Legal Agreements

What Is the Difference Between a Lease & Leave & License Agreement?

calendar26 Apr, 2023
timeReading Time: 6 Minutes
What Is the Difference Between a Lease & Leave & License Agreement?

What is a Lease Agreement?

A lease agreement in India is a legal contract between a landlord (lessor) and a tenant (lessee) that outlines the terms and conditions of renting a property. It is also known as a rental agreement or a rental contract.

The lease agreement typically includes details such as the name and address of the landlord and tenant, the term of the lease, the rent amount and payment schedule, security deposit, maintenance and repair responsibilities, rules and regulations for the use of the property, and other important clauses.

In India, the lease agreement must be in writing, and both parties should sign it. It is recommended to register the lease agreement with the local authority to make it legally binding and enforceable. The registration of the lease agreement involves paying a nominal stamp duty and registration fee.

A well-drafted lease agreement can help prevent disputes and misunderstandings between the landlord and tenant and provide a clear understanding of the rights and responsibilities of both parties.

Legal Aspects

Anywhere in India, a Leave and Licence Agreement is acceptable as proof of address. It is a legal instrument that binds the licensor with regard to the amount of the security deposit, the rent to be paid, the length of the stay, and other obligations for using the property. Once both parties have signed the contract, certain clauses cannot be modified. It is crucial for the tenant since it safeguards his right to occupy the space and makes plain the rules governing his stay.

Having a Leave and Licence agreement in place for 11 months is safer. The agreement should be renewed after 11 months for an additional 11 months. Keep the duration of your contract to 11 months.

Why a Leave and Licence Agreement Is Better For Homeowners than A Regular Rent Agreement?

The worst nightmare for any property owner is squatters. We frequently hear reports of renters illegally occupying sizeable houses because owning their real estate is out of reach for a big proportion of people. Typically, if the squatter refuses to leave your property, it results in a protracted legal battle. Or a settlement reached outside of court that may not necessarily be in your best interests. Do not fret, though, since we have a mechanism to revoke the Leave and Licence Agreement.

You Can Rent Out Your Property In One Of Two Ways:

You have two options: execute a standard rent agreement or create a leave-and-license agreement.

In either case, as a property owner, you would want to rent out your property with the full confidence of the law to ensure that ownership of the property will remain “vacant and unencumbered” at the end of the contracted term.

What is a Leave and Licence Agreement?

An agreement known as a “Leave and Licence” grants the Licensee permission to inhabit the Licensor’s property. As a result, permission to occupy is issued on a leave and licence basis rather than a tenancy basis. Such a contract facilitates eviction and gives the landlord more authority overall.

The difference between a leave and licence agreement and a lease is that the latter creates an interest in the property, whereas the former does not. Additionally, unlike a Leave and Licence arrangement, a lease can be transferred.

A “Licence” is a right conferred by one person to another person or group of people in accordance with Indian law. These rights typically apply to activities carried out on or in relation to immovable property that otherwise appear to be illegal. Personal rights granted by a licence are non-transferable.

The person who provides the licence is known as the licensor, while the person who purchases the licence and uses its rights is known as the licensee. Leases and rental agreements should not be confused with licences because each is unique in its own way.

According to Section 52 of the Indian Easements Act[1], “where one person grants to another, or to a specific number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which, in the absence of such right, would be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a licence.”

In Leave and License Agreement:

Owner license the property to the tenant, and the tenant leaves the property at termination or the end of the license period.

Tenant cannot claim ownership of the property. This agreement doesn’t come under the Rent Control Act.

In Rental Agreement:

Tenants may claim ownership of property after staying for atleast 10 years and claiming under the Rent Control Act. You have limited options to vacate the tenant and increase rent.

To avoid such a situation, execute a rental agreement only for 11 months. An 11-month rent agreement doesn’t come under the Rent Control Act.

To make your agreement even safer, choose Leave and License agreement for 11 months. Post 11 months, renew the agreement for another 11 months. Keep your agreement limited to 11 months.

A tenant should not understay or overstay. I mean, financially, it’s not healthy if the tenant terminates the agreement within 11 months, as you may spend again on renovation, painting, cleaning, repairs, and broker fees.

The tenant should not stay more than 10 years as well, as this may become legally challenging for you.

The ideal tenancy is around 5 years.

Here’s A Format to What and How a Leave Agreement Is Made:

Leave and License Agreement

This Leave and License Agreement (“Agreement”) is made and entered into on [Date] by and between [Licensor Name] (“Licensor”), residing at [Licensor’s Address], and [Licensee Name] (“Licensee”), residing at [Licensee’s Address].

WHEREAS, Licensor is the owner of the property located at [Property Address] (“Property”), and Licensor desires to grant a license to Licensee to use the Property on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

Grant of License: Licensor hereby grants to Licensee a non-exclusive, non-transferable license to use the Property for residential purposes only, commencing on [Start Date] and ending on [End Date]. Licensee shall have the right to use the Property only for the purpose of residential use and shall not use the Property for any commercial or other purposes.

License Fee: Licensee shall pay Licensor a license fee of [License Fee Amount] per month, payable in advance on the [Payment Date] of each month.

Security Deposit: Licensee shall pay Licensor a security deposit of [Security Deposit Amount] on or before the Start Date. The security deposit shall be refunded to Licensee at the end of the license period, subject to any deductions for damages, unpaid license fees or other charges.

Use of Property: Licensee shall use the Property in a reasonable and lawful manner, and shall not cause any damage to the Property or any disturbance to the neighbors. Licensee shall keep the Property clean and in good condition, and shall not make any alterations or additions to the Property without the prior written consent of Licensor.

Maintenance and Repairs: Licensor shall be responsible for the maintenance and repairs of the Property, except for any damage caused by Licensee. Licensee shall immediately notify Licensor of any damage or need for repairs to the Property.

Termination: Either party may terminate this Agreement upon [Notice Period] days’ written notice to the other party. Licensee shall vacate the Property on or before the End Date or the termination date, whichever is earlier.

Default: In the event of any default by Licensee, including but not limited to failure to pay the license fee, Licensor may terminate this Agreement and remove Licensee from the Property. Licensor may also deduct any unpaid license fees or other charges from the security deposit.

Governing Law: This Agreement shall be governed by and construed in accordance with the laws of India.

Entire Agreement: This Agreement constitutes the entire agreement between the parties and supersedes all prior or contemporaneous agreements, understandings, negotiations, representations, and warranties, whether oral or written, between the parties.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

[Licensor Name] [Licensee Name]

[Licensor Signature] [Licensee Signature]

What are the differences among the three types of agreement?

Lease/Rental Agreement Leave & License Agreement
Tenant is given exclusive possession of the movable property. only grants authority to occupy a specific piece of property
Eviction is not easily achieved Makes eviction easier
Governed by Rent Control Act Governed by Indian Contract Act
Not revocable by the landlord Revocable by the landlord
Stamp duty is higher Stamp duty is lower
Creates heritable rights Does not create heritable rights
Creates property rights for tenant No property rights are created
Is transferable and terminationis not easy Is not transferable and termination is easy
Leave and licence agreement

How Can A Leave and Licencing Agreement Be Made Legally Valid?

Once the deed’s content has been produced, print it on stamp paper that meets the necessary requirements. The signatures of two (2) witnesses, as well as those of the licensor and licensee, must then be placed where they have been specifically noted.

Conclusion

In conclusion, lease, leave, and license agreements serve different purposes and involve different parties and assets. Lease agreements are used to rent real property for a specified period, while leave and licence agreements are used to grant permission. The licensor grants the licensee a temporary right to use and occupy the licensor’s real estate property for residential or commercial purposes. The licensee will pay the Licensor a predetermined sum known as a rental charge in exchange for this. Before the sub-registrar, the licensor and licensee record the contract. Wherever the property is located, the registration takes place.

Read Our Article: Everything About Leave And License Agreement

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