A leave and license agreement are compatible with a rental agreement. Simply put, a leave and license is an understanding, where one party (the owner, named the ‘licensor’) provides a limited right to use his/her premises to the other party (called the ‘licensee’) for rent. This arrangement is recommended since it generates no lasting legal rights in favor of the license. Linked to a lease agreement a leave and license agreement has restricted authority with regards to the property.

Leave and Licence Agreement

A Leave and Licence agreement a document that gives the Licensee permission to hold the property of the Licensor. Occupancy is thus issued based on leave and license and not based on the ownership. Such an arrangement encourages eviction and gives greater control to the landlord in general.

Leave and Licence agreement is separate from leases as leases generate interest in a property whereas the former does not. Also, leases are easy to transfer which is not the case in a Leave and Licence agreement.

As per Indian law, a “Licence” is a right given by one person to another person or a group of people. Such rights normally involve actions performed in or upon immovable property, actions that would seem unlawful otherwise. The license gives personal rights and such rights are not transferable. Licensor is the person who gives the Licence and a Licensee is a person who pays for the Licence and holds the rights. Licenses must not be mixed with leases or rental agreements as they are each diverse in their own characteristics.

Why there is a need to register a leave and license agreement?

Many licensors erroneously assume that it is necessary to sign a leave and license agreement to give them legal protection. Some others have the contract approved by a notary. This isn’t legally adequate. Registration of a permit and license agreement is mandatory (Section 17 of the Registration Act, 1908). The agreement must be registered with the Office of the Sub-registrar. While registering the agreement, the signatures of two witnesses are required.

The licensor is responsible for registering the leave and license agreement with the government; non-registration of a leave & license agreement also leaves the licensor responsible for a monetary fine or incarceration, in addition to the possibility of pushing the premises into litigation. Rs. 1000 is the registration fee payable on the leave and license agreement.

Features of A Leave and Licence Agreement

A common choice among landlords, the Leave and Licence agreement has the following properties.

  • No transfer of interest is generated from owner to tenant
  • No property rights are designed
  • The amount due to a Licence fee, deposit, and other charges can be contractually defined by participating individuals.
  • The average duration of a contract is eleven (11) months.
  • The owner has a higher right and advantage when it comes to the cancellation and eviction of a tenant.

How can legally make a leave and license agreement valid? 

Print the appropriate value on stamp paper after you have prepared the material of the deed. The licensor and the licensee must then, together with the signatures of two (2) witnesses, place their signatures in the designated locations.

We have a checked, pre-drafted template from a lawyer that helps you to build a Leave And Licence agreement in a matter of minutes. We also have the feature of printing it on stamp paper and shipping it to your preferred address! Do give this one a shot.

Differences Between Lease and Leave & Licence Agreement

Following are the basic differences between a lease agreement (commonly referred to as a rental agreement) and a Leave and Licence agreement.

  • A lease generates an interest in the property while the Leave and Licence agreement does not.
  • A lease gives a tenant independent possession of the immovable property while the Leave & Licence agreement only permits to occupy a certain property.
  • Leases are transferable but Licences are not.
  • Licenses are reversible by the Licensor whereas leases are not reversible by the lessor.
  • Leases are not known by the grantor, Licences are.
  • A lease formulates heritable rights while Licences do not.

Advantages 

At this time, we’d like to state that this appropriate deed favors the owner and not the tenant. Don’t take wrong, this deed does not Leave the tenant exposed or unsafe, it just favors the landlord by a clear margin, that’s all.

1) Mentions Conditions: It defines all the terms and conditions granted by both the parties signing it.

2) Clarity: It gives clarity among the parties to comprehend the terms and conditions of the agreement.

3) Enforceable: It is enforceable from the date jointly accepted by both the parties in the agreement.

4) Secures property: The Agreement is a contractual document and it is in written form. It ensures the property of the Licensor from any fraud.

5) Legally Binding: The Agreement is a legitimate document. It is merging on both the parties signing it and the terms and conditions agreed are to be satisfied by both the parties.

Renting in Today’s Real Estate Market

The real estate market has always been considered as complex and tricky, with transactions that see parties involved often putting their life’s hard-earned money at stake. With several complicated deeds being thrown around, the layman has always been timid about venturing into the legal side of it.

The last few years saw the real estate market undergoing more than a few changes. The Indian Janata is growing frequently aware of the law governing deals and transactions. Eventually, the market saw a shift in the very way in which documents and agreements were enlisted.

One of the most basic real estate functions, which even single people like you and me access, is renting. In metro cities and towns with large populations, renting homes and through rental agreements have become a need. While everyone agrees that a rental agreement needs to be in place, most do not understand the implications of not having one.

As you may now know, a rental deed is a document outlined and signed by the owner of the premise and the tenant who intends to occupy it. The document, in length, presents the monthly rent and several other charges. Basically, this document transfers the right to hold property from its owner, to a tenant, for a fixed period of time and for a fixed amount of money.

Leave & License to the Landlord’s Rescue

What if the owner does not want to transfer the interest on the property to his employer? What if the employer refuses to leave? Indian law states that as long as the employer is familiar with the payment of taxes and other charges, you can not dismiss him for a period of 5 years unless he has done something in breach of contract.

Thus the leave and License Agreement arises. This agreement, which is often used as a substitute for the old lease agreement, is now being used more often in cities like Mumbai. A leave and license agreement is the safest way for a landlord, experts say.

Unlike a lease agreement, the Lease and License agreement does not transfer the right to enjoy the property to the employer. It is a license issued by a property owner called a licensee to a licensee to use the property for a period of time under certain terms and conditions, without creating a relationship with the property owner. Throughout the term of the contract, the right to own property rests with the owner. By definition, its document gives a person the right to do or continue to do something inside the immovable property. No transfer of property interest is made, it simply gives the right to enjoy the property temporarily while the landlord retains full interest.

 Essential elements of leave and license agreement

There are the general conditions to be included in an arrangement for leave and a license. These characteristics are not comprehensive, and not all of these characteristics might be present in an agreement. It depends on the conditions negotiated between the licensor and the licensee respectively.

  • Definition of the licensor and the licensee

-The agreement must clearly verify the licensor and licensee.

  • Title of the licensor

– The power of the licensor to reach the agreement must be seen. The licensor may reach into the Agreement as an owner or as a person completely legal by the owner.

  • Title of the licensee

– Where the licensee has agreed on part of a firm or a company, the source of authority of the licensee (board resolution, etc.) to access the contract must be stated in the agreement.

  • Definition of the premises

– The agreement must verify the premises being let out and must define the actual portion of the premises that is being given on a leave & license basis. These assist avoid mixing about the entitlement of the licensee.

  • Term of the license

– The agreement must be explicit as to the length of the license. The relationship between the licensor and the licensee comes to an end after the duration of the license is finished. Generally speaking, for convenience, a clause is included for the extension of the term upon completion of the initial duration by mutual consent of the parties.

  • Use of the premises

– The licensor may want to limit the manner of use of the premises. Therefore, the agreement can define whether the premises are to be done for residential or commercial purposes only.

  • Consideration for the license

– It is important to specifically indicate the amount of rent payable, the date and method of payment and interest in the event of delayed payment. Generally, rent is agreed to be charged on a monthly or quarterly basis in advance.

  • Security Deposit

– In most cases, the licensee is required to keep an unintentional deposit with the licensee. This deposit protects the interest of the licensee in the event that he does not pay the rent by the licensee. In some cases, the licensee may be required to pay rent a few months in advance. The amount and terms of use and refund of such deposit and advancement must be clearly stated in the agreement.

  • Raises rent

– For licensing periods of more than 1 year, the licensee may require that the rent increase in each subsequent year. This increase is often referred to as a percentage of the tax paid in the previous year.

  • Other costs and charges

– The agreement must specify who is between the licensee and the licensee who will bear the costs of services such as electricity, water, and maintenance. Usually, these costs are borne by the licensee.

  • Common facilities

– If the site has certain facilities associated with it, such as using a common area, roof, park, swimming pool, car park, library, club, gym, etc., is the licensee of those properties.

  • Furniture and appliances

– Most of the time, buildings are rented and furniture and appliances are mixed. It is recommended that you record a complete list of all furniture and electrical appliances that have been approved for licensing and location. Replacement provisions or damages for such services may be provided in the agreement.

  • Right to sub-license

– Unless the agreement states, the licensee does not have the right to grant local licenses to a third party.

  • Termination of the license

– It is necessary to determine events where the license may be terminated. This provision serves as a guide for the licensee and ensures the safety of the licensee.

Termination of the Leave and License Agreement

You may terminate the agreement by providing the licensee with an advance notice under the provision of your lease agreement.

If all parties agree to terminate at any time by mutual consent, it can also be achieved. In addition to these, the Licensor can also incorporate a clause stating that the premises are to be properly maintained, annual rent increment, security number, rent, and tenure of agreement and penalize the Licensee if any furnishings or fixtures are found out of order.

The penalty could be credited from the security or depending on the damage suffered by the party, it could be over and above the security sum.

To Remember Things 

In contrast to the standard rental deed, the Leave and License arrangement provides a more comfortable owner-tenant relationship. They are commonly used as an alternative to leases and similar documents in locations like Mumbai.

Though, if you are a tenant who believes that this is not your cup of tea, consider free to go by our pre-drafted, ready to practice rental agreements. It is a complete document that includes both tenant and landlord.

We provide all kinds of legal services like Trademark RegistrationCompany RegistrationFSSAI License, and many more. So, contact the expert team of “LegalRaasta”, for a completely smooth and hassle-free process.

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