Legal Agreements

Everything about Leave and License Agreement

calendar31 Mar, 2023
timeReading Time: 8 Minutes
Everything about Leave and License Agreement

The Indian Easements Act of 1882[1] serves as the legal foundation for the leave and license agreement, despite the fact that different courts have sometimes elaborated on the topic. A license is “a right by which one person confers to another, or to a certain number of other persons, the right to do or continue to do anything that would be prohibited in the absence of such a right on the immovable property of the grantor,” as stated in Section 52 of the Indian Easements Act. The Supreme Court (SC) has determined that a document is a license if it only grants the right to use the property in a specific manner or under certain conditions as long as the property remains in the owner’s ownership and control. In essence, the renter does not acquire any ownership interest in the property. The owner maintains legal ownership of the property, and the licensee is only allowed to use it for that purpose. Without this waiver, carrying out his job would put him in breach of the law. “It generates no estate or interest in the land in his favor,” the Supreme Court said.

Advantages of a Leave and License Agreement

Following are the advantages of a Leave and License Agreement:

  1. A leave and license agreement that is completed in India offers a number of advantages. To get things started, there is not an exorbitant lot of paperwork to fill out or labor that has to be done. Second, the agreement serves as a deterrent for any disagreements that may arise in the future by outlining the roles and responsibilities of each side.
  2. If you are looking to lease commercial property in India, a leave and license agreement might be an ideal approach to secure your interests.
  3. One of the primary advantages of entering into a leave and license agreement is the potential assistance it may provide you with regarding the protection of your investment.
  4. Commercial leases in India often cover a period of three years or more. In the event that certain conditions are not met, you have the right, under the terms of the leave and license agreement, to terminate the lease without incurring any further costs. This might prove to be a substantial benefit in the event that your company’s core principles need to be modernized or the site ends up being improper.

Clauses That Are an Absolute Necessity for a Leave and License Agreement

Important terms and clauses in the leave and license agreement include:

  1. Party’s Identification Clause: The parties to the agreement must be identified in a clause. The names, addresses, and other identifying information of the licensor and licensee are included in the party name clause, which is an essential clause. The commercial agreement must contain the licensee’s business name and, if appropriate, the Company Identification Number (CIN).
  2. The Clause for Definitions: This clause provides a description of the unique and diverse terminology that is utilized and used throughout the agreement in order to facilitate understanding. This clause explains itself.
  3. Premise Clause: The kind of business that will be conducted there must also be defined in a commercial agreement, together with the whole site and a description of the property’s boundaries. How the area will be utilized should be made very apparent in the agreement.
  4. Transfer of Rights: This clause is crucial because it makes it clearly obvious that the lessor is providing the lessee with a temporary license to use his property. The primary goal is stated in this clause, which is also important to the Agreement.
  5. Rent And A Security Deposit: The security deposit and rent amounts are specified in this clause. Rent is the payment agreed upon by both parties, and in certain business agreements, in addition to the basic rent, the party is required to split the profit percentage with the other party. The Lessee shall pay the Security Deposit to the Lessor as security in the event of any dispute or breach of this Agreement. This should preferably be paid after the agreement has been signed by both parties and refunded at the conclusion of the term.
  6. The Length of the Agreement: In most cases, the duration of the time is determined to be 11 months and must be indicated. Nonetheless, if both parties agree, the time limit may be extended under a business agreement.
  7. Each Party’s Responsibilities and Obligations: This clause outlines in detail the responsibilities and obligations of each party with relation to this Agreement. It is an agreement that is legally binding on both parties and must be followed at all times. The tenant is responsible for a number of responsibilities, including taking excellent care of the property, ensuring that law and order are maintained in the neighborhood, and paying the rent in a timely manner. Throughout the time period covered by the lease, the landlord is the one who is in charge of supplying the tenant with water and electricity.
  8. Termination Clause: The processes for terminating the agreement are outlined in this clause, including the dates and methods for giving notifications. Any time after or before the termination, the parties may decide to extend or renew the agreement.
  9. Dispute Resolution: In the case of any dispute arising out of or during the Term, this clause shall be the governing and controlling provision. Dispute resolution procedures are outlined in this clause. The most popular methods of dispute resolution are Arbitration, Conciliation, and Court.

With A Leave And License Agreement, What Responsibilities Do Each Party Have?

You are need to have a solid understanding of the leave and license agreement if you want to rent a property in India. The parameters of the rental agreement are spelled out in this sort of agreement between the landlord and the renter. According to the agreement, each party is responsible for certain things.

The landlord is in charge of giving the renter a secure and pleasant living environment. In addition to this, it is also their responsibility to fix any damage produced by regular usage, such as wear and tear. Also, the renter is accountable for the upkeep of the property as well as the timely payment of the rent. However, they are unable to do any more harm to the region than the damage caused by natural wear and tear.

If a party breaches the conditions of the leave and license agreement, that party may be held accountable for damages. It is crucial that you read the agreement all the way through before signing it to ensure that you are aware of all of the rights and responsibilities that are associated with it.

What Will Happen To The Property If There Is A Dispute?

A leave and license agreement is a kind of contract that is often used in India. It is an agreement that is made between the owner of the property and the person who want to make use of the property. This agreement typically lasts 11 months, although it may be extended. The person has the right to use the property for their own benefit in accordance with the terms of the leave and license agreement. Yet, the agreement may be terminated if the owner and the person who is utilizing the property cannot get along with one another.

Impact of Leave and License Agreement

You are subject to a number of repercussions as a result of the leave and license agreement in India. If you want to rent a property in India, the first thing that you need to do is make sure that you fully understand the conditions of the agreement. Your rights as a renter may be impacted by the agreement. Last but not least, if you wish to leave India, you are going to need a leave and license agreement that is both current and effective.

Differences between a Lease, a Leave, and a License

The following characteristics are often used to differentiate between a Lease (sometimes referred to as a Rental Agreement) and a Leave and License Agreement.

  1. In contrast to a Leave and License agreement, a lease provides a property interest.
  2. The difference between a Lease and a Leave & License agreement is that the former gives the renter exclusive usage of the property.
  3. Licenses, in contrast to leases, are not transferable in any way, shape, or form.
  4. In contrast to leases, which cannot be terminated by the lessor, licenses may.
  5. Although Leases are not specified by the grantor, Licenses are
  6. Licenses do not grant transferable rights, but Lease does.

Issue to Be Considered Before You Sign a Leave and License Agreement

You need to be aware of the legal ramifications of the leave and license agreement that you will sign when you are getting ready to move into a leased home. This will help ensure that your relocation goes as smoothly as possible.

These Are Some Crucial Points To Keep In Mind:

  1. The leave and license agreement must specify a maximum of 11 months.
  2. The agreement must include the monthly rent and any additional fees and charges to be incurred on the premises while usage of the premises.
  3. Make sure you acquire a copy of the agreement, which has to be properly signed by all parties before it can be considered valid.
  4. The court in the city where the property is situated is solely responsible for resolving any issues.

The Following Remedies Are Available To Landlords:

  1. The lease has expired, and the lessee is no longer permitted to keep ownership of the property, thus he must leave. Lessee cannot object to having the ownership returned if a dispute occurs during the period. If the Lessee does not vacate the premises, the Lessor may file a petition for the eviction of the Lessee.
  2. At least for the time being, the legislation governing rent control is on the side of the tenant. This rule prohibits landlords from charging renters’ exorbitant sums, which is a victory for renters. The tenant has the right to property ownership in the event of a lease, which makes it more difficult for the landlord to remove the renter. Landlords do not want to sign agreements that are longer than 11 months.
  3. All leases with lengths of a year or longer must be in writing, recorded, and subject to stamp duty, according to Section 55 of the Maharashtra Rent Control Act, 1999. Failure to register may result in a fine of up to Rs. 5000 or a jail sentence of up to three months, or both.

The Following Legal Options Are Available To The Tenant:

  1. Every state has a Rent Control Act that lays out the guidelines for when a lessor may lawfully evict a lessee. Before anything else, the lessor has to get acquainted with the Act that was just discussed. In the case that the lessee is being evicted, they have the legal right to challenge the notice and ask for assistance from the Rent Controller in the relevant jurisdiction in order to have the notice delayed.
  2. According to the Act, the renter is permitted to rent the property for a predetermined amount for either residential or commercial use. As long as the rent is being paid, the owner or landlord cannot technically reclaim the property. Since this is just a temporary agreement, substantial changes to the property are not permitted, and the space cannot be used for anything other than what was initially envisioned or specified in the agreement.

Typical Problems with Leave and License Agreements

The leave and license agreement is the most typical kind of agreement used for this purpose in India, where renting out property is a prevalent practice. Yet, there are a number of problems that are quite typical with these agreements.

The Following Are Some Of The Most Frequent Issues:

  1. Deficiency of Clarity in The Terms of the Agreement: It is necessary that the terms of the agreement be clear and unambiguous in order to prevent future misunderstandings or confusion. Yet, a lot of license and leave agreements are poorly worded and leave out essential information. This might eventually cause issues between the landlord and the renter.
  2. Incorrect rent computation the renter may find it difficult to pay the rent if the landlord sets it at an exorbitantly high price. On the other side, if the landlord fails to account for all of their expenses, they may not be able to cover them. Yet, this may provide difficulties in the future.
  3. Neglect of The Maintenance of the Property: Throughout the term of the lease, the property must be properly maintained. This includes doing routine maintenance tasks including cleaning, repairing, and repainting. The condition of the property over time may degrade to the point that it is no longer safe for human occupancy if routine maintenance is not performed.

Conclusion

The leave and license are an agreement that relieves both parties of any dispute arising from or linked to the rental agreement. The majority of people in India now choose to rent rather than own a home as a consequence of the country’s significant increase in emigration. Several homes and apartments in India that are owned by both Indian citizens and non-Indians are empty and underutilized. Since keeping it in pristine condition would be too expensive for the landlords, they have made the decision to allow it to decay instead. Rental revenue in India is quite modest when compared to other risk-free market activities. E-registration is the name given to the process through which the Indian government has lately introduced an alternative to the traditional method of personally going to the office of the Sub Registrar in order to register businesses and organizations.

Also Read:
What Are The Pros And Cons Of Commercial Lease Agreement In India?

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