License Agreement Entitles Owner to Evict

Facts: An owner licensed 24,000 square feet of retail space in its shopping center to a licensee to sell its merchandise. The owner later revoked the license, under which the licensee was required to leave the space in case of a revocation. However, the licensee refused to leave, and the owner filed an eviction proceeding under state law. The licensee claimed that it had the same rights that it would’ve been entitled to under a lease, including the right to stay in the space until the matter was settled.

Decision: A New York court granted the owner’s request for an eviction judgment.

Reasoning: The court said that the owner was entitled to possession of the space because it demonstrated that the license agreement that it signed with the licensee constituted a license and not a lease. “Whether a given agreement is a lease or a license depends upon the parties’ intentions,” said the court. “Neither the name of the instrument nor its designation of the parties is determinative,” it specified. It said that the central distinguishing characteristic of a lease is the surrender of absolute possession and control of property to another party for an agreed-upon rental, whereas a license gives no interest in land and confers only the nonexclusive, revocable right to use a space.

Here, the owner established the parties’ unequivocal intent to create a license, not a lease, for the space. First, although not determinative, the parties called their agreement a “License Agreement” and designated themselves as licensor and licensee. It specifically states that the licensee recognizes and agrees that the owner is granting it a revocable license only; not a “leasehold interest or other estate in real property.” The terms of the license agreement granted the licensee only the ability to “occupy and use” the space.

Moreover, even this right was severely limited, noted the court. The owner retained the right to relocate the licensee from that space to another space in the mall, regardless of size, at any time during the term of the license on “24 hours advance written notice.” In addition, the owner retained the right, in its “sole discretion,” to revoke the license at any time during the term for “any reason, or no reason, upon giving 48 hours’ advance written notice.” These terms are not typical of a standard commercial lease, said the court. The license agreement’s terms demonstrate the parties’ intent to enter into a license, concluded the court.

As a result, the owner had properly revoked the license agreement. Pursuant to its terms, the owner retained the right to revoke it on 48-hours written notice. The notice could be delivered to any of the licensee’s employees located at the space and if no employees were present at that time, the notice could be mailed, via regular mail to the address the licensee had used in the license. (The license provided that the notice was complete “in the case of hand delivery on the day so delivered or if by mail, then the date so mailed.”) The court determined that the owner had properly served its written revocation notice by both delivery and mail. And because the revocation wasn’t effective until several months past the required 48 hour notice, the license agreement was properly revoked. Additionally, after revocation, the owner properly served a 10-day Notice to Quit in accordance with state law. Thus, it was entitled to possession of the space and to evict the licensee.

• Chong Wang v. Crossgates Mall Gen. Co. Newco, LLC, October 2012