If you’re letting someone use your property (or part of it) for business purposes, it can be surprisingly easy to end up in a messy situation - especially if you assume it’s “basically a lease”.
A property licence agreement is often the faster, more flexible alternative to a lease. But it also comes with different legal risks, different levels of control, and different outcomes if things go wrong.
This guide is updated for current New Zealand commercial arrangements and common licensing use-cases, so you can feel confident you’re setting things up properly from day one.
What Is A Property Licence Agreement?
A property licence agreement (often just called a “licence”) is a contract where the property owner or occupier (the licensor) gives another party (the licensee) permission to use a space for a specific purpose, usually on specific terms.
The key idea is permission to use - not a transfer of exclusive possession.
In practical terms, a licence agreement commonly covers situations like:
- allowing a business to use a room, desk, salon chair, kiosk, yard area, or storage space;
- letting an operator place equipment on-site (like an ATM, vending machine, or advertising signage);
- short-term use of a space for events, pop-ups, or overflow operations;
- shared spaces where multiple users come and go under rules set by the owner (like co-working environments).
Licences are popular because they’re usually more flexible than leases. But that flexibility only helps you if the agreement is drafted clearly - otherwise you risk accidentally creating a lease (or creating a dispute about what you agreed).
Depending on what you’re doing, a tailored Property Licence Agreement can be the document that keeps your arrangement simple, enforceable, and commercially workable.
Is A Licence The Same As A Lease?
No - and that difference matters.
A lease generally gives the tenant a legal right to occupy premises for a term, usually with stronger protections around possession, renewal, and termination (and in some industries, lease arrangements are treated as a big, long-term commitment).
A licence is usually:
- more limited in scope (use of a particular area, for a particular purpose);
- more controlled by the owner/host (rules, access hours, shared use);
- more flexible to end or change (if drafted properly).
The legal label isn’t everything. Courts tend to look at the substance of the arrangement. So if you call it a “licence” but you grant exclusive possession and long-term occupation, you may have created a lease in practice.
When Should You Use A Property Licence Agreement?
A property licence agreement can be a great fit when you want to grant use of a space without handing over full control.
You might consider a licence where:
- the space is shared (for example, multiple businesses operate in the same premises);
- you need operational control (rules about access, safety, security, noise, staffing, or customer flow);
- the arrangement is short-term or may change quickly (pop-ups, trials, pilot sites);
- you’re licensing only part of a larger premises (like a storeroom, bay, or a small retail corner);
- you want a simpler exit pathway if the relationship doesn’t work out.
Common NZ Examples Of Licensing Arrangements
Here are a few scenarios where licences are frequently used in New Zealand businesses:
- Co-working and shared office space: hot desks, dedicated desks, meeting rooms, and rules-based access.
- Rent-a-chair set-ups: salons, barbers, and beauty clinics often allow operators to use a chair/room without leasing the whole premises (this can overlap with contractor vs employee issues, so the paperwork matters).
- Equipment placement: allowing a third party to install and operate equipment on-site (ATMs, vending machines, coffee carts, promotional displays).
- Short-term commercial use: a pop-up retail store inside a larger venue, or a seasonal operator using a portion of your land.
If your situation involves a more traditional long-term tenancy with exclusive use, you may instead need a Commercial Lease Agreement (or at least advice on whether a lease is being created by accident).
What Should A Property Licence Agreement Include?
A good licence agreement isn’t just “permission in writing”. It sets clear expectations, makes payment enforceable, and gives you a plan for what happens if something changes.
While every business is different, most property licence agreements should cover the following essentials.
1. The Licensed Area (And What’s Included)
Be very clear about what space is being licensed, including:
- a written description of the area (and ideally a plan or marked diagram);
- what fixtures, furniture, or equipment are included;
- shared areas the licensee can use (toilets, reception, hallways, loading zones);
- any excluded areas (private offices, storage rooms, staff-only zones).
This reduces disputes like “we thought the storeroom was included” or “we assumed we could use the courtyard for customers”.
2. Permitted Use (And Prohibited Use)
Set out what the licensee is allowed to do in the space - and what they’re not allowed to do.
For example:
- permitted business activities (e.g. “nail technician services” or “storage of non-hazardous goods”);
- hours of operation and access;
- noise, signage, and customer behaviour rules;
- restrictions on hazardous substances, food preparation, or alcohol sales;
- whether they can bring staff or subcontractors on-site.
This isn’t about being controlling - it’s about making the arrangement workable for everyone using the space.
3. Licence Fee, Outgoings, And Payment Terms
Your agreement should clearly state:
- the licence fee (weekly/monthly) and whether GST applies;
- bond/security deposit (if any);
- what’s included in the fee (power, internet, cleaning, reception services);
- extra costs and how they’re calculated (utilities, rubbish, access cards, parking).
If you run a premises where multiple businesses use shared services, clarity here can prevent ongoing friction.
4. Term, Renewal, And Ending The Agreement
Licences often work because they can be ended more easily - but only if the contract is drafted properly.
Key termination points to consider:
- start date and end date (or whether it continues month-to-month);
- notice period to terminate (for either party);
- immediate termination triggers (non-payment, serious misconduct, damage, illegal activity);
- what happens on exit (return of keys, removal of property, reinstatement obligations).
If you’re ever in a situation where a lease is being transferred to a new party, that’s a different process again - often documented via an Assigning A Lease arrangement (and usually requires landlord consent and careful paperwork).
5. Rules, Site Policies, And Operational Control
Licences commonly include “house rules” - particularly for shared premises.
This might include:
- health and safety rules and incident reporting;
- access procedures (alarms, keys, swipe cards, visitors);
- security and CCTV expectations;
- requirements to follow your policies (e.g. building management rules).
If your site uses cameras, it’s worth checking your approach aligns with workplace privacy expectations - especially if the licensed area involves staff or public interaction. (In some situations, Are Cameras Legal In The Workplace? can be a helpful starting point for understanding the practical compliance issues.)
6. Liability, Insurance, And Risk Allocation
This is where a lot of DIY agreements fall over.
Your licence should address:
- who is responsible if the licensee causes damage to the premises;
- who is responsible if the licensee’s customers are injured in the licensed area;
- the insurance each party must hold (public liability is common);
- whether the licensee must indemnify the licensor for certain losses.
In New Zealand, your health and safety duties can’t be “contracted out of” entirely. Even if the licensee is responsible for its own operations, you still want a clear system for managing risks and communicating hazards.
What Laws Do You Need To Think About In New Zealand?
A property licence agreement is primarily a contract - but the reality is that multiple legal areas can attach to the arrangement depending on how the space is used.
Here are some of the big ones to keep in mind.
Contract Law (Making The Agreement Enforceable)
At a basic level, your agreement should be clear enough that:
- both parties understand what was agreed;
- the obligations are specific (not vague promises);
- the payment and termination rights are enforceable.
If there’s a disagreement later, the most common question is simply: “What does the contract actually say?” That’s why it’s worth getting the wording right upfront.
Health And Safety (Especially In Shared Premises)
If the licensee is operating a business on-site (even a small one), health and safety obligations may apply under the Health and Safety at Work Act 2015.
Shared premises can create tricky grey areas. For example:
- who is responsible for maintaining safe walkways?
- who reports hazards (like faulty wiring or blocked exits)?
- what happens if the licensee’s customers interact with other users of the premises?
A well-drafted licence can help allocate responsibilities and set a practical reporting process - while still recognising that legal duties can sit with more than one party.
If you collect personal information about the licensee, their staff, or customers (for example: ID details, security footage, access logs, or incident reports), you’ll need to think about the Privacy Act 2020.
That doesn’t mean you can’t collect information - it means you should do it transparently, keep it secure, and only collect what you genuinely need.
In many cases, having a clear Privacy Policy and/or privacy collection notice is a simple way to show you’re taking compliance seriously.
Fair Trading And Marketing Claims (If You’re “Selling” The Space)
If you advertise licensed spaces (e.g. “private office”, “exclusive use”, “secure storage”), those claims should be accurate. Misleading representations can create issues under the Fair Trading Act 1986.
Even if your intention is good, the wrong words in an online listing can cause disputes later - like a licensee saying they relied on your advertising when deciding to sign.
Common Mistakes With Property Licence Agreements (And How To Avoid Them)
Licences are often used by fast-moving businesses because they feel “simpler” than leases. That’s true - but it’s also why people cut corners.
Here are some common pitfalls we see.
Accidentally Creating A Lease
If the licensee has exclusive possession of premises for a defined term, and you (as the owner/host) have minimal ability to control access, you may be closer to a lease than a licence.
Why does this matter? Because the legal consequences can include:
- different termination rights;
- different practical expectations about renewal and occupation;
- disputes about whether you can “just end it”.
This is one of those areas where getting tailored legal advice is worth it - especially if the arrangement will be long-term, high-value, or business-critical.
Vague Descriptions Of The Space
If the agreement doesn’t clearly describe the licensed area, you can end up debating basic facts later, like:
- where the boundary is;
- whether storage is permitted;
- whether the licensee can expand into adjacent areas;
- what shared areas can be used (and when).
A simple plan attached to the agreement often solves 80% of these problems.
No Clear Exit Process
Ending the relationship is where most disputes show up - especially if the licensee has invested money into fit-out, equipment, or signage.
Your agreement should clearly cover:
- notice periods;
- handover requirements;
- removal of property and waste;
- make-good obligations (for example, repainting or repairing).
If you’re trying to regain control of the space quickly, unclear exit rights can cost you time and money.
Not Thinking About Subcontractors Or Workers On-Site
Many licensees won’t operate alone. They may have staff, contractors, or subcontractors using the space too.
That raises questions like:
- Do they need your approval to bring other people on-site?
- Who supervises conduct in shared areas?
- Who is responsible if a worker is injured?
If your arrangement starts to look like labour hire or staffing rather than a genuine licence, you’ll want to be careful. And if you’re also hiring people in your own business, your Employment Contract and onboarding documents should align with how people actually work on-site.
Key Takeaways
- A property licence agreement is a contract that gives someone permission to use a space without granting the stronger rights that usually come with a lease.
- Licences are common for shared premises, short-term arrangements, equipment placement, pop-ups, and partial use of a site where you still need operational control.
- A well-drafted licence should clearly cover the licensed area, permitted use, fees and outgoings, term and termination, site rules, and liability/insurance responsibilities.
- In New Zealand, you should also think about broader compliance areas like the Health and Safety at Work Act 2015, the Privacy Act 2020, and the Fair Trading Act 1986, depending on how the space is used and marketed.
- A major risk is accidentally creating a lease in practice - so it’s important the agreement matches the real-world arrangement, not just the title on the document.
- Don’t rely on a generic template: property arrangements can be high-risk and expensive to unwind if the paperwork doesn’t reflect the deal.
If you’d like help drafting or reviewing a property licence agreement (or working out whether you actually need a lease instead), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
