When dealing with property transactions in Nigeria, it is crucial to understand the distinction between leases and licenses. Both terms involve granting rights over land or property, but they differ significantly in their legal nature, rights granted, and implications for both parties. Many individuals and businesses enter agreements without fully understanding these differences, which can lead to legal disputes.
In this blog post, we will examine leases and licenses, their key differences, and their legal implications under Nigerian law to help property owners, tenants, and investors make informed decisions.
What is a Lease?
A lease is a legally binding agreement in which the owner of a property (lessor/landlord) grants another party (lessee/tenant) the right to exclusive possession of the property for a specified period in exchange for rent or other consideration. A lease creates an estate in land, meaning the lessee has a legal interest in the property for the duration of the lease.
Key Features of a Lease
✅ Exclusive Possession: The lessee has control over the property and can exclude even the landlord.
✅ Fixed Term: Leases typically have a definite duration (e.g., 5 years, 10 years, or 99 years).
✅ Transferable Interest: The lessee may assign or sublet the property, subject to the landlord’s approval.
✅ Legal Protection: Leases are governed by laws such as the Tenancy Laws of various states, the Land Use Act (1978), and case law.
Examples of Leases
- Renting an apartment for two years under a written tenancy agreement.
- A company leasing office space for 10 years from a landlord.
- A foreign investor obtaining a 99-year lease for agricultural or commercial land use.
What is a License?
A license, on the other hand, is a personal, revocable permission granted by a property owner (licensor) to another party (licensee) to use the property for a specific purpose, without transferring any legal interest in the land. A license does not grant exclusive possession and can typically be revoked at any time.
Key Features of a License
✅ No Exclusive Possession: The licensee cannot exclude the owner from the premises.
✅ No Transfer of Interest: A license does not create an estate in land, so it cannot be assigned or inherited.
✅ Easily Revocable: A license can be terminated at the discretion of the licensor, unless stated otherwise in the agreement.
✅ Limited Rights: The licensee can use the land only for the specified purpose agreed upon.
Examples of Licenses
- A hotel guest staying in a room for a few nights (they do not own or lease the space).
- A trader given permission to set up a stall in a shopping complex without a tenancy agreement.
- A company obtaining temporary permission to use a venue for an event.
Key Differences Between Leases and Licenses
| Feature | Lease | License |
|---|---|---|
| Legal Interest | Creates a legal estate in land | Only grants permission, no legal estate |
| Exclusive Possession | Yes, tenant can exclude the landlord | No, owner retains full control |
| Duration | Fixed term (e.g., 5 years, 99 years) | Can be temporary or indefinite |
| Transferability | Can be assigned or sublet (subject to terms) | Cannot be transferred or assigned |
| Revocability | Cannot be revoked before expiration (unless breached) | Can be revoked at any time unless stated otherwise |
| Legal Protection | Covered under tenancy laws and court protections | Subject to contract law, weaker legal protection |
Legal Implications of Leases and Licenses in Nigeria
1. Rights of the Occupant
- A leaseholder has strong legal protection and cannot be evicted without due process. The Recovery of Premises Law applies, requiring a proper notice of eviction.
- A licensee has limited legal rights and can be removed with little or no legal procedure.
2. Rent Control and Obligations
- Tenants under leases are entitled to statutory protections on rent increases and wrongful eviction under various tenancy laws in Nigeria.
- Licensees do not enjoy rent control protections since they do not have a legal estate in the land.
3. Termination and Eviction
- A lease can only be terminated after expiration or due to a breach of contract (e.g., non-payment of rent). Proper notice and legal action are required.
- A license can be revoked at the discretion of the licensor, and the licensee has no legal grounds to challenge the eviction.
4. Business and Commercial Implications
- Businesses should ensure they obtain leases rather than licenses when securing office spaces to guarantee stability and prevent unexpected eviction.
- Event planners and vendors should use licenses for short-term use of premises, as they provide flexibility.
Which is Better: Lease or License?
The choice between a lease and a license depends on the nature of the arrangement and the level of control desired.
✔ Choose a Lease if:
- You need long-term security over a property.
- You want exclusive possession and control over the space.
- You plan to invest in, modify, or sublet the property.
✔ Choose a License if:
- You need temporary access to a property.
- You do not require exclusive possession.
- You want a flexible and easily revocable arrangement.
Conclusion: Protecting Your Rights in Property Transactions
Understanding the difference between leases and licenses is crucial for landlords, tenants, business owners, and investors in Nigeria. A lease grants stronger legal protection and long-term security, while a license offers flexibility but limited rights.
Before entering into any property agreement, ensure you understand its legal implications and seek professional legal advice if necessary.
Are you currently dealing with a lease or license agreement? Have you encountered any legal issues related to property rights? Share your thoughts in the comments below!