Skip to main content

Lease Agreement or Leave and Licence Agreement, which one to choose?

Lease Agreement or Leave and Licence Agreement, which one to choose?


https://bhoolok.blogspot.in/

Lease Agreement or Leave and Licence Agreement, which one to choose?






At times, the three “L”s can be quite confusing; “Lease”, “Leave and “License”. The terms ‘Lease Agreement’ and ‘Leave and Licence Agreement’ are often misunderstood as the same thing. We are frequently asked these questions- “Which type of Agreement will protect my interests?” “Which agreement ensures my ownership remain secure?”.
To understand these better, let’s look at a scenario, where “A” is the owner of a property who wants to rent his premises “X”, and “B” is someone who needs a premise to stay for a short period. Let’s see in this situation which agreement is more suitable.
In order to ensure that the rightful interest of an individual on a property is not diluted, we need to look at the seven fundamental differences between these two agreements which are:

1.Duration
A Lease Agreement (Lease) is usually created for a certain period but can also be for an unlimited period. The property owner is called the ‘Lessor’ and the tenant is called the ‘Lessee’.
A  Leave and Licence Agreement (Licence) is created for a fixed time period. Here, the owner is referred to as ‘Licensor’ and the occupier as the ‘Licensee’.

2.Transfer of Interest
A Lease is a transfer of interest from the Lessor to a Lessee as defined under the Transfer of Property Act, 1882.
A Licence is a grant of easement right under the Indian Easement Act, 1882. Grant of Easement Right means that it allows a Licensee to use or occupy the premises, without creating any sort of interest on the property.  In case a Licensee remains in an occupation beyond the limited period, he will be considered an unlawful occupant or trespasser.

3.Possession 
In the Lease agreement, there is a delivery of exclusive possession. You may find it relevant to note that in the standard Lease Agreement, the Lessee is always granted peaceful possession without any interference of any kind, which implies that the Lessor needs to take prior permission before entering the premises.
On the other hand, in the Licence agreement, there is no exclusive possession being transferred to the Licensee and the Licensor has all the rights to inspect the premises at any given time.

4.Sub-letting
The standard practice we see across our country is that the Lessee normally has the option to sub-let the premises unless specifically barred by the Lessor.
In the Licence agreement, the subletting is strictly not permitted.

5.Stamp Duty and Registration Fees
Any Lease agreement which is entered for more than a year needs to be compulsorily registered, however, there are no such restrictions for the Licence agreement.
The implication of stamp duty varies from state to state, but on an average, there is not much difference in the stamp duty charges for both Lease and Licence.

6.Termination or Revocation
Upon expiry of the Lease Agreement, if the Lessee does not vacate the premises but continues to pay the rent to the Lessor, the Lessee remains a lawful tenant of that premise.
In comparison to the above, once the Licence period expires and if the Licensee continues to occupy the premises, he or she is considered a trespasser.

 7.Dispute/Eviction
In case of any dispute or eviction by the Landlord, the rights of a tenant are protected under the State Rent Control Act, as long as the tenant pays his rentals at the regular interval.
The Licensee has no such protection and the competent court can order for eviction upon revocation of license.

These clear distinctions on “Lease” and “Licence” should hopefully help you choose the right agreement for our owner “A” above.

Comments

Popular posts from this blog

Store your property documents online- Top 3 benefits of moving to a Digital Platform

Store your property documents online- Top 3 benefits of moving to a Digital Platform



BENEFIT #1: Quick and Easy Access Have you wasted hours trying to find the one document you need? Searching for documents through a library of file cabinets is tedious and involves a lot of energy. On the other hand, documents stored digitally can be easily tracked and retrieved immediately during an emergency. Digitized documents can also be shared with anyone who needs it in real-time, which is usually not possible with the paper documents.
BENEFIT #2: Enhanced Security and Greater Reliability Who can you turn to for help and aid, if your property papers have been misplaced, lost or stolen? Property documents are important and having adequate security and control is imperative. Hard copies have a high probability of being damaged either by a flood, fire outbreak, or any other force majeure meaning Act of God. With digital archiving as a backup, documents are protected from any kind of disasters. Digit…

Know the difference: Agreement to Sell and Sale Deed!

Know the difference: Agreement to Sell and Sale Deed!
Whether you plan to buy a property or already own one; whether you are a home buyer or a home owner, you should know the legal documents that establish absolute ownership over the Property. When we talk about Sale, there are two terms which are widely used i.e. Sale Deed and Agreement to Sell.  Many times we have come across buyers who hold Agreement to Sell and mistake it for the Sale Deed. Lack of understanding of the difference could lead to grave errors and at times, dire consequences.
What is an Agreement to Sell? When a buyer approaches a house owner to buy his property, certain terms are agreed upon including the offer price. These buying terms, advance amount and other ‘conditions precedent’ (agreed conditions under which the sale can conclude) for the sale are recorded in writing and accepted by the parties in what is called the Agreement to Sell. It is important to note that the Sale Agreement in only an agreement where o…

Buy Vs Rent ! What should I do?

Buy Vs Rent ! What should I do? For a modern day home buyer, it has become a tough choice. “Should I pay rent or EMI’s for my house”?  Hefty costs associated with buying a house, make most independent youngsters to rent one, once they start earning.

As they start families and save money, many choose to buy a home. However, while it is apparent that there are no returns in renting, one needs to be mindful of the costs and recurring expenses associated with buying and owning a house. In this article, we have listed down five important points to consider while comparing Buying Vs Renting which shall help you take a right decision. 1. Cost:  Buying: Buying definitely has a huge upfront cost which includes paying the token money/advance amount at the time of booking or entering into an agreement. In most cases, this is 20% of the purchase price. If you are planning for a home loan, there are installments to be paid. With many banks, during the initial years, the monthly payment gets adjusted …