Reading time: 4 minutes

If you are a landlord or tenant, you may be looking to licence a part of your premises. If so, you will need a licence agreement. A licence agreement allows a licensee to use and occupy part of your premises. Licences are commonly used where a third party is occupying only part of the premises. It is also common where the premises is shared between parties, such as in a co-working space. While either a landlord or a tenant may licence part of their premises, tenants will need the landlord’s consent. This article explains six key terms that you will need in your licence agreement if you are looking to licence your premises.

1. The Licensed Area

The licensed area refers to the part of the premises that you are planning to license out to another tenant. It is crucial that you describe this area as accurately and in as much detail as possible. This is especially important if you are not licensing the entire premises. 

This description should also include the square meters of the area and any other parts of the premises that are available for the licensee to use, such as: 

  • shared meeting rooms; and
  • car parking spaces. 

To avoid doubt, it will be beneficial to attach a plan which marks out the licensed area.

For example, the licensed area could state: 

“an area of 34.9sqm, including the use of four desks and a shared meeting room, as outlines out on the attached plan”.

2. Term of the Licence

The term of the licence is the length of time that your licensee may occupy the area. This is generally up to your discretion. But, if you are a tenant, the term of the licence should not be longer than the term of your lease. 

In this case, it is common to have licences which terminate the day before the lease’s expiry date.

3. Licence Fee and Outgoings

A licence fee is a fee which your licensee must pay, usually on a monthly basis, much like rent. Outgoings refer to additional costs and expenses that a landlord bares which are associated with the premises.

If you are a landlord, you may wish for your licensee to pay part of the additional fees or outgoings you are responsible for. If you are a tenant, you may wish the licensee to pay part of the outgoings that you are responsible for and any additional service fees. This will be up for negotiation.

4. Assignment

An assignment is where the licensee transfers their licence to another party. In general, licenses will prohibit the licensee from being able to assign their interests under the licence to another party.

This is something that you will have to negotiate with the licensee.

5. Make Good

Make good is the licensee’s obligation to restore the premises to a clean condition at the end of the licence term and is usually their last obligation to complete at the end of their licence term. 

For example, a make good obligation could include that the licensee:

  • removes any moveable furniture; and
  • cleans the premises.

You should ensure that the licensee’s make good obligations will return the area to the condition it was in at the commencement of the licence. If you are a tenant licensing out part of your premises, you should ensure that the licensee’s make good obligations align with your own make good obligations in your lease. This will ensure that you do not have a lot of extra work to make good the premises at the end of your lease. 

6. Default and Termination

Default is the circumstances where you may choose to terminate the license agreement before the end of the term. You will usually only be able to do this when the licensee breaches the license agreement. 

For example, this could occur if they:

  • did not pay their license fee; or 
  • failed to comply with their obligations.

Your licence agreement must include a strong default clause as this will allow you to terminate the agreement early in case of a breach. If you do not include this clause, you may be locked into the agreement until the end of the term.

Key Takeaways

When looking to licence your premises, there are some important terms for you to consider and include in your licence agreement. However, note that licence agreements will depend on your particular circumstances, and if you are looking to draft a licence agreement, it is best to contact a lawyer. If you have any questions about license agreements, contact LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards