July 28, 2016

Generally speaking, the distinction between a lease and a license is important because a lease gives a tenant a leasehold interest in real property whereas a license may be non-exclusive and may be revocable. Whether an agreement is deemed a lease or a license may have other legal implications as well.

In Union Square Park Community Coalition, Inc. v. New York City Department of Parks and Recreation, 22 NY3d 648 (2014), the Plaintiffs challenged the ability of the New York City Department of Parks and Recreation to enter into a license agreement with Chef Driven Market, LLC (CDM) that would allow CDM to operate a seasonal restaurant in a public park without State legislative approval.  Under the public trust doctrine, public parkland cannot be converted to a non-park purpose for an extended period of time absent the approval of the State Legislature.  The Union Square Court found that because the agreement was a license and not a lease, the agreement did not violate the public trust doctrine.

The Court reiterated the legal standard as follows: a document is a lease “if it grants not merely a revocable right to be exercised over the grantor’s land without possessing any interest therein but the exclusive right to use and occupy that land.” It is the conveyance of “absolute control and possession of property at an agreed rental which differentiates a lease from other arrangements dealing with property rights.”  A license, on the other hand, is a revocable privilege given “to one, without interest in the lands of another, to do one or more acts of a temporary nature upon such lands.”

The Court found that in Union Square, the following factors tipped the scale in favor of a license rather than a lease: (i) the Department retained significant control over the daily operations of the restaurant, including the months and hours of operation, staffing plan, work schedules and menu prices; (ii) CDM’s use of the premises is only seasonal, and is not exclusive even in the summer, as outdoor seating is required to be available to the general public (with the exception of an area reserved for the service of alcoholic beverages); and (iii) CDM is obligated to open the pavilion to the public for community events on a weekly basis.

Based on the foregoing, the Court determined that the Department granted CDM a license which does not require State legislative approval. See also Glick v. Harvey, 25 N.Y.3d 1175 (2015)(“The permit, memorandum of understanding and lease/license relating to Mercer Playground, LaGuardia Park and LaGuardia Corner Gardens, respectively, show that “any management of the parcels by the [DPR] was understood to be temporary and provisional”).

This decision may have implications in the commercial leasing context where landlords often prefer to grant a license over a lease. The practical outcome of the decision is to broaden the legal definition of a license in New York.

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