Renting Property : What is difference between "Lease Agreement / Deed" & "Leave And License Agreement"?

Dear Readers,

Just thought to write this very important, most demanding information in real estate which relates to renting property. while renting both owner & tenant, come across the rent document to sign which has two phrases called Lease agreement /  Deed Or  Leave & Licence agreement and you will be surely curious to know what is the difference & usage of both?

Although, i am not a lawyer and this matter should be consulted with professional lawyer to address it specifically in real time at the time of renting any property, still here i will try to share best available information which will be a mix of both my many years of real estate consultancy experience in such rental transactions and others online available legal opinion on this matter.

would really encourage the readers to write comments for any missing/latest information related to this topic to make this article more purposeful and beneficial.

Why required Lease Deed or Leave & License Agreement?
basically, this document is penned down legally all agreed verbal terms between owner & tenant on various monetary & related aspect of renting the premises, the key points are:

1. Description of Property: must contain the description of the property like the area, location, address, structure, furniture and fittings, etc.
2. Duration: must clearly state the time period for which this document will be valid. This provision can also include the information relating to the renewal of the lease deed if both the parties wish to continue and renew their contract.
3. Rent, Maintenance, and Security: The amount of rent, mode of payment, due dates, security deposit to be paid, interest on delay in payment, etc. must be clarified in the document. this must also include the details and responsibility for paying any maintenance charges, utility bills, society charges, etc.
4. Termination of Lease: must state the reasons for which this document can be terminated. This may include breach of lease deed, use of the property for illegal acts, failure to pay rent, nuisance by the tenant, etc.
5. Subletting: must state whether the tenant is allowed to sublet the property or not.
6. Dispute Resolution: The agreement must mention the manner in which the legal disputes between the landlord and tenant arising out of breach of the contract will be dealt with. This may include any ADR processes like Arbitration.
7. Applicable Laws: This provision states the laws which will be applicable over the lessor and lessee in case of a dispute and which court will have jurisdiction to deal with such matters.

What is Leave & License Agreement:
A leave and license agreement is an agreement wherein the licensor (Owner) temporarily allows the licensee (Tenant) to use and occupy licensor's immovable property full or a portion of it, for the purpose of carrying business activity or residential use. For this, the licensor shall be paid by the licensee a fixed amount also known as the rent. The leave and license are usually granted to the licensee for a period of 11 months. The agreement must be registered before the sub-registrar at the place of jurisdiction (the place where the immovable property is located).

What is a Lease Deed?
A lease deed is a written contract between a landlord (lessor) and tenant (lessee), which states that the landlord would receive a periodic payment in exchange of allowing the tenant to use and occupy the property. The lease deed also defines the terms and conditions that govern the relationship between a landlord and a tenant during the period of lease. A lease deed is generally required when the property is leased for a long period of time, ranging between 1-5 years or even longer. In such cases, a lease deed plays an important role to govern the relationship between the landlord and tenant and lays down the provisions legally binding over them.

Difference between "Lease Agreement / Deed" and  "Leave & License Agreement"?

My Opinion: i have been working as an real estate consultant from more than a decade, came across many rental transactions and with my experience, can nut shell the major Two difference between Lease Deed and Leave &  license are:
1) Rent Period: mostly Leave & license agreement is used for rent period between 1 month to 59 months (less then 5 years) contract whereas Lease Deed is used for long period of time from 1 year to 9 years or more longer period of time.
2) Stamp Duty: there is huge difference in stamp duty charged by government to registration of both these contract, leave & license attract much lesser stamp duty compare to hefty stamp duty paid upon lease deed. the calculation of leave & license agreement is on paid rent & deposit by the tenant whereas lease deed stamp duty is calculated on government ready reckoner valuation of the property.

Apart from my opinion of above two key points, there are many legal differences between these two above contracts which i am taking out online available legal sources and sharing herewith:

First Legal Opinion:
1)A Lease, defined under Section 105 of The Transfer of Property Act, 1882, is a transfer of the right to enjoy the concerned property for a pre-defined time period or in perpetuity. The lessor (owner of the property) gives the lessee (the one leasing the property) such consideration periodically, usually at the beginning or end of a lease agreement.

2) License is defined in Section 52 of the Indian Easements Act,1882. License does not allow any interest in the premises on the licensee's part. It merely gives the licensee the right to use and occupy the premises for a limited duration.

3) A lease deed needs to be stamped and registered. The amount payable towards the lease deed's stamp duty is more than that payable towards the Leave and License's. For a period exceeding three years, the stamp duty is same for both agreements.

4) Usually when the premise has to be given for use for a longer duration lease would be the usual practice. In either case if the lessee or the tenant refuses to vacate there are stipulations in the agreement that you enter into to evict.

5) Therefore you may either enter into a leave and license Agreement or Lease Agreement. You need to make sure that the draft is duly vetted by a good lawyer and your interests are protected.

Second Legal Opinion: (Q &A)
Q1. What is difference between "Lease Agreement" & "Leave And License Agreement"?

Under license agreements, the legal ownership and the possession of the property remain with the licensor. Under a lease agreement, the tenant generally has exclusive possession with respect to the property. In other words, a license does not create any interest in the premises in favor of the licensee.

A license agreement is easier to terminate than a rent agreement. License agreements are terminable, whereas lease agreements are generally not.

The amount payable towards stamp duty is more for a lease agreement as compared to a leave and license agreement. But for duration of more than three years, the stamp duty payable is the same for both.

Q2. I have a property which I want to give for Leave And License. One MNC company is interested but their Legal Department wants me to do Lease Deed instead of Leave & License. Its for duration of 5 years only and may be extended for further 5 years after expiration of first 5 years. What is best suited for me? What risk I have in this case?

It is a general practice by such MNCs to enter into a lease agreement instead of leave and licence agreement because they will then have an interest in the property. In other words, they will have more control over the property. The lease agreement for the period may be decided mutually, it is not very important that you should abide by the conditions they would try to impose, you can make alterations suiting to your taste too.

Q3. How best I can convince them to sign a "Leave And License Agreement" instead of "Lease Deed"? In my view, idea of signing Lease Deed is risky. What if they do not vacant the place after Lease Deed period is over?

There is no reason for them to refuse to vacate the leased property after expiration of lease period. You can file an eviction suit, in fact in a leave and licence agreement too if they refuse to vacate, you may have to follow the due process of law for vacating them and cannot throw them out as per your will and wish.

So there is no much difference between them, choice is yours.

thanks for reading my article, would really encourage the readers to write comments for any missing/latest information related to this topic to make this article more purposeful and beneficial.

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hope able to explain our point of view, still any query, please contact anytime on given contact number for detailed Discussion, cell no./whatsapp # +91-9822052388 / +91-7498829332, Email: deepaksundrani@thegururalty.com. 

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Thank you very much for reading my article as here intention is to share information and enhance knowledge for each & everyone for the betterment & provide more transparency in real estate sector.

wishing everyone good health and happyness.

Warm Regards,

Deepak Sundrani