Leave and Licence Agreement

The word ‘licence’ has been defined in section 523 of the Indian Easement Act, 1882 "where one person grants to another, or to a definite number of other persons, a right do or continue to do in or upon the immovable property of the grantor, something which would, in the absence of such a right, be unlawful, and such right does not amount to an easement or interest in the property, the right is called a licence.

In a leave and licence agreement the juridicial possession of the premises is deemed to remain with the licensor and the licensee is said to be in constructive possession of the said premises. Thus a leave and licence does not create any interest in the premises in favour of the licensee but gives the licensee the mere right to use and occupy the premises for a temporary period.

Section 24 of the Maharashtra Rent Control Act, 1999, which has come into effect since March 31, 2000, provides for a body known as the Competent Authority which provides summary relief to the owner of residential premises as opposed to the existing Court System. Section 24 of the Maharashtra Rent Control Act, 1999 provides that the Competent Authority on being satisfied that the period of licence has expired shall pass an order for the eviction of the licensee. Section 24 also provides that the licensee shall be liable to pay damages at double the rate of the licence fee or charge fixed under the agreement of the license from the day of default till the date of disposition.

Most owners prefer to give their premises on leave and license basis rather than tenancy or lease basis. A tenant is defined in section 7(13) of the Maharashtra Rent Control Act, 1999, and means any person by whom or on whose account rent is payable for any premises. A lease is defined in section 105 of the Transfer of Property Act, which provides that "A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time expressed or implied or in perpetuity in consideration of a price paid or promised, or of money, a share of crops, service or any other things of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms."

The cardinal distinction between a lease and a licence is that in a lease there is a transfer of interest in the premises, whereas in the case of a licence there is no transfer of interest, although the licensee acquires a right to occupy the premises. When premises are given out on lease or tenancy basis the legal possession of the premises in these cases is also deemed to be transferred to the lessee and tenant respectively.

In deciding whether to give out premises on leave & licence basis some of the factors to be considered are as follows:

• Possession: In a leave and licence agreement, the owner is deemed to be in legal or judicial possession of the premises and the licensee is in constructive possession of the premises.

• Income Tax: In a leave and license agreement the owner has to pay tax effectively at the rate of 33% on the license fee earned and gets a standard deduction amounting to 1/4th of the license fee for repairs.

• Municipal Tax: In a leave and license agreement the Municipal Authorities may charge taxes at the rate of up to 60% of the license fee and if there is a security deposit amount sometimes the Municipal Authorities may calculate a notional interest on the securities deposit amount and charge tax thereon.

Where the leave and license agreement purports to be for a term not exceeding thirty three months with or without the renewal clause and relates to property situated within the limits of:—

(i) the District of MumbaiCity and Mumbai Suburban District:

List of details required for a Leave and Licence Agreement

LEAVE AND LICENCE AGREEMENT

BETWEEN
______________________________

AND
_____________________

RE : FLAT NO. ____ON THE ____ FLOOR AND ____ CAR PARKING SPACE/S IN THE COMPOUND IN ________________ BUILDING SITUATE AT _____________ MUMBAI – 400 0___.

THIS AGREEMENT OF LEAVE AND LICENCE made at Mumbai this ____ day of ________, 200_ BETWEEN __________________ having address at ___________________ Mumbai – 400 0__, hereinafter referred to as "the Licensor" (which expression shall unless repugnant to the context or meaning thereof, be deemed to mean and include his/her/ their heirs, executors, administrators and assigns) of the One Part AND _____________ a company incorporated under the Companies Act, 1956 by the hand of its ___________________, having address at ______________ _____________________________________, hereinafter called "the Licensee" (which expression shall unless repugnant to the context or meaning thereof be deemed to mean and include its successors and assigns ) of the Other Part;

WHEREAS:

1. The Licensor is seized and possessed of and well and sufficiently entitled as owner of the premises being flat No.__ admeasuring approx. ______ sq.ft. carpet area on the ____ floor and ____ car parking space/s in _______________ Building situate at __________
   Mumbai – 400 0___ having C.S. No. ______ of ___________ Division (hereinafter referred to as "the said premises");
    

2. The Licensee has requested the Licensor to allow the Licensee to use the said premises for a period of ___ months from ____ ______, 200__ to _____ ________, 200__ for the residence of its Director/ its office and business use;
    

3. The Licensee has represented to the Licensor that :-

   1. the use and occupation of the said premises allowed to be made as hereinafter stated will not tantamount to a tenancy and will not create any tenancy or other similar rights;

   2. at no point of time will the Licensee or its agents or servants or any one on behalf of the Licensee contend that this Agreement or the occupation of the said premises amounts to or creates any tenancy or other similar rights or that any of them has derived any title to the said premises or any part thereof;

   3. even after the commencement of the use and occupation of the said premises by the Licensee, the Licensor alone shall remain in possession of the said premises and the Licensee, its agents and servants shall at no time whether during the subsistence of the Licence or thereafter claim to be in possession of the said premises or any part thereof;

   4. neither the Licensee nor its agents and servants, shall claim protection of the Maharashtra Rent Control Act, 1999 or any modification or re-enactment thereof or any law giving any protection to a tenant or a licensee and that notwithstanding any change in law the rights and liabilities of the parties set out herein will remain unaffected;

   5. The Licensee has represented to the Licensor that the use and occupation of the said premises as hereinafter stated shall be strictly in compliance with and as contemplated under Section 24 of the Maharashtra Rent Control Act, 1999 (Act 18 of 2000);
       

4. relying upon the representations made by the Licensee set out in recital (iii) above and believing the same to be true, the Licensor has agreed to allow the Licensee to use and occupy the said premises strictly on the terms and conditions set out hereinafter;

1. The Licensee confirms the representations made by it as hereinbefore recited and accepts that the said representations form the basis of this Agreement and the licence from the Licensor to use and occupy the said premises. The parties hereby declare, record and confirm that nothing herein contained nor the permission for leave and licence herein referred to nor the use and occupation of the said premises will create any rights in the nature of tenancy or any similar right in favour of the Licensee, its agents or servants or any one or more of them and that neither the Licensee nor any one on its behalf nor any of the persons aforesaid will at any time contend that any tenancy rights or any similar rights have come into  existence in favour of the Licensee or any of the persons aforesaid or any one or more of them.
    

2. This Agreement is personal to the Licensee and the Licensee is not entitled to part with possession of the said premises or sub-let the said premises to any other person or entity.
    

3. In consideration of the licence fee herein reserved and contained and relying on the representations made by the Licensee and believing the same to be true, the Licensor does hereby allow the Licensee leave and licence to use and occupy the said premises for the purpose of residence of its Director purely on leave and licence basis and the Licensee shall upon expiry of the licence or earlier determination thereof remove itself, its employees, agents and servants and belongings from the said premises forthwith, and hand over quiet, vacant and peaceful possession of the said premises to the Licensor.
    

4. The Licensee shall pay to the Licensor licence fees/compensation for the said premises at the rate of Rs.______/- (Rupees ___________________ only) per month. The Licensee shall pay the licence fee to the Licensor subject to deduction of tax at source and the Licensee shall send the TDS certificate in original to the Licensor.
    

5. The Licensee has paid to the Licensor an amount of Rs.___________/- (Rupees _____________________________ only) on or before the execution of this Agreement to be treated as security deposit free of interest for due performance and observance of the terms of this arrangement. This security deposit shall be retained by the Licensor during the subsistence of this Agreement. The security deposit shall be returned by the Licensor to the Licensee subject to deduction of any outstanding dues payable by the Licensee to the Licensor under this Agreement, forthwith on the expiry of this Agreement simultaneously with the licensee removing its articles and things from the said premises and ceasing to use the said premises.
    

6. The Licensee shall use the said premises and the Licensor’s furniture, fixtures and fittings therein in good and proper way and ensure that the same is not spoiled or damaged in any manner (normal wear and tear excepted) and upon termination of this Agreement shall leave the same in as good condition as it was on the date of commencement of the Licensee’s use and make compensation for any damage done (normal wear and tear excepted) or any articles missing from the said premises. The Licensee shall be at liberty to carry on any renovations, make, fix or install and remove in the premises its own furniture, fittings, accessories etc. provided the Licensee will leave behind all improvements done by it in the said premises of a fixed nature.
    

7. The Licensee shall observe all the rules and regulations of the said Society in so far as they pertain to the use of the said Premises and as may be in force from time to time.
    

8. The Licensee is not entitled to make any structural changes in or to the said premises. The day to day repair jobs such as blowout, plumbing leaks and other minor repairs etc., shall be effected by the Licensee at its own cost, and any repairs of a structural nature shall be attended to by the Licensor.
    

9. The Licensee shall use and occupy the said premises purely for the purpose of residence of its Director and the Licensee, its Director, agents and servants will take due care and caution and shall not do or cause anything to be done in the said premises which is likely to be a nuisance or annoyance to the other occupants of the said building or which can cause any damage to the said premises or any part thereof or which may prejudice the rights of the Licensor as the owner of the said premises. The Licensee, and its agents and servants shall observe and perform all the rules, conditions, covenants and the stipulations and all the rules and regulations and bye laws relating to the use of the premises in the building as laid down by the Society from time.
    

10. All existing and future society outgoings, society charges, society non-occupancy charges and maintenance expenses in respect of the said premises payable to the Society including municipal taxes shall be borne and paid by the Licensor.
     

11. The Licensee shall not ask for any refund/ rebate/ adjustment out of the monthly compensation and / or security deposit for the inconvenience or loss caused due to the repairs and renovation of the building being carried out, if any.
     

12. The Licensee shall pay the charges for electricity, water charges and air-condition maintenance consumed by the Licensee in the licensed premises, according to the bills of the concerned authorities.
     

13. The Licensee shall pay the charges for any telephone which the Licensor may have gratuitously provided to the Licensee in the said premises at actuals according to the telephone bills.
     

14. The Licensee agrees to hand over to the Licensor the photo copies of paid up electricity bills, telephone bills and Cable TV, if any, at the time of handing over possession of the said premises.
     

15. Upon the termination or earlier determination of this licence and in the event of the Licensee and the persons referred to in clause 1 above, not removing themselves and/or their articles, belongings and effects from the said premises or any part thereof, it is agreed that the Licensor shall have a right to remove from the said premises and/or to prevent from entering in or upon the said premises the Licensee, its agents and servants and all its/their articles, effects and belongings. In such an event the Licensee or any of the persons aforesaid entering upon the said premises will amount to trespass and the Licensor shall have the right to take all legal and reasonable steps to prevent the Licensee and the persons aforesaid from committing such trespass upon the said premises and the Licensor shall not be liable for any loss, damage or injury caused to any person or property therein while enforcing its rights under this agreement. The Licensee agrees and undertakes for itself and each of the persons aforesaid not to enter upon the said premises or commit trespass after termination of the licence. In the event the Licensee fails to vacate the said premises on the expiry or earlier termination then the Licensee shall be liable to pay the Licensor an amount of Rs._____/- (Rupees __________________ only) for every day of default without prejudice to the Licensor rights to get the Licensee evicted from the said premises. The Licensor shall be entitled to approach the Competent Authority as provided in Section 24 of the Maharashtra Rent Control Act, 1999 in the event the Licensee fails to vacate the said premises on the expiry or early termination of this Agreement.
     

16. The Licensor has given the Licensee one set of duplicate keys of the main entrance door to the said premises and the Licensee shall not change the lock. In the event the Licensee changes the lock the Licensee shall give the Licensor one set of keys of the new lock, after taking the Licensor’s prior consent in writing for changing the same.
     

17. With a view to check the said premises, the Licensor shall be entitled to visit and inspect, the said premises or any part thereof through any of its authorised representatives after giving the Licensee reasonable notice and the Licensee shall not hinder or obstruct any such visitor from visiting the said premises or any part thereof.
     

18. In the event of the Licensee committing breach of any of the terms and conditions of this Agreement or in the event of there being any objection from the Society, the Licensor is entitled to terminate this Agreement by giving the Licensee two months notice in writing. In the event of the breach or objection complained of in such notice not being substantially remedied by the Licensee within the said period of two months this Licence shall automatically stand terminated, without prejudice to the other rights and remedies of the Licensor. The Licensee shall be entitled to terminate this agreement at any time by giving the Licensor a two months notice in writing and this agreement shall come to an end on the expiry of the two months notice period.
     

19. The Licensor agrees and undertakes that upon the Licensee observing and performing the stipulations and covenants herein contained to be observed and performed by it, the Licensee shall during the period of this agreement use and occupy the said premises without interference from the Licensor or any person or persons claiming under or through them .
     

20. Any notice intended to be given to the parties hereto by each other shall be deemed to be properly and validly given if it is delivered to or sent by Registered Post or hand delivery, duly acknowledged to the respective address of the Licensor hereinabove mentioned and to the Licensee at the said premises.
     

21. It is clearly agreed and understood that it will be the responsibility of the Licensee to ensure that the Licensee, its agents and servants cease to use and occupy and vacate the said premises upon the termination and/or earlier determination of the Licence and in the event of the Licensee, its employees, agents and servants failing and/or neglecting and/or refusing to do so all the consequences will be on the Licensee’s account and the Licensor shall be entitled to proceed on the footing that the Licensee has failed to carry out its obligations under this Agreement.
     

22. The Licensee shall not store or bring upon the licensed premises any hazardous articles or articles of a combustible, inflammable or dangerous nature except cooking gas cylinders in the said premises nor shall the Licensee do or permit or suffer anything to be done on the said premises by reason whereof any insurance effected on the said premises may be rendered void or voidable or whereby the rate of premium thereon may be increased and shall comply with all recommendations of the insurers and fire authorities as to fire precautions relating to the said premises.
     

23. The Licensee shall keep articles in the said premises at its own risk and costs and the Licensor shall not be responsible for any theft or loss of goods and articles in any manner whatsoever nor for any bodily injury or harm to anyone residing in the said premises for any reason whatsoever.
     

24. The Licensee hereby covenants with the Licensor that it will at all times hereafter well and sufficiently indemnify and keep indemnified the Licensor and save it harmless against any action, proceedings, claims or demand that may be filed, taken, instituted or made against it in the event of the Licensee breaching any of the provisions of any Act or statutory regulations or in consequence of any act or omission or default of the Licensee, its agents and servants, against all charges, damages and expenses which the Licensor may have to pay, incur or sustain by any such action, reason, proceeding, claim or demand or otherwise in relation thereto.
     

25. In the event of any change, modification or amendment in Law relating to Leave and License by any Act of Legislation, Notification, Ordinance, Judgement or otherwise howsoever, by virtue whereof the Licensee is granted, conferred upon and/ or entitled to any greater rights other than those conferred under these presents as contemplated under Section 24 of the said Act, then in such event, this Agreement shall come to an end mutatis mutandis on the day prior to such legislation notwithstanding the tenure of the license granted hereunder.
     

26. Nothing herein contained shall be construed as treating any right, interest, easement, tenancy or sub-tenancy in favour of the Licensee in, over and upon the licensed premises or as transferring any interest therein in favour of the Licensee other than the permissive right of use hereby granted.
     

27. If as a result of any legislation the Licensee becomes entitled to continue the use or occupation of the said premises against the will or desire of the Licensor or if any of the rights, powers or privileges of the Licensor becomes incapable of legal recognition or enforcement in their entirety, this document shall be deemed never to have been entered into and/or shall stand cancelled as from the beginning.
     

28. Any relaxation or indulgence granted or shown to the Licensee by the Licensor shall not in any way add, alter, amend or vary this Agreement or part thereof.
     

29. The Licensor retains the right to sell or deal with the premises in any way it desires so long as the rights of the Licensee under this agreement are not prejudicially affected in any way.
     

30. This Agreement is executed in Mumbai, the said premises in Mumbai and this Agreement is subject to the jurisdiction of Mumbai. Each party shall bear and pay their respective Advocates & Solicitors costs.
     

31. The stamp duty and registration charges shall be borne and paid by the Licensor and Licensee equally.
     

32. The Licensee undertakes to co-operate with the Licensor and get this Agreement registered before the Sub-Registrar of Assurances in accordance with section 55 of The Maharashtra Rent Control Act 1999.

IN WITNESS WHEREOF the parties hereto have hereunto set and subscribed their respective hands the day and year first hereinabove written.