It is always advised to take all preventive measures while you rent out or give your property to any caretaker especially when you live abroad.
A leave and license agreement is one of the most popular ways adopted by the parties to ensure that the leasing of property does not result in a lease under the tenancy law. In contrast to a tenancy or lease, a lease and license agreement does not create any ownership rights in favour of the person who occupies the house (licensee).
LEAVE AND LICENSE AGREEMENT
It grants a right to “occupy the premises” for a limited period, without transferring any interest in the property. It is purely a permissive right and is personally for the grantee. It does not create any obligations and duties upon the persons making the grant and is thus revocable except in certain circumstances expressly provided for in the Act itself.
Taking into account the advantages of the written and registered leave and license agreement and the protection of the licensor’s property, it is necessary for the licensors to ensure that a proper leave and license agreement is received and registered.
Norms to be adhered to while entering into a Leave and License agreement:
Written Agreement – The Landlords or the Licensors have to execute Agreement in writing incorporating terms agreed between them.
Registration – The agreement is obligated to be registered under the Registration Act, 1908, with the Sub-Registrar within whose jurisdiction the said property falls. There has been responsibility cast upon the landlord to get the said agreement registered.
Why is it import to register the Lease and License Agreement?
- The Landlord who fails to register the leave and license agreement is liable to be imprisoned, which may be up to three months or with fine not exceeding Rs. 5000/- or with both.
- Also, the effect of non-registration of the agreement is in favour of the tenant. In the absence of a recorded agreement, the tenant’s claim about the terms and conditions subject to which premises has been given by the owner on leave and license or let out by him will prevail unless the landlord can prove otherwise.
- It would be sufficient for the tenant to contend one way and Court will accept it unless the landlord provides otherwise. Even if the premises are granted on leave and licence basis, and there is no written recorded agreement, then licensee can contend to be a tenant, and the burden of proof would lie on the landlord to prove that such person is a licensee and not a tenant.
- Period – By granting a license, Licensor is merely granting a permissive right to the licensee to obtain and use the property and is not intending to create an interest in the property Even if the agreement contains a lock-in period, it must be noted that license is always terminable at will. Therefore, any form of lock-in period being imposed in the contract may not hold water in the court as it goes against the very logic of license.
- Possession – The agreement shall further specifically state that the possession shall remain with Licensor and only right to occupy the premises for the term of the agreement is given to the Licensee. Since exclusive possession is the key portion to determine whether the transaction is in the nature of license or a lease.
- Notice Period – Under the law, the Licensor does not have any statutory obligation notify the licensee during revoking the license, but the principles of natural justice demand that such notice should be given by the licensor. When both the licensee and licensor agrees to certain form notice to be given by licensor to licensee before any revocation of license by the licensee, in that event such provision of notice is agreed, it shall be a contractual obligation of Licensor to provide such notice to the licensee.
- Keys and Locks – the clause in the agreement that locks and keys of the premises shall for all purposes be with the licensor, strengthens the fact that the possession at all times is with Licensor and Licensor has allowed merely permitted rights to the licensee.
- Assignment – under the law Leave and license agreement is personal in nature and the rights under the agreement cannot be assigned/transferred. If the licensee anticipates that in future he may have to transfer the use of premises to his associate/group/sister company, then it is suggested that a suitable clause is incorporated. The clause can state that Licensor is under a commitment to execute a fresh license in favour of group / associate / sister companies if this is desired by the licensee. In such a way, it is not the licensee who is transferring the license and licensor shall be the one who shall be executing a fresh license.
- Payment – Apart from the specific obligation to pay and the amount of the rent/ license fee/ lease fee, the contract should be very clear when the payment obligation arises. There should be no doubt at what time the amounts are due. It is also authorized to specify what the type of payment will be – such as check, cash or internet transfer, and to whom the payment is to be made. Sometimes the security deposit is adjusted against the last month’s rent – which should also be specified in the agreement. The consequences for late payment, usually punctual interest rates in the range of 12 to 18%, if there are more than 10 days delay, can also be indicated.
- E-registration – In a recent initiative by the government of Maharashtra, registration of leave and license agreement can be done at your doorstep through e-registration.