The landlords have to take all
necessary precautions to protect their rights through appropriately worded
contractual documents called Leave and license agreements.
Licence agreement is a document
granting permission to use a land without a right to exclusive possession and
such transactions are governed by section 52 of the Easement Act; however the
Transfer of Property Act does not refer to leave and licence as a mode of
Transfer of Property.
Section 52 of the Indian Easement
Act, defines licence as where the grantor grants to another person or number of
other persons, a right to do, or continue to do in the immovable property of
the grantor, something which would, in the absence of such permission, be unlawful
and such a right does not amount to an easement or an interest in the property,
the right is called a licence.
A licence is notionally created
where a person is granted the right to use the premises without being entitled
to exclusive possession of the premises
or the circumstances and conduct of the parties show that all that was intended
was that the grantee should be granted a personal privilege with no interest in
the property. Thus, if the agreement is merely for the use of the property in a
certain way and on certain terms, while the property remains in the owner’s
possession and control, the agreement will operate as a licence agreement.
The person who grants the right to
do something on his immovable property is called grantor or licensor and the
person who gets the right is licensee. Licence is a personal right given to the
licensee and therefore cannot be transferred by the licensee or exercised by
his servants and agents Thus, the licence is the grant of permission to do
something upon the immovable property, however it does not create any right in
the immovable property in favour of the person, who does something. It is
different from lease, which is a mode of Transfer of Property, where the lessee
gets certain rights including the possession to do something that is occupying
or residing. Even the possession is not exclusive, in leave and licence but
deemed to the joint possession of both, the licensor or licensee. It is not an
easement right and is in fact akin to residing in a lodge on payment of charge.
The charges paid for occupation is called compensation.
Similarly, where the licensor
transfers the immovable property to another person by way of sale, gift, etc.,
the transferee is not bound by the licence. This is not so in case of rented or
leased property, where the transferee is bound by the terms of agreement made
between the lessor and lessee.
Though there are definite legal
provisions, which separate licence agreements from lease agreements or tenancy
agreements, often it is confusing leading to litigation. Outwardly both lease
and licence seem similar. In lease or renting, a property is given to some
other person for definite period on payment of some specified amount, which may
be lump sum, or periodical called lease amount or rent. Similarly in leave and
licence also property is given to some other person for use on payment of
compensation. The real determining factor is the creation of interest in the
property. It has been held in many cases that the intention of the parties and
their conduct are important to determine whether a particular case is licence
or lease.
In another case, the court has laid
down the following principles for determining the agreement as licence:
a. The agreement is signed by the
licensee only.
b. The licences for carrying the
business stand in the name of licensor.
c. Both the parties have control
over the property,
d. Admission made by the licensee in
subsequent correspondence indicating that the agreement is a mere licence
It has also been held that, if the
licensee under the terms of licence constructs any structure of permanent
nature and the construction made by the licensee with the knowledge and consent
of the licensor; the licence cannot be revoked, likewise the licence cannot be
revoked, when coupled with transfer of property and such transfer is in force.
a. The period of licence should not
be more than 11 months; even if feasible no definite period should be
mentioned.
b. There should not be provision to
extend the agreement with mutual consent.
c. The licence should be liable for
cancellation without assigning any reason.
d. The possession should not be
exclusive.
e.There should not be any provision
for termination of licence or re-entry, if mentioned it would amount to
exclusive possession and transfer.
f. There should not be any clause
about keeping property in good and tenantable repairs, which is an indication
of tenancy.
g. Avoid mentioning clauses
pertaining to the payment of taxes, rates by the licensee.
h.Avoid mentioning clauses
pertaining to letting or subletting, since license does not confer such rights
on the licensee.
Just incorporating the words
licence, licensor and licensee in an agreement, does not make a document a
leave and licence agreement, but the contents, intention of parties and their
conduct determine the nature. Courts are inclined to treat the documents as
that of lease, in case of any doubt as to whether a document is a leave and
licence agreement.
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