LEAVE AND LICENCE AGREEMENT

The landlords have to take all necessary precautions to protect their rights through
appropriately worded contractual documents called Leave and license agreements.
What is a license?
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 owners 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.
Leave and License Agreements:
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.
Principles for License:
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.
Contents of the Agreement:
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.