What is a Leave and License Agreement? An Overview for Indian Property Owners

June 27, 2023 . Home Buyer's Guide . 10 min read

Legal Definition of a Leave and License Agreement

The leave and license agreement, which finds its foundation in the Indian Easements Act of 1882, entails granting restricted rights to utilize a property. Under this agreement, the landlord retains the authority to revoke any permissions granted to the tenant at their discretion. This type of rental agreement is typically favored when the property owner intends to lease out the premises for a relatively shorter duration.

Online Leave and License Agreements

In today’s digital age, it is possible to obtain leave and license agreements conveniently through various online platforms. These platforms provide a hassle-free process for creating and acquiring such agreements.

Understanding Property Ownership

In a leave and license agreement, it is important to note that the tenant does not acquire any ownership rights over the property. This type of agreement falls outside the purview of the rent control act in India. Essentially, the owner grants a license to the tenant to use the property while retaining ownership. The owner, in turn, vacates the property.

In contrast, under traditional rental agreements, tenants may have the opportunity to claim ownership of the property if they have resided in the same place for a minimum of 10 years. This right is protected under the Rent Control Act of India. In such cases, landlords face limited options to evict the tenant or increase the rent.

How to Terminate a Leave and License Agreement

Terminating a leave and license agreement is a relatively straightforward process. The tenant is required to provide the landowner with advance notice in accordance with the stipulations outlined in the rental agreement format. In some cases, termination may occur by mutual consent of both parties at any given time. The licensor also has the option to include clauses regarding the proper maintenance of the premises, along with potential penalties for non-compliance with the agreed-upon terms by the licensee.

Key Features of a Leave and License Agreement

The Leave and License agreement holds considerable appeal for landlords, offering several notable features, particularly in the online realm:

1. Non-Transfer of Interest:

In a Leave and License agreement, there is no transfer of an interest in the property from the owner to the tenant. The tenant merely gains permission or a license to use the property for a specified period.

2. Absence of Property Rights:

The agreement does not grant the tenant any ownership or property rights. The tenant’s rights are limited to the duration and conditions specified in the agreement.

3. Customizable Financial Terms:

The participating parties have the flexibility to mutually determine the license fee, security deposit, and other associated expenses through contractual arrangements.

4. Typical Duration:

Leave and License agreements commonly span an average duration of eleven (11) months. However, the duration can be negotiated and specified as per the requirements of both parties.

5. Enhanced Rights for the Owner:

In terms of cancellation and eviction, the owner holds a greater advantage and authority over the tenant. The agreement grants the owner the necessary rights and legal recourse in case of tenant non-compliance or breach of terms.

Key Considerations Before Signing a Leave and License Agreement

While there are no definitive advantages or disadvantages of a leave and license agreement, it is essential to be aware of certain crucial aspects before signing the agreement. Here are a few key points to keep in mind:

• Party Clause: It is imperative to include a comprehensive clause that clearly identifies the involved parties. This should entail the names, addresses, and proof of identity of both the landlord and tenant. In the case of a commercial agreement, it is important to specify the firm’s name and corporate identification number (CIN).

• Definitions Clause: This clause serves to clarify various terms and conditions utilized throughout the agreement, ensuring a common understanding between the parties involved.

• Premise Clause: The premise clause should provide detailed information about the rental property, including its location, available space, pricing, and built-up areas.

• Duties and Responsibilities: It is essential to outline the respective responsibilities and obligations of both parties within the agreement. Clearly defining these duties ensures legal compliance and facilitates a smooth landlord-tenant relationship.

• Dispute Resolution: Including a dispute resolution clause is crucial to establish a framework for resolving potential conflicts. Popular methods for dispute settlement include arbitration, conciliation, or resorting to legal proceedings.

By considering these factors and ensuring their inclusion in the leave and license agreement, both parties can have a clear understanding of their rights and obligations, reducing the likelihood of disputes and facilitating a harmonious tenancy experience.

Conclusion

The benefits of a leave and license agreement are manifold, as it provides legal clarity and protection for both landlords and tenants. This agreement grants restricted rights to tenants without transferring property ownership. It offers flexibility in terms of contract duration, customizable financial terms, and enhanced rights for the property owner in case of cancellation or eviction. It is important to differentiate this agreement from traditional rental agreements governed by the Rent Control Act, where tenants may have the opportunity to claim ownership rights after a certain period. By understanding the key features and considerations of a Leave and License Agreement, both parties can ensure a smooth and legally compliant tenancy experience.