Landowners can allow others to utilize their property in multiple ways. One way is with a lease that generally grants a user (the tenant) the exclusive right to use and access the property during the term of the lease. A second option is to grant a license to use property. Unlike a lease, a license does not give the licensee an exclusive right to possess the property. It merely provides a temporary right to utilize the property for a certain purpose. Licensees also don’t have the extensive protections that tenants enjoy under New York law. Instead, the general rule is that a license can be terminated at the will of the granting party. However, as demonstrated in a recent New York appellate decision, not all licenses to use property can be terminated at will.
The case of Skaneateles Country Club v. Cambs involved an agreement between the plaintiff, a country club, and the defendant, a club member, that granted the defendant a license to use one of the plaintiff’s boat slips adjacent to Skaneateles Lake. The defendant contributed $5,000 for construction of the slip and agreed to pay an annual maintenance fee. Subsequently, the parties had a dispute over the calculation of the maintenance fee, as a result of which the country club brought an action to declare the defendant’s slip license to be “terminable at will.” The trial court granted summary judgment to the plaintiff. However, the appellate court reversed the decision finding that although the general rule is that licenses are terminable at will, parties are free to agree otherwise.
The New York Appellate Division noted that the agreement obligated the defendant to pay a maintenance fee and abide by the plaintiff’s rules and policies. The Court found that created an “implication” that the license could only be terminated if the defendant failed to comply with the agreement.
Further, the fact that the agreement contained an explicit right of termination for the defendant, but did not include one for the plaintiff evidenced the parties’ intention not to allow the plaintiff to terminate at will.
Finally, the Court found that the plaintiff’s position that the agreement was terminable at will “implied” that it would not be obligated to return any portion of the defendant’s payment towards construction costs if it terminated the license, and that this would not be fair and reasonable.
Two justices on the court dissented on the grounds that the agreement did not unambiguously indicate that the parties agreed to change the default rule that licenses are terminable at will.
The takeaway of this case is that license agreements must be carefully drafted in order to reflect the parties’ understanding of the terms and avoid giving a court an opportunity to fill in blanks in the contract.
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