Leave And License Agreement

Leave And License Agreement:

Meaning of Leave And License Agreement:

Leave and license is an agreement entered into between the parties wherein the licensee (a person or a party who pays for the license and enjoys the right over the property) gets the permission to occupy the licensor’s (a person or a party who grants the right in the property to the licensee) property.

The rights granted are personal rights and therefore, not transferable to a third party  sec 54 of the Easements Act) The only exception is in case of a public entertainment. It has to be noted that a leave and license agreement is different from a lease because the leases create an interest in property and the leases are also transferable, whereas this is not the case in a leave and license agreement.

Section 52 of the Indian Easements Act, defines license as an agreement ‘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 a right be unlawful’

This definition clearly states that it is a grant of permission by one person to another to use the immovable property. It also states that if the use of the property is without permission or an agreement, the same is unlawful and the landlord has a right to evict the person using such property unlawfully.

The duration for such agreements is 11 months, but they can also be extended for a period of up to 5 years. The reason that such agreements are generally for a period of 11 months is due to the reason that the Rent Control Act does not apply to contracts of less than 12 months and therefore, it becomes easy for the licensor to exercise his rights which is not available under the Rent Control Act because the Rent Control Act favors the tenants and the freedom of the landlord with respect to his rights is thus restricted.

Important Clauses In The Leave And License Agreement:

Following are the important clauses to be mentioned while drafting a leave and license agreement:

1.Names of the parties (names of the licensor/s and licensee)

2.Address of the property.

3.Duration of the agreement (the dates have to mentioned specifically)

4.License Fees (this should include the consideration, due date for payment and penalty in case of a default in the payment, delay in rent, security deposit, returning the deposit).

5.Repairsand alterations(furniture and fixtures)

6.Lock in period

7.Notice period

8.Escalation clause (market rate in a particular city)

9.Inspection

10.Termination of the license.

Documents Required For A Leave And License Agreement:

In Maharashtra, it is essential and mandatory to register the leave and license agreement and to pay the stamp duty. There are various modes for the payment of stamp duty such as e-challan, stamp paper, e-stamp etc. Sec 17 of the Registration Act, 1908 makes it compulsory to register the leave and license agreement. It has to be registered with the Sub-Registrar’s office along with the signatures of two witnesses. It is the licensor’s duty to register the agreement. Registration can also be done online i.e. e-registration. It requires the Aadhar details of the parties. In some cases, the police verification is also necessary (in case where property is situated in Mumbai).

Statutory Rights To The Licensor And Licensee:

Following are the rights of the Licensor as per sec 52 of the Easements Act, 1882:

1.The licensor is bound to disclose to the licensee any defect in the subject matter of the property which may affect the licensee.

2.The licensee is not bound by a license where a defect which has not been mentioned by the licensor affects the licensee.

Following are the rights of the Licensee as per sec 52 of the Easements Act, 1882:

1.The licensee is bound to take away all the goods after the termination of the agreement, within a reasonable time from the licensed property.

2.The licensee is entitled for the refund of the consideration paid by him on the termination of the license.

Decisions of the Supreme Court in Associated Hotels of India Ltd. vs. R.N. Kapoor [AIR 1959 SC 1262] summed the concept of License as under:

“Under the aforesaid section, if a document gives only a right to use the property in particular way or under certain terms while it remains in the possession and control of the owner thereof, it will be a license. The legal possession, thereof, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission, his occupation would be unlawful. It does not create in his favor any estate or interest in the property.”

Conclusion:

It is essential to draft a leave and license agreement very carefully by following all the means and procedures mentioned above in order to avoid unnecessary litigation for a number of years or to avoid the licensee to use the property with a malafide intention by claiming the right over the property.

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