May 15, 2024

What is leave and licence agreement?

A leave and licence agreement is a legal document that gives the licensee permission to occupy the property of the licensor. As opposed to a rental arrangement, a leave and licence agreement gives the landlord greater power and does not transfer right of enjoyment of the property to the tenant. The licensee or tenant can only use the property for a certain period of time, adhering to some terms and conditions and the right of possession remains with the owner. Also, unlike leases, a leave and license agreement is not transferable.

Salient features of a leave and licence agreement:

# Owner-to-tenant transfer of interest is not mandated

# There are no property rights created

# The licensor and licensee can mutually agree on licence fee, deposit amount and other applicable levies

# The most common practice is to create a contract of 11 months’ duration

# The powers are skewed towards the owner when it comes to cancellation of the agreement or eviction of the tenant

How is a leave and licence agreement different from a lease?

# A leave and licence agreement doesn’t create an interest in property unlike a lease

# In a lease, the tenant gets exclusive possession of an immovable property while a leave and licence agreement simply allows the licensee to occupy a certain property

# A leave and licence agreement is not transferable like a lease

# The licensor can cancel a licence in a leave and licence agreement, but a lessor can’t revoke a lease

# While licences are determined by the grantor, leases are not

# A lease agreement creates heritable rights, but licences don’t

What are the pluses of a leave and licence agreement?

# It gives more power to the owner and makes eviction easier

# It doesn’t confer rights to the property, simply permission to occupy

# Property rights are not created in favour of the lessee

# Doesn’t involve any transfer of interest

# Falls under Indian Contract Act and not the Rent Control Act, since it’s not a tenancy

Points to remember before signing an L&L agreement:

# Party clause: The names of the owner and tenant, along with their respective addresses and proof of identity, are mandatorily required. If the deed is commercial in nature, the name of the firm as well as the corporate identification number (CIN) are necessary

# Definitions clause: This spells out all the terms and conditions of the agreement

# Premise clause: This must incorporate the situation, space, price and built-up areas of the rental property

# Responsibilities: The obligations and responsibilities of both parties must be clearly mentioned and those conditions must be legally binding

# Dispute resolution: The agreement must lay down modalities of resolving disputes, like arbitration, conciliation or moving court

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