Leave and license

By, The Spartans.

LEAVE AND LICENSE AGREEMENTS

BRIEF SUMMARY Introduction Differences Related Laws Stamp Duty requirements Registration Procedures Common Problems Solutions Case Laws Parties for which agreements are not necessary

Sec 52: Definition Where one person(Licensor) grants to

another (licensee) Right to do or continue to do something in

or upon an immovable property No transfer of interest or creation of interest

in immovable property

INTRODUCTION

It important to take note of essential features of license as under:

1. A license is not connected with the ownership of land / property but creates only a personal right or obligation;

2. A license cannot be transferred or assigned; 3. License is purely permissive right arising only by

permission, express or implied, and not by adverse exercise or in any other way;

4. It only legalize a certain act which would otherwise be unlawful and does not confer any interest in the property itself in or upon or over which such act is allowed to be done;

ESSENTIAL FEATURES OF LICENSE

Title Leave and License Lease or Rent

Legal Ownership & Possession

Both Remains with Landlord

Possession passes to the tenant.

Eviction Procedures

Easier and covered by Easement Act .

Tedious and Rent Control Act applies.

Subletting Not allowed – Except license to attend places of public entertainment e.g theatre

Allowed (if provided).

Advance payments

Paid & adjusted against Rent payable.

Prohibited as per Rent Control Act.

Differences :

Differences (Contd.)Title Leave and License Lease or Rent

Quantum of Stamp Duty

Lower for first 5 years and for next period it is same.

Higher for first 5 years.

Suit for Trespassing

Action can be taken only after permission from licensor

No permission from lessor required

Interest There is no creation of interest, only personal right

Creation of interest in favour of lessee

Maharashtra Rent Control Act, 1999

Bombay Stamp Act, 1958

Indian Easement Act, 1882

Registration Act, 1908

Transfer of Property Act, 1882

Indian Contract Act, 1862

Arbitration and Conciliation Act, 1996

RELATED LAWS

In the Bombay Stamp Act, 1958 a new article 36A has been added.

Stamp duty depends on :- Location of the property. Whether for Residential or Commercial purposes Duration of the agreement.

STAMP DUTY REQUIREMENTS

Duration

12 Months

24 Months

36 Months

48 Months 60 Months

AAR* Resi. Comm. Resi. Comm. Resi. Comm. Resi. Comm. Resi. Comm.

0 - 2,50,000 600 1,200 1,200 2,400 1,800 3,600 2,400 4,800 3,000 6,000

250001 -5,00,000 1,200 2,400 2,400 4,800 3,600 7,200 4,800 9,600 6,000 12,000

500001 -10,00,000 2,500 5,000 5,000 10,000 7,500 15,000 10,000 20,000 12,500 25,000

10,00,000 and above 5,000 10,000 10,000 20,000 15,000 30,000 20,000 40,000 25,000 50,000

Mumbai City and Suburban Article 36A(a) of the Schedule I of the Bombay Stamp Act,

1958

*Average Annual Rent (AAR) plus deposit or money advanced or to be advanced

Paying Guests: Case Law: Feroze N. Dotivala vs P.M Wadhwani 2003.

A member of family residing together A person in service or employment of the licensor A person having any accomodation for rendering

or carrying on medical or para medical services. A person taking up accomodation in a hotel,

lodging house, hostel, dharamshala, marriage hall and home for widows (orphans)

Parties for which agreements are not necessary - Licensee

Exemptions from the Maharashtra Rent Control Act

Premises belonging to the Government or a local authority

Premises let or sub-let to Banks, Any PSU Any Corporation established by or any Central or

State Act, foreign missions, international agencies, MNC’s and private or public limited companies

having a share capital of more than rupee 1 crore.

UNDER Section 55 (1) of the Maharashtra Rent Control Act, 1999, any agreement for Leave and License or letting of any premises entered into between the landlord and the tenant or the licensee as the case may be should be in writing and should be registered under the Registration Act, 1908.

Section 55 (2) imposes the responsibility of getting such agreement registered on the landlord.

Registration Procedure

Registration means recording of the content of a document with a registering officer and preservation of the copies of the original document. The documents are registered for the purpose of conservation of evidence, assurance of title, public documents and prevention of any disputes.

Under the computerized registration system, registration is easy.

For registering documents relating to property, one should go the respective registration office along with the original document and one photocopy.


The document must be printed or typed on one side only and in black color. A photocopy should be taken on only one side of the paper and the paper should be of 90 GSM thickness. There should be butter paper between the two sheets of the photocopy.◦ Original Stamp Duty payment receipt◦ One should go along with along with two

witnesses◦ Registration fees and computer service

charges is to be paid in cash to sub-registrar at the time of registration


The Sub-Registrar of Assurances does the following:-

He verifies the document to ascertain whether it is legal to register it.

He further verifies that the full stamp duty is paid. In his presence all parties executing the document

admit that they have executed the document presented for registration. Parties who are present and admitting to execute the document are then personally identified by two independent witnesses. All parties and witnesses present, again sign in the presence of sub-registrar on an additional page attached to the document.


Parties to the document are photographed and their thumb impression is taken and such photograph and thumb impression is affixed on additional pages attached to the document.

He puts his official seal on each page and puts a unique numbering block on each page of the document including the additional pages. On the last page he signs the document as being registered.

After completing this procedure, he records the contents of the document, including the additional pages, either by photocopying the content or by scanning the content of the document.


The photocopy or scanned image is permanently retained by him in his records so that in future whenever a copy of the document is required it can be obtained. Also that copy becomes a public document, which anybody can inspect by paying the requisite inspection fees.

After taking a copy of the document, as mentioned above, on the record and after completing the above formalities the original document is returned to the party presenting the document for registration. This completes the process.


Registration is done after the parties execute the document. The agreement should be registered with the Sub-Registrar of Assurance under the provisions of the Registration Act, 1908 within four months from the date of execution of the document.

However, if due to any unavoidable circumstances, the document is not registered within the time limit, then the document can be registered only on making an application to the Sub-Registrar of Assurance within a further period not exceeding four months and on payment of appropriate fine.


Consequences of non-compliance: Imprisonment of three months or with fine not exceeding Rs.5000/- or with both.

In the absence of a written registered agreement, contention of the tenant about the terms and conditions on which the premises have been given either on leave and license or even let out shall prevail.


Problems & Solutions:

Drafting Problems: Leave and license provides protection to licensor. It is necessary to draft it properly. While facing court decisions court may rule that the same is lease agreement and not the leave and license agreement.

Problems & Solutions: (Continued)

The following clauses needs to be mentioned in agreement.

1. Possession: Shall remain with the licensor. Keys and locks with the licensor.

2. Transfer of Right and Interest: Explicitly state that no such transfer is made.

3. Transferability: It is personal in nature and cannot be transferred.

4. Period, purpose and Conditions:

Problems & Solutions: (Conti.)

What if tenant does not pays rent as well not vacating the premises owned by you?

A 90 days notice to the tenants for demand of the Standard Rent in the manner provided in Section 106 of the Transfer of Property Act, 1882

On expiry of 90 days if the tenant fails to pay rent for 90 days, a suit may be filed for eviction of the tenants under the Maharashtra Rent Control Act, 1999 and recover possession of the tenanted premises under Section 16 of the said Act.

Sec 59: Transfer of property by grantor

Transferee not bound by the licenseSec 60: Revocation by the grantor Revocable at will of licensor Exceptions : When license is coupled with a transfer of property or licensee acting upon the license, has executed work of permanent Character

Termination and Revocation(Easements Act)

Sec 62: Deemed Revocation- Grantor ceases to have interest release of license by licensee end of period of license completion of purpose for which license was granted etc.

Termination and Revocation(Easements Act)

Khalil Ahmed Bashir Ahmed v/s Tufelhussein Samasbhai Sarangpurwala SC - 1988)

- In order to determine whether a document created is a licence or a lease, the real test is to ascertain the Operative intention of the parties i.e. whether they intended to create a license or a lease

- If the document creates an interest in the property entitling the transferee to enjoyment, then it is a lease; but if it only permits another to make use of the property without exclusive possession, then it is a license

- Substance of the document must be preferred to form

CASE LAW 1

Milkha Singh v. Diana (J & K HC- 1964)

- A mere license does not create any estate or interest in the property but it only makes an action lawful which without it would be unlawful

- the possession of a licensee is not a juridical possession but only an occupation with the premission of the licenser. While the actual occupation remains with the licensee, the control or possession of the property is with the licensor through his licensee.

CASE LAW 2

Carona Ltd Vs Parvathy Swaminathan & Sons. (SC - 2008)Facts

The appellant-tenant appealed against the eviction proceedings initiated by the landlord. The appellant company has paid up share capital more than 1 cr. on the date on which tenancy terminated. The appellant company afterwards reduced its capital by passing a resolution. As per the appellant company MRCA Act was applicable as capital was reduced below Rs. 1 Crore.

Decision Held, since tenant public limited company had paid up share capital

over Rs.1 cr. on the date when tenancy terminated hence, MRCA, 1999 was not applicable. [Sec 3(1)(b)]

Unilateral act of the tenant cannot take away the landlord’s accrued right and the eviction procedures were maintainable even though the tenant company was sick unit.

CASE LAW 3

THANK YOU

Leave and license

Education

Transcript of Leave and license