Leases and Licences

Leases are the most common type of transfer of ownership from a public body since freehold transfers mean that there is no prospect of the current owner controlling the use of an asset into the future. Public bodies are loath to do this partly because of the risks associated with doing so (the organisation that it transfers to may fail and sell it with the result that community/public benefits may then be lost) and partly because public assets have often been acquired with public money and as statutory bodies they are more likely to exist well into the future so when a lease term is up, it can return to public ownership by a statutory body.

Leases however come in many shapes and sizes and with many conditions and liabilities. These can have an impact on their use and their costs and as a result may affect the financial viability for the organisation that enters into it. It is worthwhile familiarising stakeholders in a project on key lease terms if that is the ownership interest that is being considered. Click here for a glossary of lease terms.

There are some model leases that exist as a template for considering these issues. Some have been created specifically for meanwhile use of an asset (click here to access an example), others for longer leaseholds that have been transferred to community and social enterprises (click here to see an example and here for guidance on its use from the Asset Transfer Unit).

Below is a table of the main lease clauses that will impact on the future viability and sustainability of an asset transfer and development project and the organisation that is proposing to enter into the lease. Particular attention should be paid to these issues with legal advisors in the negotiations on any lease and their impact on the achievement of the projects objectives.

 

Licenses are not used to transfer ownership of an asset. They are a short term agreement between a landlord and tenant - often for only 6 months to 2 years. They do not convey an ownership interest or security of tenure beyond the agreed terms set out in the licence. Licences are most often used for “easy-in, easy-out” arrangements by organisations that have benefitted from a transfer and then want to use it without conveying the liabilities of a lease onto their tenants.