A leave and license agreement rent is similar to an ordinary rental agreement. In simple terms, Leave and License Agreement is an agreement between two parties i.e. Licensor and Licensee by which the first party grants the right to use his freehold premises to the second party on payment of rent. All are advised to enter into such an agreement as no lasting legal rights in favor of the license are ultimately conferred by this agreement. A leave and license agreement give restricted rights to the second party with regards to the property.
Leave and License Agreement
A Leave and License Agreement is a document whereby the first party allows the second party to use the property he owns. Thus, occupancy is issued on leave and license agreement and not on ownership. Such an arrangement encourages eviction and generally gives the landlord more control over it.
Leave and license agreements are different from leases. Because a lease creates an interest in the property whereas a Leave and License agreement does not. Also, the lease is easily transferable, which is not possible in a Leave and License agreement.
As per Indian law, “License” is a right granted by one person to another person or to the group of people. Such rights or entitlements generally include actions relating to or performed on immovable property, otherwise those actions would be deemed illegal without the rights conferred. A license confers personal rights and is not transferable. Licensor is the person who gives the License and a Licensee is a person who pays for the License and holds the rights. Licenses must not mix with leases or rental agreements as they are different from each other with their own unique characteristics.
Important points to remember in Leave and License Laws
A few points on laws relating to leave and license Agreement are important to note:
• A license does not give an exclusive interest and ownership of that particular property.
• License is a personal right and cannot be assigned or transferred to anyone.
• A license is revocable in other cases except as provided in the Indian Easements Act, 1882.
In general, a license is always revocable at the will and as per the choice of the licensor. This means that the license can be revoked if the licensor wishes to do so. However, there are 2 restrictions-imposed Section 60 of the Indian Easement Act, 1882:
• A license coupled with a transfer of property and if such a license exists, it acts as a contract, gift or grant. Once such transfer is in effect, it becomes irrevocable.
• If the licensee is acting on the license. The fact that the license was granted for a fixed period cannot affect the revocability of the bare license.
Cancellation Policy of leave and license
As per the terms and conditions mentioned in the leave and license agreement, the license can default in case the fees remain unpaid against the same agreement. Licensor can able to retain its right to terminate the agreement binding upon the licensee and the licensor, by issuing him a notice for the same default. Once the leave and license agreement is executed, we have to take the approval of sub-registrar. There are four ways for cancellation or termination of leave and license agreements:
i. Automatic Termination- The agreement that is automatically terminated after the end of the period mentioned in the leave and license Agreement is referred as automatic termination.
ii. Notice by either party- A various types of standard clauses of termination available and mentioned in every leave and license agreement. This method of cancellation is applicable when the agreement is terminated before the expiry of the leave and license period mentioned in the agreement.
iii. New registered rent agreement- In case a new leave and license agreement is executed within the same lease period which is mentioned in the old agreement and also for the same property, the old leave and license agreement is terminated or cancelled.
iv. Registration of cancellation deed- This particular process involves payment of stamp duty and registration fees to the government, submission of the same to the registrar office, and after that make the collection of the executed deed from the sub-registrar office by taking the approval of final stamp by the sub-registrar. Then the executed deed gets cancelled after following the same process.
Cancellation process of leave and license
The first three ways of cancelation of leave and license agreements do not require any type of legal fees. However, the fourth one requires mandatory payment of Stamp Duty and registration fees to the government. It is totally at the discretion of the parties involved in the agreement to choose the method or process for leave and license cancellation. All the clauses have to be terminated for more secured understanding and with the approval of Government of India.
Any leave and license statement do not reveal that if it is a transaction or a legal relationship. It may or may not be revocable. Revocation in case of leave and license agreement may be a transaction, may be unwritten, or written unsealed, or couched in casual terms. It may also be designed for the special purpose of the involved parties in the same agreement. Legal consequences for every circumstance or case may vary.
Conclusion
All the above given methods of cancellation serve the same purpose of termination of registered rent agreement. However, the basic difference in all the given methods above is the involvement of Government fees, which are applicable while preparing the cancellation deed and registration process of the same deed.
It’s totally at the discretion of the involved parties, to choose or select the method which is convenient for them. It’s suggestible to prepare a cancellation deed where the tenure, and License fee related to the leave and license Agreement is high. The same process is specially designed like this to have a more secured understanding and record that the Leave and License Agreement along with the clauses has been terminated by taking the approval of the Government.
