Mayura was looking at the possibility of earning some money by letting out her flat for some time. She was wondering about the best way in which she could document this legally so that while she could earn some income, the occupant would vacate the flat on the conclusion of the term of agreement. She set out to find out more…
What is a Leave & Licence?
A leave & licence is an agreement by which a person allows or gives the leave/licence to another person to use and occupy his premises for a specified period. It does not create ‘tenancy’ rights. Under Section 52 of the Indian Easements Act, 1882, a Licence is a grant by one person to another, of a right to do, or continue to do, on the immoveable property of the grantor, which in the absence of such right, would be unlawful. A right to use the property of the owner for residence or business purpose is an example of licence.
The Licensor is the person who grants the Licence and the Licensee is the person who is granted the right to use and occupy the property. A Leave and Licence agreement grants a permission to use and occupy and use the property and there is no transfer of any interest or right in the property from the Licensor to the Licensee and no property rights are created.
The amount of licence fee, deposit and other charges are determined by the parties. A leave and licence agreement is specific to the licensor and licensor and the rights under this agreement are not transferable. Thus, it does not create a heritable right.
Parties: Full name, age and address of the Licensor (owner giving premises on Leave and Licence) and the Licensee (person to whom the Licence is given) with proof of identity and address. If any of the parties is a company, it is important to mention the Company Identification Number (CIN).
Premises: Full description of the premises with address, area, furniture and fixtures (as applicable)
Rights: The scope of the rights for which the licence is given, e.g. use for residence or business purpose, what activities are not permitted on the premises. If the Licensor is entitled to certain facilities like a common area, swimming pool, parking facility, club, gym, etc, the agreement can include the right to access and use these facilities.
Furniture, fixtures and appliances: Where the use of the premises is allowed along with the furniture, fixtures and appliances on the premises, the agreement contains a list of all the furniture, fixtures and appliances approved for use by the Licensee. The Licensee is required to take care of the furniture, fixtures and appliances and will be required to replace or reimburse in case of damage to the furniture, fixtures or appliances.
Duration: The tenure is to be clearly stated and is usually for eleven months.
Compensation and Security Deposit: The compensation is the amount to be paid by the Licensee to the Licensor for use and occupation of the premises. While it is usually a fixed amount, in cases where the premises are given for commercial purpose, the payment can include a percentage of revenue/profits. The Security Deposit is the amount kept by the Licensee with the Licensor for assurance in case the Licensee defaults on any of the terms and conditions of the agreement. The Licensor has the option to deduct the cost/loss incurred by the Licensor from the Security Deposit. The Security deposit does not carry any interest and is to be returned by the Licensor to the Licensee on the conclusion of the term of the agreement.
Obligations of both parties: The duties of the Licensor include provision of water and electricity, major upkeep and repairs and the duties of the Licensee include taking care of the premises, maintain peaceful occupation and pay the security deposit and the compensation on time.
Termination: The agreement can be terminated by either of or both the parties. The grounds of termination are to be stated in the agreement, e.g. non-payment of compensation by the Licensee, improper conduct by the Licensee, failure on the part of the Licensor to carry out the major repairs of the premises. It also states how notice of termination, where required, is to be served.
Vacation of premises: After the expiry of the term of the agreement, the Licensee has no right to continue occupation of the premises and has to vacate the premises.
Escalation clause: There is usually a clause in the agreement that the monthly compensation will be revised upwards annually. The rate of increase depends on the prevailing market rates in the city.
Dispute resolution: In case of any dispute between the parties, this clause states the means by which the dispute is to be resolved. This can be done by conciliation, arbitration or by approaching the court.
Execution and Stamp Duty
In Goa, a leave & licence agreement is to be executed on Rs 500 stamp paper for leave and licence of premises for residential purpose and on Rs 1,000 for leave and licence of premises for commercial purpose.
Mayura now had a better understanding of leave and licence agreements and looked ahead to letting out her flat…
The author has her focus on education, legal issues and governance and enjoys working with individuals and organizations towards enhancing their effectiveness
Key Points
A leave & licence is an agreement by which a person allows or gives the leave/licence to another person to use and occupy his premises for a specified period. It contains:
Name and description of parties
Premises
Rights granted
Furniture, fixtures and appliances
Duration
Compensation and security deposit
Obligations of both parties
Termination
Vacation of premises
Escalation clause
Dispute resolution
