It is very common to hear the word “Lease” or “Leave and License” being used by someone known to us in our daily lives. Whilst most of us know the essential meaning of these terms, most people may not be aware of the actual rights transferred under such arrangements.
We have attempted, in this article, to bring to the notice of the readers the legal meaning of these terminologies, the rights and liabilities of a lessor and a lessee and the concept of lease vis-à-vis that of a leave and license under Indian law.
Lease of Immovable Property
Leases are governed by the provisions of the Transfer of Property Act, 1882. As per Section 105 of this law, the lease of an immovable property is a transfer of a right to enjoy the property for a certain period of time or in perpetuity and for a certain price (in cash or in kind) paid or agreed to be paid over a period of time by the lessee to the lessor on such terms agreed between the parties.
This legal arrangement therefore confers rights and imposes duties on both the lessor and the lessee of the property. We will now explore some of these rights and liabilities of each person.
Rights and Liabilities of the Lessor
As per Section 108 (A) of the Transfer of Property Act, 1882, the rights and liabilities of a lessor include:
- Disclosing to the lessee material defects, if any, in the leased property;
- Putting the lessee in possession of the leased property on his request;
- Allowing the lessee to peacefully hold and enjoy the leased property on his paying the rents reserved to him on time and performing the contract binding on him.
Rights and Liabilities of the Lessee
As per Section 108 (A) of the Transfer of Property Act, 1882, the rights and liabilities of the lessee include the following:
- Any accession made to the leased property shall be comprised in the lease;
- The right to determine the lease if the leased property is destroyed substantially and becomes unfit for the purpose it was leased for due to any “Act of God”, provided the injury occurred is not due to the wrongful acts of the lessee;
- The right to carry out any repairs to the leased property and thereafter recover the amount spend for such repairs from the monthly rent payable by him, if the lessor neglects to carry out such repairs on time as requested by the lessee;
- If the lessor neglects to make any payment which he is bound to make within a reasonable time, the lessee has the the right to make such payments and recover the same with interest from rent payable to the lessor;
- The right to remove all articles from the leased property even after determination of the lease and during the lessee’s possession in the leased property, provided the lessee leaves the property in the state which he has received it;
- The lessee is entitled to all the crops planted or sown by the lessee upon the leased property and he may carry them after termination of the lease and while he is in the possession of the leased property;
- The right to sub-lease/sub-let, or transfer absolutely or by way of mortgage, the leased property to any other third party subject to their being no restriction of any kind to it in the contract. Even after such sub-lease/sub-let the lessee will still be liable to all its liabilities under the lease deed;
- The lessee is bound to disclose to the lessor all or any facts pertaining to the leased property of which the lessor is not aware and which materially increases the value of such interest;
- The lessee is bound to pay the rents on time;
- The lessee is also bound to keep the leased property in good condition and, after termination of the lease, to restore the property as it was at the time when he was put in possession, subject to reasonable wear and tear;
- The lessee is bound to allow the lessor and his agents to enter the leased property at all reasonable times and inspect the premises thereof and give notice of any defects caused by the lessee or his agents to the leased property. The lessee is bound to make good such defects within three months of such notice;
- The lessee is bound to keep the lessor informed of any proceedings made to recover the leased property or any pat thereof or any encroachment made upon or any interference by the third party to the leased property;
- The lessee is bound to use the leased property only for the purpose it is leased for and to not carry out any illegal or any non-permissible business on such property;
- The lessee is bound to put the lessor in possession of the property on determination of the lease.
A reading of the above shows that in a lease arrangement, the lessee is given the right to enjoy the property without any disturbance or hindrance from the lessor during the agreed term. In addition to those listed above, the lessee and lessor are also entitled to certain other rights.
While a lease grants a certain interest and rights in leased property in favour of the lessee, another manner in which a right may be given in an immovable property is through a “leave and license” arrangement, also called a “license”. A license is a mere “right to use” which is transferred to the licensee herein. We have, below, briefly introduced the concept of a “license” as defined under law and endeavoured to bring to the notice of the readers the basic differences between a “lease” and a “leave and license” under Indian law.
License of Immovable Property
As per Section 52 of The Easements Act, 1882, the license of an immovable property is a mere grant of right by the licensor to the licensee to enjoy the licensed property, and which in absence of such right, would be unlawful, and such right does not amount to an easement or an interest in the licensed property. Another important aspect of a license is that anyone who has any interest in the property can license the property – it need not necessarily be the owner of the property in question.
Right and Liabilities of a Licensor
As per Section 52 of The Easements Act, 1882, the rights and liabilities of the licensor includes:
- Disclosing to the licensee any defect in the property licensed which may affect the licensee and which the licensee is not aware of;
- Not to do anything likely to render the licensed property in a state which may affect the licensee. If the licensor transfers such affected property the licensee is not bound by such license.
Rights and Liabilities of a Licensee
As per Section 52 of The Easements Act 1882, the rights and liabilities of the licensee includes:
- Being bound to leave the licensed property within a reasonable time and to remove all his goods placed on the licensed property on determination or earlier termination of the license;
- Being entitled to the refund of the consideration paid by him on the termination or determination of the license.
While some of the rights and liabilities of a lessor and lessee are similar to the corresponding rights and liabilities of a licensor and licensee, some of the important differences between a lease and a license are as follows:
|Lease of Immovable Property||License of Immovable Property|
|The lessee is given the exclusive possession of the leased property||The licensee is given a mere right to use and occupy the licensed property for a period of time|
|It is a transferable right i.e., if the lessor sells the leased property to any third party during the continuance of the lease the purchaser is bound by the existing lease deed||It is only a personal right i.e., if the licensor sells the licensed property to any third party the leave and license agreement (if any) automatically gets terminated|
|If the lessor has to enter the leased premises for any inspection or repairs, he can only after giving a prior notice and obtaining the prior approval from the lessee||The licensor is free to enter his licensed premises at any point of time|
|Lessee under certain circumstances may be considered as a tenant and has all the rights as per the applicable tenancy laws||Licensee is not considered as a tenant and is not covered under any tenancy laws|
|Normally the stamp duty applicable to a lease is high||Stamp duty may be lesser than the Lease, however in certain states (for example in Maharashtra) a license exceeding a certain period is considered as a lease and the same stamp duty as a lease is applicable to it.|
It is therefore in the best interest of the owner of a property in question and the person taking such property on lease or leave and license to firstly understand whether they would like to lease or license a property and thereafter enter into a detailed lease or leave and license agreement, as the case may be, to ensure that their rights and liabilities are protected as per the provisions of law.
Disclaimer: This article is to bring to make a reader understand the meaning of a lease and leave and license and the rights and liabilities that is given under law. The above information / suggestions / guidelines / tips are generic in nature and should not be acted upon unless a professionally qualified legal consultant has examined the requirements of the transaction and has advised that some of the above terms may be made applicable to a proposed transaction.
The information provided is “as is,” and “as available” and the information provided may include inaccuracies or typographical errors.