If you’ve been looking for a house to rent, ringing a house or have rented a house, then you would have come across terms like Leave and License Agreement, and Rent Agreement. When you compare the leave and license vs rent agreement, you will see that the two are separate concepts. In this blog post, we will look at the difference between rent and leave and license agreements.
The Indian Easements Act, of 1882 forms the foundation of the leave and license agreement. This means that the agreement gives restricted rights to the use of the property. The landlord can revoke permissions granted to the tenant at will. This mode of rental agreement is preferred if the landowner wants to lend out property for a shorter period.
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To terminate the agreement, all you need to do is to provide the landowner with advance notice, following the provision under your rental agreement format. If both parties agree to terminate at any time by mutual consent. The licensor can include clauses stating proper maintenance of the premises and a penalty if the licensee does not comply with the terms.
There are no set advantages and disadvantages of leave and licence agreement, but listed below are a few things to keep in mind -
The agreement format is easily available online, but to give you a clear idea - the format is listed below as well.
This rent agreement is made on this __________ (date) by ________________ (name of the landlord) S/o _______________ (father’s name of the landlord), Address: ___________________________________________________ (residential address of the landlord). Hereinafter called the Lessor/Owner and first party
_____________________________ (Name of tenant), called lessee/tenant, or second party
The expression Lessor/Owner and the Lessee/Tenant shall mean and include their legal heirs successors, assigns, representatives etc.
Whereas the first party is the owner and in possession of the property No: _______________________________________________________________________________________________ (address of rented property) and has agreed to let out the said property to the second party for a monthly rent of Rs. ______/- (in words) per month.
That the second party will have to pay Rs. ______/- (in words) as monthly rent, which does not include electricity and water charges.
That the second party shall pay one month's rent in advance to the landlord that would be further adjusted in the monthly rent.
That the second party shall pay the water and electricity charges on the basis of the consumption to the landlord/owner.
That the second party shall not lease the property to a subtenant under any circumstances without the consent of the owner/landlord.
That the second party shall follow all the rules and regulations, and by-laws set by the local authorities in respect of the leased property and will not get involved or do illegal activities on the leased property.
That this rent agreement is granted for a period of eleven (11) months starting from ___________, and this contract can be extended further with the mutual consent of both the parties.
That the second party shall not be permitted to do construction in the rented premises. Besides, he/she could do the installation of temporary decoration, wooden partition/cabin, air conditioners etc. without seeking the permission of the landlord.
That the second party is not allowed to make any alteration in the rented property without the written consent of the owner.
That the second party will have to allow the landlord or his authorized agent to enter into rented premises for its inspection or general checking for any repair work if needed.
That the second party shall keep the premises clean.
That the second party shall bear the cost of day to day minor repairs.
That this contract/agreement could be revoked before the expiry of this tenancy period by serving a one-month prior notice.
That both the parties have read and understood this agreement and have agreed to sign the same without any pressure from any side.
In WITNESS WHEREOF
The landlord and the tenant have hereunto subscribed their hand at ______ (place) on this the _____________ (date of rent agreement) year first above mentioned in presence of the following witnesses.
___________ (name of the landlord) _________________ (name of the tenant)Lessor Lessee
Many people use these terms thinking it is the same things, but in reality, they actually are two different documents and there are a few key differences between them. Although in the end, they both look after the interest of the landlord and tenant, the differences are:
In a leave and license agreement, the tenant cannot claim any ownership of the property as this agreement doesn’t come under the rent control act of India. In this agreement, the owner licenses the property to the “tenant” and leaves the property. For example, if you rent a zoom car or a yulu bike, you can use it, but you can’t claim it’s yours and you own it.
When it comes to rental agreements, tenants may claim ownership of the property after staying in the same place for at least 10 years. They can claim it under the Rent Control Act of India. In this case, landlords have very limited options to vacate the tenant or increase the rent.
A Leave and License Agreement can be used as valid address proof anywhere in India. It is a legal document that binds the licensor in terms of the security amount, rent amount, stay duration, and other payables for the use of the property. These points cannot be changed once the agreement is signed by both parties. It is important for the tenant as it protects his rights to stay there and the conditions of his stay are clear.
A rental agreement that is registered gives a tenant a certain right to the property. In Mumbai, there are many tenants still paying Rs. 15/month and sitting on prime property due to the rent control act! As per their rental agreement, as long as they pay rent on time, they cannot be evicted. To avoid such a situation, execute the rental agreement only for 11 months. The 11-monthly rent agreement doesn’t come under the rent control act.
It’s safer to have a Leave and License agreement for 11 months. After 11 months, a renewal of the agreement for another 11 months should be made. Keep your agreement limited to 11 months.
A leave and license agreement are governed by the Indian Easement Act, 1882. Here, it says that the owner leaves the property with various facilities, and the same is given to the licensee for use, while the owner is on a leave for a specific period of time. Once the leave is over, and the owner returns, the licensee leaves. When he leaves, it is his duty to leave the home in the same condition it was given to him. He can’t make any major changes and everything that the property was given needs to be there as the agreement is temporary. The property has to be used only for the activity that was originally intended or mentioned in the agreement. As for payment, a large sum is paid by the tenant at the beginning of the tenancy, and no monthly rents are paid after.
In the Rent Control Act, the tenant takes the property on rent from the landlord, paying a fixed amount as rent, for commercial or residential use. Legally, as long as the rent is being paid the landlord cannot evict the tenant. The tenant pays a deposit and the monthly rent that was decided upon in the agreement.
If you look at it, a tenant has a lot more rights and gets favoured more when it comes to a rental agreement as it is governed by rent control laws. They prevent landlords from overcharging and gives tenants more right to the ownership of the property.
A leave and license agreement is more landlord/owner friendly as their property can’t be taken over by the tenant in any case. No major modifications can happen to their property either.
If you need help with Rental Agreements or Leave and License Agreements, just leave it to the experts at NoBroker. We are here to make your documentation process easy and stress-free. Click here to know more. You can look for your dream home on NoBoker.
Ans. A Leave and Licence agreement gives the Licensee the right to occupy the licensor's property where such a right would be prohibited without such authorization.
Q2 Is a leave and licence agreement the same as a lease?Ans. A leave and licence agreement differs from a rental or lease agreement in that it is controlled by the Indian Easement Act, 1882.
Q3 Why is there an 11-month leave and licence agreement?Ans. A rental agreement that lasts more than 12 months must be registered under the Registration Act of 1908. As a result, leave and licence agreements are normally for 11 months to save stamp duty and registration fees.
Q4 Is the agreement format available online?Ans. Yes, the Leave and Licence agreement is available online and is given in the article above.
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