In simple words, a Leave and Licence agreement is a legal document that lets a party allow another party the usage of their immovable assets. These assets include property, for a significant period with no change in the ownership of the asset.
Leave And License Agreement - In Detail
As mentioned in the section above, a Leave and Licence agreement is a legal document that offers transfer of interest and the rent control of the immovable property from one party to another. This documentation is most common amongst the landlords and tenants in India, especially in the rental housing segment of real estate. However, in the commercial realty segment, the use of these lease agreements is rather common.
One of the major highlights is that a lease helps to create in favor of the tenant with an exclusive interest in the property, while, on the other hand, a Leave and Licence agreement works the opposite, that is, it does not create any interest in the property towards the tenant.
Leave And Licence Agreement: The Characteristics
As the agreement falls in the most popular choice among landlords, it’s best to have a deeper understanding and know the properties associated with it. To help you, we have curated a list below that includes the characteristics of leave and license agreement:
- No transfer of interest is created from the owner to the tenant
- The absence of any property right
- The changes such as the amount due as Licence fee, the deposit, and others can be contractually determined by participating individuals
- In most cases, the typical duration of the contract is of 11 months
- The owner happens to maintain higher freedom and rights when it comes to the cancellation and eviction of the tenant
What Is The Difference Between The Lease And The Leave And Licence Agreement?
Lease VS Leave And Licence Agreement:
|LEASE AGREEMENT||LEAVE AND LICENCE AGREEMENT|
|It creates an interest in the property||It does not create an interest in the property|
|It grants the tenant an exclusive possession||It only grants permission to occupy the property in question|
|They are not revocable||They are revocable|
|They are not determined by the grantor||They are determined by the grantor|
|A lease is transferable||Leave and license agreement are not transferable|
|It creates inheritable rights||They do not create any inheritable rights|
A Leave And License Agreement: What Do They Mean In Legal Terms
Although the courts have been elaborating on the legal concept from time to time, the basis of a leave and license agreement can be found in the Indian Easements Act, 1882.
In actual words and as per the act – Section 52 of the Indian Easements Act, it reads, “Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful and such right does not amount to an easement or an interest in the property, the right is called a license.”
On the other hand, according to the Supreme Court, if documentation of any property only gives the right to use an immovable asset in a particular way or under certain terms, while the remains in the control and possession of the owner, thereof, it is termed as a license. In simple words, no property interest is transferred to the tenant.
Supreme Court states – “The legal possession, thereof, continues to be with the owner of the property but the licensee is permitted to make use of the premises for a particular purpose. But for this permission, his occupation would be unlawful. It does not create in his favour any estate or interest in the property.”
Note – Since no easement right is granted, the landlord can easily revoke the permission that is granted to the tenant in the agreement. If in case the landlord wished to let out the property in question for a shorter period then, working a rental agreement keeping in mind the leave and license agreement allows them the freedom to do so. As for the tenants, it benefits them as they do not have to serve for longer notice periods to vacate the property of the landlord.
Leave And Licence: The Rescue Of The Landlord
As given and simple as the agreement might seem, there are cases where the owner does not wish to transfer the interest of the property to the tenant, or, the tenant refuses to vacate the assets. What then? What happens if such as such is presented in any scenario?
As per Indian law, it mentions that as long as a tenant is regular about paying the house rent including the other charges, a landlord cannot evict the tenant for about 5 years, until and unless they commit any breach in the agreement and/or are found faulty.
Enter the Leave and Licence agreement! This agreement is often used as a replacement for the good old rental agreement and is frequently used in cities such as Mumbai and the agreement is seen as a much safer option for the landlord as per the observations of experts.
The Leave and Licence agreement helps to set a relaxed owner-tenant relationship when it comes to comparing with the regular rental deed. This is widely used in Mumbai as an alternative to leases and similar documents.
In case you are a tenant and do not feel that the document matches your taste, feel free to go through a pre-drafted rental agreement. This is documentation that is comprehensive and covers both tenant and landlord.