Licensing vs Leasing: Why Flexibility is the Key to Unlocking Underutilised Property

To enable the monetisation of property as a collection of individual attributes, a licensing approach makes more sense than a traditional lease. This is not about cutting corners or creating an inferior form of occupation. It is about using the right legal structure for the right situation.

A lease grants the tenant exclusive possession of the premises for a defined term, with payment of rent. The tenant has control of the space, and the landlord cannot enter freely outside of the terms agreed. Business leases typically fall under the Landlord and Tenant Act 1954, meaning tenants often have the right to renew, and landlords need strong statutory grounds to regain possession. Depending on the terms, there may also be provision for the tenant to assign the lease. This structure provides security and certainty, which is valuable when a long-term occupier exists.

But where the goal is to generate income during void periods, to make use of a property with an uncertain future, or to enable multiple users to occupy different parts of a building simultaneously, a lease is too rigid.

Licences are typically on shorter or rolling terms. They fall outside the Landlord and Tenant Act 1954, meaning there are no statutory renewals and they are easier to terminate and adapt. The owner retains control of the property, with access by licensees controlled or supervised. A licence fee is paid rather than rent. Licences cannot be assigned, and are specific to the company or individual — the owner always knows who is in their building and can manage the mix of uses accordingly.

This makes licensing particularly suitable for experimental use, testing of demand, early-stage operators who value flexibility, and buildings where the long-term plan is not yet settled. A building awaiting redevelopment, planning, or sale can generate income through licensing without creating tenancy rights that complicate a future disposal or change of use.

There are management considerations. Unlike a lease where the tenant takes on repairing obligations, responsibility for the building in a licence arrangement remains with the owner, although the licence will normally provide protection from damage caused by licensees. Management complexity increases when dealing with multiple occupiers rather than a single tenant, though with standardised licence templates, clear physical segregation of space, and modular contracts, this is manageable.

There is also the question of valuation. Income from licence fees may be treated more cautiously

by valuers than traditional rental income, as it is seen as less secure. However, in a building that is currently vacant or heavily underutilised, licence fee income improves cashflow, shortens void periods, and helps prevent further decline of the property — all of which support rather than undermine long-term value.

The comparison is not between licence income and lease income. It is between licence income and no income at all. For a building that has been empty for months or years, that is not a difficult comparison to make.