Leave license agreement

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Leave and License Agreement why eleven months only
There is a practice prevalent in Maharashtra that a Leave & License Agreement in respect of a
residential premises is, usually, entered into and executed for a period of 11 months. The
question arises whether it can not be for more than 11 months, if both the parties are
interested in a much longer period.


A license has been defined in Section 62 of the Indian Easement Act, as a right to do or continue
to do something in or upon an immovable property. It does not transfer the interest or create
any interest in the immovable property, like a ‘LEASE’, as defined in Section 105 of the Transfer
of Property Act, as a right to enjoy property for a certain period in consideration of the price
paid. Provisions of Section 62 of the Indian Easements Act do not prescribe, any minimum or
maximum period for which a license may be granted.


A lease of an immovable property in Maharashtra used to be governed by the provisions of the
Bombay Rents, Hotel & Lodging House Rates Control Act, 1947 (Popularly known as Bombay
Rent Act,) which did not provide, prior to 1.2.1973, for giving a residential premises on Leave &
License basis. Nevertheless, a practice was in vogue to give the residential premises on Leave &
License basis. An instrument creating a lease of immovable property for a term of one year and
above is required compulsorily to be registered by virtue of provisions of Section 17 (d) of the
Indian Registration Act.


Therefore, Leave & License Agreements were being executed for a period of 11 months with
the intention with the intention to avoid the stamping and registration of such agreements and
treating such. Agreements as a Lease of the immovable property. So that the occupiers of such
premises could not invoke the provisions of the said Bombay Rent Act against their eviction.
Secondly in respect of Flats in a registered Co-Operative Housing Society, period of sub-letting
was restricted to eleven months with the provision of extension for similar period of part
thereof, as per Bye-law 45 © of the old Model By-laws.


In the year 1973 an amendment was carried out in the said Bombay rent Act by the State of
Maharashtra, whereby section 15A was introduced therein providing that any person in
occupation of any premises as a License on 1.2.1973 shall be deemed to have become a tenant
in respect of the premises in his occupation as licensee as on 1.2.1973, and by a stroke of pen
they all became the statutory tenants of the premises with the benefit of protection against
vacation of the premises, expect in accordance with the provisions of the said Bombay Rent
Act. Thus an illegal practice of creating Leave & License in respect of residential premises, which
was contrary to the provisions of the said Bombay Rent Act. Thus an illegal practice of creating
Leave & License in respect of residential premises, which was contrary to the provi sions of the
said Rent Act, converted such occupation into tenancy. Therefore, the Landlords, who did not
require the premises for their own use, were not willing to give the premises to others, which
created scarcity inasmuch as on the one hand sufficient real estate stock was available and on
the other, people were not getting the accommodation, albeit for temporary period. These
were being held back by the owners because of the apprehension of not getting the premises
back, when they needed in view of the protection provided to the tenants by said Bombay Rent
Act.


In the circumstances and as a practical solution to this problem, a specific provision was made
by way of Section 13A2 in said Act for giving the residential premises on license basis, which
also provided that in case of the failure of the licensee to deliver the possession of the licensed
premises on the expiry of the period of license, the licensee could be summarily evicted from
the premises by the Component Authority as per the provisions of Section 31D of the said
Bombay Rent Act. This Section 13A2 did not provide for any specific period of a license and
further clarified that an Agreement of License in writing shall be conclusive evidence of the fact
of the License.


Be that as it may. With a view to unify, consolidate the laws prevailing in the different parts of
the State, the Bombay Rent Control Act of 1947, has been repealed and replaced by the
Maharashtra Rent Control Act, 1999, (Act No: 18 of 2000) w.e.f. 31st March, 2000, wherein a
Licensee means a person in occupation of the premises under a subsisting agreement for
license given for a license fee or charge and notwithstanding the protective provisions of the
said Act, a licensee has to deliver possession of the licensed premises to the landlord on the
expiry of the period of license and failing which Section 24 thereof, empowers a landlord to
recover possession of the premises through summary proceedings before the Competent
Authority and till the date of dispossession, a licensee is liable to pay damages at double the
rate of the license fee or charge of the premises fixed under the Agreements of License.
As per the provisions of the said Act in Section 43 and 44, a licensee in such proceedings has to
first satisfy the Competent Authority about the grounds on which he seeks to contest the
eviction proceedings and obtain the permission to contest the same. The order of recovery of
possession of the premises made by the Competent Authority is non-appealable, though a
revision application may be filed within ninety days with the State Government.
As there is a thin difference between a Tenancy Agreement and License Agreement, it is
provided in Section 55 of the Act, that such an Agreement has to be in writing and registered
under the Registration Act and it shall be the responsibility of the landlord to register it, failing
which the contention of the tenant or the licensee about the terms and conditions on which a
premises has been give to him, shall prevail, unless proved otherwise. The failure of a landlord
to register the Agreement may also attracts punishment of imprisonment up to three months
or fine not exceeding rupees five thousand or both. The State Government has issued an
Notification on the 8th June, 2000, prescribing the registration charges as Rs. 1000/- in respect
of the premises in the limits of the Municipal Corporation and Rs. 500/- in other areas
irrespective of the amount of the license fee or the term of the Agreement. In either the old
Rent Act of 1947 or the present Act of 1999, there is no restriction on the term for which a
premises may be given on license basis and Bye-law 43 © of the new Model Bye-laws of the Co-
Operative Housing Societies, circulated by the State Government for adoption by the Societies,
now also provides the period as eleven months or for more period, which may be extended for
similar period or part thereof. Thus none of the legal provisions put any restriction of eleven
months on the period of license agreement and it can legally be for a longer period or term and
the non-occupancy charges in respect of the premises in a registered Society has been
restricted to 10% of the service charges (excluding property tax) by Government Notification
dated 1st August 2001, whose validity has been finally upheld by the Hon’ble Bombay High
Court on 2nd March 2007, in the case of Palm Beach Riviera CHS and other Societies.
In addition to the Registration of an Agreements of License, it has be stamped as per the
provisions of Article 36-A of the Bombay Stamp Act at the rate depending on the yearly
amount, period of license and the location of the premises. In the said provision team of an
agreement has been described as twelve months, but not exceeding sixty months with or
without the renewal clause. Where the team of a Leave and License Agreement exceeds sixty
months, it has to be stamped at the rate applicable to a ‘Lease Agreement’ under Article 36 of
the said Act.


In the ultimate analysis, the period of eleven months has now no relevance and the way the law
has evolved during the past three decades on the subject, it is entirely safe to give premises on
leave and license basis for a longer period say up to sixty months, with renewal clause and
option of termination by notice, provided bot the parties agree and a proper Leave and License
Agreement is drawn, stamped and registered and nearest Police Station is apprised of about
the antecedents of the licensee, as per the Order issued by the Police Commissioner. Needless
to add that a little temptation in saving expenses on stamping and registration and giving the
premises by way of distorted agreements known as Care Taker Agreement and so on may land
the landlord in trouble, particularly, keeping in view the experience of the year 1973, as
aforesaid.
LEAVE AND LICENCE AGREEMENT
THIS AGREEMENT OF LEAVE AND LICENCE made and entered into at Bombay on this _____ day of
_______, 200__ by and BETWEEN Shri ______________________, an Adult, Indian Inhabitant of
Mumbai Occupation: ______________, residing at ________________________________________,
hereinafter called "the LICENSOR" the Party of the First Part AND Shri ___________________, an adult,
Indian inhabitant of Mumbai, occupation: _____________ having his address at
____________________________, hereinafter called "the LICENSEE" the Party of the Second Part.

WHEREAS the Licensor is carrying on business of ________________________ from his Shop
No._________________________________ and he is otherwise well and sufficiently entitled to and
possessed of the said Shop No.__________________, hereinafter referred to the said shop premises
AND WHEREAS the Licensor is not in a position to carry on his business on a full fledged basis AND
WHEREAS the Licensee has approached the Licensor and requested him to grant a Licence to use and
occupy portion of the said shop premises for a temporary period i.e. for eleven months AND WHEREAS
the Parties have agreed to record the following terms and conditions agreed between them in respect of
the said license:-

NOW THIS AGREEMENT WITNESSETH AS UNDER:-

1. It is hereby agreed by the Parties that the LICENSOR has allowed the LICENSEE to use and occupy a
portion of the said shop premises to carry on its business activities, for the period of eleven months
commencing from _____ day of ______, 200__ and accordingly allowed the Licensee to use and occupy
a portion of the said shop premises for the said purpose and the said period will expire on the _______
day of _____, 200__.

2. It is hereby agreed by and between the parties that the Licensee shall pay interest free security
deposit of Rs.___________ to the Licensor on or before execution of this agreement. Accordingly, the
Licensee has paid the sum of Rs.___________ (Rupees __________________only) to the Licensor
towards Interest free Security Deposit and the Licensor doth hereunder admit and acknowledge the
receipt of the said Security Deposit.

3. The Licensor shall refund the said Security Deposit to the Licensee at the expiry of the License period
and hands over vacant charge of the portion of the said shop premises to the Licensor forthwith after
adjusting dues, if any.
4. The Licensee shall pay Rs.____________(Rupees ___________) per month towards monthly
compensation to the Licensor in advance on or before ________day of every license month.

5. The Licensee is allowed to bring in its own articles and things in the portion of the said shop premises
during the period of licence and the Licensee shall remove the same at the expiry of the License period.
6. The Licensee shall pay or reimburse the Electricity charges to the Licensor as per the Electricity Bills in
respect of the said shop premises during the license period within 7 days of such demand made by the
Licensor.

7. The Licensee shall not cause any nuisance and/or annoyance to the Licensor and/or neighbouring
occupants.

8. The Licensee shall not store hazardous and/or inflammable material/goods save and except the
material/goods permitted to be stored in their usual course of business and the Licensee shall take out
necessary insurance for the said material goods at its own cost.

9. It is hereby agreed by the Parties that after the expiry of this agreement, the Licensee shall hand over
the portion of the said shop premises to the Licensor without fail subject to refund security depo sit after
adjusting dues if any as aforesaid to the Licensee.

10. It is hereby agreed by and between the parties that what is agreed is only a license in favour of the
Licensee for a period of eleven months and the Licensee undertakes that it will not cl aim any right over
the portion of the said shop premises as tenancy or sub-tenancy and also will not claim any right, title or
interest in respect of the said shop premises.

11. The Licensee hereby undertakes that it will use and occupy the portion of the said shop premises for
its own business activities and will not allow any third party interest in the portion of the said shop
premises nor will it allow any third party to use and occupy the said portion of the shop premises.

12. The Licensee hereby further undertakes and promises that it shall not carry out any structural
additions or alterations in the said portion of the shop premises.

13. It is clearly understood by the Licensee that the exclusive possession of the said shop premises is
with the Licensor and he will continue to be in exclusive possession of the said shop premises.

14. The Licensor has handed over one bunch of duplicate keys of the main door/shutter to the Licensee
for convenience and the Licensee shall not change/alter the said locks under any pretext. At the expiry
of the license period, the Licensee shall hand over the said bunch of duplicate keys to the Licensor.

IN WITNESS WHEREOF both the parties are putting their respective seals and signature to this writing on
this day and year as mentioned hereinabove.

SIGNED SEALED AND DELIVERED BY )
the withinnamed LICENSOR; )
_____________________________ )
in the presence of................... )
SIGNED SEALED AND DELIVERED BY )
the withinnamed the LICENSEE )
________________________________ )
in the presence of............ )

RECEIPT

RECEIVED a sum of Rs._______ )
(Rupees ______________ only ) as )
Security deposit without any interest )
from the Party of the Second Part ) Rs.___________/-

WITNESSES: I SAY RECEIVED:
Rs.___________
1.

2.
(_______________________)
LICENSOR

				
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Description: There is a practice prevalent in Maharashtra that a Leave & License Agreement in respect of a residential premises is, usually, entered into and executed for a period of 11 months. The question arises whether it can not be for more than 11 months, if both the parties are interested in a much longer period. A license has been defined in Section 62 of the Indian Easement Act, as a right to do or continue to do something in or upon an immovable property. It does not transfer the interest or create any interest in the immovable property, like a ‘LEASE’, as defined in Section 105 of the Transfer of Property Act, as a right to enjoy property for a certain period in consideration of the price paid. Provisions of Section 62 of the Indian Easements Act do not prescribe, any minimum or maximum period for which a license may be granted.