Lease or licence? The distinction that decides what rights your occupant has
Calling an agreement a licence does not make it one. Kenyan courts look at exclusive possession, not the heading on the document, and getting the classification wrong changes who can be removed and how quickly.
A landlord who wants an occupant who is easy to remove is often advised to head the document “licence agreement” rather than “lease”. It is one of the more expensive pieces of informal advice circulating in Nairobi, because the heading is close to the least important thing on the page.
Kenyan courts, following long established common law, decide what an agreement is by looking at what it actually does. If the occupant has exclusive possession of a defined space for a defined period at a rent, the arrangement is a lease, and it remains a lease if you have typed the word licence at the top forty times. The label is evidence of intention. It is not determinative, and where the substance contradicts it, the substance wins.
What actually separates the two
A lease grants an interest in land. The tenant gets exclusive possession, which means the right to exclude everybody including the owner, for the term. A licence grants permission to be somewhere that would otherwise be trespass. The licensee has no interest in the land and no right to exclude the owner.
Three features are usually decisive.
Exclusive possession
This is the main test. Can the occupant lock the door and keep the owner out? If yes, it is almost certainly a lease. Rooms in a shared house where the occupant has their own lockable room but shares a kitchen may still involve exclusive possession of the room itself.
The reverse also holds and it is where landlords get caught. A clause reserving the owner an unrestricted right to enter at any time without notice looks like it defeats exclusive possession, but if in practice the owner never enters and the occupant treats the place as their own, a court may read the clause as a sham inserted to disguise a lease.
A defined term
A lease runs for a certain period, or for a period capable of being made certain: a year, six months, or month to month until terminated on notice. An arrangement with no ascertainable term points away from a lease.
Rent, or the absence of it
Rent is usually present in a lease, though its absence does not by itself make an arrangement a licence. Regular periodic payment for occupation of a defined space is strong evidence of a tenancy whatever the parties call the payment.
Why the classification changes your position
- Removal. A licence can generally be terminated on reasonable notice under its own terms, and the licensee then has no right to remain. A tenant has security derived from the tenancy and, where the tenancy is controlled, from statute. Removing a tenant means the notice sequence and, if they do not go, a court or tribunal.
- Statutory protection. Where a residential tenancy falls under the Rent Restriction Act, the Act supplies notice periods and a tribunal and you cannot contract out of it. A genuine licence sits outside that framework.
- Business premises. A tenancy of shop, hotel or catering premises for an unspecified term, or a term not exceeding five years, may be a controlled tenancy under the Landlord and Tenant Shops, Hotels and Catering Establishments Act, bringing the Business Premises Rent Tribunal into play. This catches residential landlords who let a ground floor unit to a shop without thinking about which statute they have walked into.
- Transferability. A lease is an interest in land and can, subject to its terms, be assigned. A licence is personal and generally cannot.
- Registration and duty. Longer leases attract registration requirements and stamp duty. Licences generally do not, which is part of their appeal and part of why the classification gets litigated.
Courts read the arrangement, not the heading. If the occupant can lock the door and keep you out for a fixed period at a rent, you have granted a lease, whatever the document is called.
Where a licence is genuinely the right instrument
None of this means licences are a fiction. There are arrangements that really are licences, and dressing them up as leases would be equally wrong.
- Serviced and short-stay occupation. A guest in a furnished unit for a few nights, where the operator retains control, cleans, changes linen and can move the guest between units, is a licensee. This is the ordinary position for short-stay letting.
- Lodgers sharing with the owner. Someone occupying a room in a house the owner also lives in, without exclusive possession of the whole, is usually a licensee.
- Occupation pending completion. A buyer let into possession before completion under a sale agreement occupies under a licence, not a tenancy.
- Staff accommodation tied to employment. Where occupation is incidental to a job and ends with it, a service occupancy can be a licence.
What this means practically
If you want a tenant, grant a lease and write it properly. The security a tenancy gives the occupant is the other side of a commitment that also gives you twelve months of predictable income, and trying to have the income without the commitment is what produces documents that fail.
If your arrangement genuinely is a licence, make the substance match: retain control, retain access, retain the ability to relocate the occupant, and do those things in practice rather than only on paper.
And if you are letting to a business, get advice before signing. The commercial statute has its own tribunal, its own notice regime and its own definition of a controlled tenancy, and a residential landlord who lets a ground floor unit to a salon on a handshake has usually not realised which framework now applies.
How Goldstay handles it
We use leases for long term letting and licences for short stay, because that is what each arrangement actually is. On long-term management the tenant gets a properly drafted lease with exclusive possession and the notice provisions that go with it. On short-stay management the guest occupies under a licence, we retain control of the unit, and no tenancy arises.
Where we inherit a property whose agreement is misclassified, and we see it regularly, we say so before the renewal rather than after the dispute. This article is general information and not legal advice on your particular arrangement, which turns on facts we have not seen.
Related reading: what a landlord’s tenancy agreement should contain and the eviction playbook.
The Goldstay Legal Desk covers Kenyan and Ghanaian property law, title diligence, sale agreements, stamp duty, succession and the regulatory environment that property owners and investors encounter. Pieces are written in collaboration with our advocate partners.
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