Riya Tayal | 25 May 2022

What is the Leave and License Agreement

What is the Leave and License Agreement

A Leave and License Agreement is a legal document governed by the Indian Easement Act, 1882. It is a document that enables one party to allow another party to use their property or immovable assets for a specified period of time without any change in ownership. Such an agreement is commonly used among the tenants and landlords in India, especially in the rental real estate segment. However, in the case of the commercial realty segment, the use of lease agreements is more common. 

To clear the difference between the two, a lease creates an exclusive interest in the real estate in favour of the tenant. In contrast, a Leave and License Agreement does not create any interest in the property in favour of the tenant. Under the Leave and License Agreement, the rights of the tenant involve making use of the premises for a particular purpose, as per the terms stated in the agreement. And, the legal possession of the real estate still remains with the owner of the property. 

To put simply, a Leave and License Agreement is an agreement wherein the licensor temporarily allows the licensee to occupy and use the licensor's immovable property for residential use or for carrying out any business activity. For this, the licensor must be paid by the licensee a fixed amount, known as rent. Besides this, it is important to get the agreement registered before the sub-registrar at the place of jurisdiction or the place where the immovable property is located. 

Let's now move forward and look at other aspects of the Leave and License Agreement, including its features, advantages, termination, and much more. 

Features of a Leave and License Agreement

The Leave and License Agreement, a common choice among the landlords, have the following features:

  • No property rights are designed

  • No transfer of interest is generated from the owner to the tenant 

  • The average duration of a contract is 11 months

  • The amount due to a deposit, License fee, and other charges can be contractually defined by participating individuals

  • The owner has a higher right and benefit when it comes to the cancellation and eviction of a tenant 

Why is there a need to register a Leave and License Agreement?

Are you wondering why it is necessary to register a Leave and License Agreement? If yes, we’ve an answer! Many licensors mistakenly assume that it is necessary to sign a Leave and License Agreement in order to give them legal protection. But in reality, the Leave and License Agreement must be registered with the office of the sub-registrar. In addition, at the time of registering the agreement, the sign of two witnesses is required. 

You must know that the licensor is responsible for registering the Leave and License Agreement with the government. The non-registration of this agreement might leave the licensor responsible for incarceration or a monetary fine, along with the possibility of pushing the premises into litigation. 

Advantages of Leave and License Agreement 

Below mentioned are the top advantages of a Leave and License Agreement:

1. Clarity

The Leave and License Agreement gives complete clarity among the parties to comprehend the terms and conditions of the agreement. 

2. Mentions conditions

The Leave and License Agreement clearly defines all the terms and conditions granted by both the parties signing the agreement. 

3. Enforceable

The agreement is enforceable from the date mutually agreed and accepted by both the parties involved in the agreement. 

4. Legally binding

The Leave and License Agreement is a legitimate document merging on both the parties signing it. Also, the terms and conditions stated in the agreement and agreed are to be satisfied by both parties. 

5. Secures property

The Leave and License Agreement is a contractual document, and it is in written form. It ensures the property of the Licensor from any fraudulent activity. 

Termination of the Leave and License Agreement 

If you wish to terminate the Leave and License Agreement, you may terminate the agreement by providing the licensee with an advance written notice under the provisions of your lease agreement. 

If all the involved parties agree to terminate the agreement at any time by mutual consent, it can also be achieved. Additionally, the licensor can also incorporate a clause stating that the premises are to be maintained properly, rent, and tenure of the agreement. And, the licensor can penalise the licensee if any fixtures or furnishings are found out of order. 

The penalty can be deducted from the security, depending on the damage suffered by the party. It's also important to note that penalty could be over and above the security deposit. 

Differences between Lease & Leave and License Agreement

Following are the differences between Lease & Leave and License Agreement:

Difference 1: A lease creates an interest in the real estate, unlike a Leave and License Agreement.

Difference 2: Licenses are revocable, whereas leases are not.

Difference 3: A lease grants a tenant possession over the property. On the other hand, a Leave and License Agreement only grants permission to occupy the property.

Difference 4: Leases are not determined by the grantor, whereas licenses are.

Difference 5: A lease creates inheritable rights, but this is not true with licenses. 

Difference 6: Leases are transferable while licenses are non-transferable.

We hope this article on the Leave and License Agreement has cleared all your doubts relating to the same. In contrast to the standard rental deed, the Leave and License Agreement offers a more comfortable tenant-owner relationship. They are more commonly used as a perfect alternative to leases and similar documents in the cities like Mumbai. If you have any questions relating to the topic, you can ask us by commenting below. 

Also Read: What is a lease agreement and what are its important elements?

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