LEAVE AND LICENSE

If you’ve ever left the comfort of your familial home and gone house hunting to set up a temporary home for yourself or you’re now planning on doing so, you would have come across the term “Leave and License”.

WHAT EXACTLY DOES THIS MEAN?

A ‘License’ is defined in The Indian Easement Act as: “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” .

A Leave and License (Agreement) refers to a document which is a written understanding between two parties, where one party being the owner of an immovable property is desirous of giving out their immovable property and the other being a party who takes the same for their use on certain terms and conditions agreed by and between them. The owner in such a case is described as the “Licensor”, and the person taking the premises for their use is the “Licensee”.

In such an Agreement the Licensor gives a limited right to use his premises to the other party for a fixed (monthly) amount known as “Compensation”. The concept of ‘Leave and License’ literally implies that the owner “Leaves” the premises with certain amenities and facilities and provides a “License” to the Licensee to use the premises with such amenities and facilities provided therein.

A Leave and License agreement may seem akin to a “Rental” arrangement (i.e. A Lease Agreement) at first glance. However, a Rental Agreement and a Leave and License are two completely different concepts and cannot and should not be used interchangeably.

Lease is defined in The Transfer of Property Act as: “A lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. Lessor, lessee, premium and rent defined.—The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.”

WHAT ARE IT’S IMPLICATIONS ?
The concept of “Leave and License” implies that the Agreement itself is of a temporary and fixed time frame whereas a Rental Agreement need not have a fixed tenure and will continue in perpetuity or till a Clause of the Agreement is breached by one or both parties. Compared to a lease agreement, a leave and license agreement has limited authority with regards to the property. It does not transfer the interest or create any interest in the immovable property. These are the reasons a Leave and License is preferred by the owners of properties so as to secure their immoveable property.

A LICENSOR OR A LICENSEE FRIENDLY AGREEMENT
The main focus of the Clauses in an Agreement for a Leave and License differs depending on who has made the agreement. Now, as far as the Licensee is concerned, it should be that they get to stay/use the premises for the term of the License as long as they is not doing anything detrimental to the premises.

While an owner of property wishes to generate income from his immoveable property by “Licensing” it out, they may also be concerned about the implications under Tenancy laws. These laws, give legal rights under certain conditions in the premises to the occupier. Leave and license is a way in which an owner can put the premises to good use without the fear of him being forced to resort to lengthy litigation as a means to recover their property.

A well balanced Leave and License Agreement will secure both “the Licensor” (person who owns the property) as well as the “Licensee” (person wishing to give out the premises on License). The main crux of the Licensor’s clauses in a “Leave and License” is on the rights of ownership of the property and that merely Licensing out one’s property does not provide the other person with any rights to the property aside from a temporary right to reside in the premises and use the facilities and amenities provided therein. It provides permission to use the premises without the “transfer of an interest in the property” by the owner.

Sources:
Maharashtra Rent Control Act
Maharashtra Stamp Act
Indian Easement Act
Transfer of Property Act