Commercial Division Blog

Posted: March 28, 2016 / Categories Commercial, Real Property

Agreement Relating to Billboard Was a Lease, Not a License

On March 17, 2016, the First Department issued a decision in Z. Justin Management Co., Inc. v. Metro Outdoor, LLC, 2016 NY Slip Op. 01915, discussing the difference between a lease and a license:

This case involves a purported wrongful assignment of an outdoor advertising agreement by defendant Metro to defendant 860 Sign. The agreement, which was originally entered into between plaintiff and defendant Metro, was assigned by Metro to 860 Sign for an assignment fee of $1.6 million. On appeal, plaintiff contends that the agreement, despite being labeled a "sublease," was actually a non-assignable licensing agreement as a matter of law, or, in the alternative, that plaintiff was entitled to a portion of the assignment fee.

Plaintiff's arguments are unavailing. The nature of the transfer of absolute control and possession is what differentiates a lease from a license whereas a license connotes use or occupancy of the grantor's premises, a lease grants exclusive possession of designated space to a tenant, subject to rights specifically reserved by the lessor. The former is cancellable at will, and without cause. The critical question in determining the existence of a lease is whether exclusive control of the premises has passed to the tenant.

Under the relevant standard, the plain language of the agreement at issue reveals that the agreement is a lease and not a license. In the first paragraph of the agreement the property is unambiguously granted to Metro outright, providing that plaintiff subleases and grants exclusively to Metro the property, without restriction. In addition to granting exclusive possession of the property to Metro and the exclusive use and right to install advertising upon it, the agreement, characteristic of a lease, is not revocable at will. The agreement is a lease according to its plain terms, in both form and substance.

(Internal quotations and citations omitted) (emphasis added).