to use. We also represent and advise tenants looking to commit to leased space and offer competitive pricing and a bespoke service. Whichever route you choose to take in your next office move, we’d love to be part of the journey. Feel free to get in touch with me  to discuss your requirements directly.

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