Essentially a license to occupy document is a contract that grants someone permission to live in a property.

They are usually drafted to mirror the tenant obligations normally found in a tenancy agreement, but are structured to ensure they are not treated as a residential lease. This is to ensure they do not fall under the governance of the Tenancy Tribunal or Sale of Land Act.

When used for vendor finance purposes they are usually paired with an option to purchase agreement, an arrangement similar to a lease option.

The reason for their existance is that in some areas a vendor may find control of

their arrangement taken away from them by government regulations.

In the case of installment contracts, there are cases where the buyer can request title of the property be transferred into their name after buiding up 30% equity. In such a case a vendor would be forced to pay out their own mortgage reducing their investment return.

As for lease options, some tenancy protection agencies can dispute a rent increase made by a vendor. If the agreement was designed to mirror variations in interest rates, this can cause cashflow problems for the vendor.