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Difference between a Lease and a License

Few know that there is a legal distinction between interests in real estate, which are subject to License Law, and licenses, which are not.   Why is it that a real estate license is required for those that manage real estate rentals, but is not for those renting a room for a few nights or a week.  What is the difference?  Understanding  the difference requires first defining what constitutes a license or a lease.

A “license” is a personal, revocable, and nonassignable privilege, conferred either by writing or parole, to do a particular act or series of acts upon another’s land without possessing any estate therein.[1]  One who possesses a license pertaining to real estate has authority to enter the land in another’s possession without being a trespasser. [2]   A license does not create an interest or estate in land. [3]    A “licensee” is a person who enters the premises of another by permission or acquiescence, for his own pleasure or benefit. [4]   By way of example, a hotel guest is a mere licensee who acquire rights, but without passing any proprietary interest in, the land. [5]

A license to use or possess real property does not fall within the definition of real estate set forth in R.C. 4735.01(B).  Because the guests at a hotel, extended stay or vacation rental are only granted the temporary, personal, revocable, and nonassignable privilege to use the premises, they hold licenses, rather than a tenancy or other legal interest in real estate.  Consequently, management activities are limited to the management of those licenses, not the management of real estate for sale or rent as contemplated in R.C. 4735.01(A).

Examples of scenarios where licenses are granted as opposed to a leasehold interest in the premises, are a hotel, even extended stay, vacation rental and a hunting license.  Persons dealing in the issuance of licenses are not required to be licensed as real estate agents.  Nonetheless, licensure is absolutely required for those managing leasehold property or representing landlords or tenants.

[1] Mosher v. Cook United, Inc. (1980), 62 Ohio St. 2d 316.

[2] Id.

[3] Rodefer v. Pittsburg, O.V. & C.R. Co. (1905), 72 Ohio St. 272.

[4] Scott v. Spearman (1996), 115 Ohio App.3d 52, 684 N.E.2d 708.

[5] Ripple v. Mahoning Nat’l Bank (1944), 143 Ohio St. 614.

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