Stamp Duty, Registration of Leave, License Agreements

People residing in Leave and License accommodations don’t usually have bills, electricity bills, telephone bills or water bills issued in their names as it is in the name of the owner of the premises. As a result, most migrants find it difficult to furnish proof of local address. A Leave and License Agreement once registered can be used as a proof of residence for the occupier in addition to proving the legitimacy of one’s Licenseeship. It is important to know the stamp duty on leave and license agreement, so as to avoid unnecessary dues.

What is a Leave and License Agreement?

A leave and license agreement or a leave licence agreement is a legal instrument that allows one party to allow another to use their immovable assets, such as property, for a fixed length of time without changing the asset’s ownership. In India, landlords and renters frequently employ leave and license agreements, particularly in the rental housing sector. However, in the commercial real estate sector, lease agreements are more typical. Leave and license agreement charges are payable as per the rules of the government. 

Rights of the Tenant – To use the premises for a certain purpose in accordance with the terms of the agreement.

Leave and License Stamp Duty Calculator

The stamp duty on rental agreements consists of a flat charge of 0.25% of the total rent for the time that must be applied to all leave and license agreements. It’s worth noting that the stamp duty rate is the same for both residential and commercial properties for a period of up to 60 months.

Given below is the Leave and license agreement stamp duty aka rent stamp duty calculator –

The stamp duty for leave and licence agreement is calculated for 12 months, regardless of the length of leave and licence, and includes any advance rent paid or to be paid, as well as any deposit paid or to be paid, with or without interest. (The calculation is the same whether the licence is for one month or 60 months.)
Read: What is Land Encroachment and How to Deal with it Legally?

Make sure you are informed of the stamp duty on leave and license agreement, so as to avoid any unnecessary dues. 

How Does one Calculate the “Stamp Duty” Payable?

While registering a Leave and License Agreement for stamp duty, it is necessary to pay certain amounts as “Registration Fees” and “Stamp Duty” to the Registrar of Assurances which is a State Authority.

In accordance with the prevailing laws, the following formula can be used to calculate the stamp duty payable on a Leave and License Agreement (For a term not exceeding 60 months including a renewal clause):

• License Fee per month x Number of months = [A]
• 10% x Refundable deposit x Number of years of the agreement = [B]
• Non-refundable deposit / Advance Licence Fee = [C]
• Total economic value subject to Stamp Duty = [D] = [A] + [B] + [C]
• Stamp duty = E = 0.25% x D

Clearly, the higher the monthly Licence Fees and deposit, the higher the stamp duty.

However, should the Leave and License Agreement be for a period exceeding sixty months (with or without a renewal clause, the valuation of Stamp Duty payable would differ substantially, in accordance with prevailing laws and the adjudicated value of the property.

Read: The Ins and Outs of Purchasing Your First House with Section 80EE

Registration of Agreement

The law does not prescribe any minimum or maximum period for which a license may be granted. A Leave & License Agreement for a term below a period NO BROKER – II – 30.9.2019 of one year, while not mandatory (except in the State of Maharashtra), is highly recommended to be registered.

By virtue of an Instrument or Deed, which by itself does not create any Right, Title or Interest in an immovable property does not require registration.

Read: Sales Deed Vs. Sale Agreement, What Do You Need?

Leave and Licensing agreement for Mumbai and Maharashtra – As per the laws on stamp duty on leave and licence agreements in Maharashtra, any agreement for leave and licence or letting of any premises entered into between the landlord and the tenant or the licensee, as the case may be in writing and to be registered. You may visit the Leave and Licence agreement main page of the Online filing portal of the Government of Maharashtra to learn more.
Read: Villangam Certificate Explained – Here’s Why It’s Important to Get One

Read Everything You Need to Know About Maharashtra Land Records

Besides, the responsibility of getting such agreement registered shall be on the landlord and in the absence of the written registered agreement, the contention of the tenant about the terms and conditions subject to which premises have been given to him by the landlord on leave and licence or have been let to him shall prevail, unless proved otherwise.

Note: All calculations are done with Mumbai as an example, consult your state authorities for the prevailing statutory dues payable in your state.

Leave and License Agreement Format

This rent agreement is made on this __________ (date) by ________________ (name of the landlord) S/o _______________ (father’s name of the landlord), Address: ___________________________________________________ (residential address of the landlord). Hereinafter called the Lessor/Owner, and first party

AND

_____________________________ (Name of tenant), called lessee/tenant, or second party

The expression Lessor/Owner and the Lessee/Tenant shall mean and include their legal heirs successors, assigns, representatives etc.

Whereas the first party is the owner and in possession of the property No: _______________________________________________________________________________________________ (address of rented property) and has agreed to let out the said property to the second party for a monthly rent of Rs. ______/- (in words) per month.

Now This Rent Agreement Witness as Under:

That the second party will have to pay Rs. ______/- (in words) as monthly rent, which does not include electricity and water charges.
Read: The House Construction Agreement: The Key to a Successful Dream Project

That the second party shall pay one month rent in advance to the landlord that would be further adjusted in the monthly rent.

That the second party shall pay the water and electricity charges on the basis of the consumption to the landlord/owner.

That the second party shall not lease the property to a subtenant under any circumstances without the consent of the owner/landlord.
Read: The Concept of Ancestral Property Acquisition Broken Down

That the second party shall follow all the rules and regulations, and by-laws set by the local authorities in respect of the leased property and will not get involved or do illegal activities on the leased property.

That this rent agreement is granted for a period of eleven (11) months starting from ___________, and this contract can be extended further with the mutual consent of both parties.

That the second party shall not be permitted to do construction in the rented premises. Besides, he/she could do the installation of temporary decoration, wooden partition/cabin, air conditioners etc. without seeking the permission of the landlord.

That the second party is not allowed to make any alteration in the rented property without the written consent of the owner.

That the second party will have to allow the landlord or his authorized agent to enter into rented premises for its inspection or general checking for any repair work if needed.

That the second party shall keep the premises clean.

That the second party shall bear the cost of day-to-day minor repairs.

That this contract/agreement could be revoked before the expiry of this tenancy period by serving a one-month prior notice.

That both the parties have read and understood this agreement and have agreed to sign the same without any pressure from any side.

In WITNESS WHEREOF

The landlord and the tenant have hereunto subscribed their hand at ______ (place) on this the _____________ (date of rent agreement) year first above mentioned in presence of the following witnesses.

Witnesses:

1.

2.

___________ (name of the landlord) _________________ (name of the tenant)

Lessor                                                                                   Lessee

Differences Between Lease and Leave and License Agreement

• Unlike a leave and license arrangement, a lease develops an interest in the property.
• A lease gives a renter exclusive possession of the property, but a leave and license arrangement just allow them to occupy it.
• Leases are not revocable, whereas licenses are.
• The grantor does not choose the terms of leases, but the grantor does determine the terms of licenses.
• Leases can be transferred, while licenses cannot.
• Unlike licenses,a lease creates inheritable rights.

Stamp duty on leave and license agreement are payable at least amount and then varies according to the type and size of the property. The above article gives you all the information about the Leave and license agreement and how you need to go about it. Looking to move to a new house? NoBroker offers the best assistance at the best rates. Drop a comment down below and our executive will be in touch with you.

FAQs

Subscribe