Licence to Occupy (New Zealand)

A Licence to Occupy in New Zealand grants a tenant the right to occupy residential premises and records the rent, bond, term, and the repair and notice obligations of landlord and tenant under the Property Law Act 2007.

In New Zealand, a licence to occupy is governed by general contract law and the Property Law Act 2007 (PLA 2007). Crucially, because a licence does not grant exclusive possession, it is not a tenancy and is not subject to the Residential Tenancies Act 1986 (RTA). This means that the many statutory protections available to tenants under the RTA — including bond lodgement limits, minimum notice periods for termination, the right to apply to the Tenancy Tribunal, and Healthy Homes Standards requirements — do not apply to a licence. The licence fee is also not 'rent' in the legal sense, and the licensor is not a 'landlord' for the purposes of the RTA.

Licences to occupy are used in a wide variety of contexts in New Zealand: co-working spaces and serviced offices where multiple businesses share a single premises without exclusive areas; granny flat and minor dwelling arrangements within family properties; short-term event venue hire; hairdressing or beauty salon licensee arrangements; temporary storage; grazing licences over agricultural land; and informal residential arrangements that the parties intend to keep outside the scope of the RTA.

New Zealand courts will look at the substance of the arrangement, not simply the label used by the parties. If a document purports to be a licence but in fact grants exclusive possession of a defined area, the courts may reclassify it as a tenancy and apply the RTA. The key factors distinguishing a licence from a tenancy are: whether the licensor retains the right to concurrent access and use; whether the agreement is genuinely revocable; and whether the occupier has the right to exclude others (including the licensor) from the area.

The Goods and Services Tax Act 1985 also applies to licence fees where the licensor is a GST-registered person and the licence is granted as part of a taxable activity — typically commercial arrangements. GST at 15% is payable by the licensee in addition to the stated licence fee, and the licensor must issue valid GST tax invoices.

A Licence to Occupy is needed whenever a property owner or occupier wants to allow another person or entity to use part or all of their premises for a defined purpose, without granting full tenancy rights or exclusive possession. It is the appropriate document when the parties deliberately want to avoid creating a tenancy relationship and the statutory obligations that come with it under the Residential Tenancies Act 1986 or commercial leasing legislation.

The most common scenarios requiring a licence to occupy in New Zealand include: co-working space arrangements, where a business grants desks, meeting rooms, or shared office areas to other businesses without allocating exclusive space to any particular business; granny flat or sleepout arrangements within residential properties, particularly where a family member is given the right to live in a secondary dwelling without the full rights of a residential tenant; hairdressing, beauty, or health clinic arrangements where a principal operator licenses a chair, treatment room, or space to an independent contractor or freelancer; storage facility access where a landlord grants access to storage spaces without creating a tenancy; event hire where a venue owner grants a licence for one or multiple events at the premises; and grazing or agistment licences over rural land where access is for livestock grazing or crop agistment without creating a formal farm lease.

A licence to occupy is also used where commercial parties want a short-term, flexible arrangement that can be terminated on short notice — for example, a pop-up retail operation, a short-term office arrangement while fitting out leased premises, or a temporary structure or equipment installation on someone else's land.

The document is not appropriate where the arrangement would, in substance, grant exclusive possession to the occupier. In those cases, the parties should use a residential tenancy agreement (for residential properties) or a commercial lease (for commercial properties), which provides the appropriate statutory protections and obligations for both parties.

A well-drafted New Zealand Licence to Occupy should include all of the following key elements to confirm that the arrangement is clear, enforceable, and achieves the parties' intention to create a licence rather than a tenancy.

The parties section must identify both the licensor (the owner or person granting the right to occupy) and the licensee (the person or entity being granted the right) by their full legal names and contact details. For companies, the full company name including 'Limited' or 'Ltd' should be used, and the authorised signatory should be identified.

The nature of licence section is critical and should clearly state that the agreement creates a licence only — not a lease, tenancy, or interest in land — and that the Residential Tenancies Act 1986 does not apply. It should confirm that the licensor retains possession and control of the premises and that the licensee is not granted exclusive possession.

The licensed premises and permitted use section must precisely describe the area covered by the licence (including the address, floor level, room numbers, and approximate area in square metres) and state the specific purpose for which the licensee may use the area. An imprecise permitted use clause can lead to disputes about whether the licensee's activities fall within the scope of the licence.

The concurrent use provision should confirm that the licensor may use and access the licensed area at the same time as the licensee, which is the essential feature distinguishing a licence from a tenancy. This should be explicitly stated to avoid any future argument that the licensee was granted exclusive possession.

The term and termination section must specify the duration of the licence (fixed-term or periodic), the commencement date, and the notice period required from either party to terminate. For a periodic licence, the notice period is typically shorter than for a residential tenancy — commonly 7, 14, or 30 days. The grounds for immediate termination (material breach, unauthorised use, failure to pay) should also be set out.

The licence fee section must state the amount payable, the frequency of payment, and whether the fee is exclusive of GST. If the licensor is GST-registered, the GST provisions must clearly state that the licensee must pay 15% GST in addition to the stated fee, and that the licensor will issue valid GST tax invoices with the licensor's GST registration number.

The licensee obligations section should set out the licensee's duties to keep the licensed area clean and tidy, comply with all applicable laws, not make alterations without consent, not assign or transfer the licence, and indemnify the licensor against any loss arising from the licensee's use of the area.

The governing law clause should confirm that the licence is governed by the laws of New Zealand. The forms-legal.com Licence to Occupy (New Zealand) provides a ready-to-use template that meets New Zealand legal requirements.