What is the Difference Between a Leave and License and Rent Agreement?

If you have actually been in the process of renting a house, either as a renter or a proprietor, you've likely come across terms like "Leave and License Agreement" and "Rent Agreement." While they may seem similar, it's vital to understand that they are unique concepts with significant distinctions. To comprehend the crucial distinction and application in between these two things, let's very first plainly comprehend the distinction in between both of these

What is a Lease Agreement?

In India, a rent contract is a legal document that explains the terms and circumstances of renting a residential or commercial property between a property owner (lessor) and a renter (lessee). It is also referred to as a Rental Contract or a Rental Agreement.

The Rent Agreement usually includes details such as the proprietor's and occupant's names and addresses, the lease term, the rent amount and payment schedule, the security deposit, maintenance and repair responsibilities, guidelines and policies for residential or commercial property usage, and other important clauses. In India, the Rent Agreement must be composed and signed by both parties. It is advised that the Rent Agreement be registered with the local authority in order for it to be legally binding and enforceable. The Rent Agreement need to be registered by paying a little stamp task and registration cost if it is for more than 11 months in period. A well-drafted Rent Agreement can help avoid arguments and misunderstandings between the property manager and renter by describing both sides' rights and duties.

What Exactly is a Leave And License Agreement?

A "Leave and License" arrangement permits the Licensee authorization to inhabit the Licensor's residential or commercial property. As an outcome, rather than a tenancy, approval to occupy is approved on a leave and licence basis. A contract like this makes expulsion much easier and gives the proprietor more power overall.

The distinction in between a Rent and a leave and licence plan is that the former develops an interest in the residential or commercial property, whereas the latter does not. A Lease, unlike a Leave and License plan, can also be moved.

A "License" is an ideal approved by a single person to another or a group of people under Indian law. These rights often apply to acts that appear to be prohibited on or in relation to unmovable residential or commercial property. A licence grants non-transferable individual rights.

The licensor is the individual who provides the licence, whereas the licensee is the one who acquires the licence and exercises its rights. Leases and rental agreements are not the like licences due to the fact that each is distinct in its own way.

According to Section 52 of the Indian Easements Act [1], "where a single person grants to another, or to a specific number of other individuals, a right to do, or continue to do, something in or upon the grantor's stationary residential or commercial property that would be illegal in the lack of such a right, and such a right does not total up to an easement or an interest in the residential or commercial property, the right is called a licence."

The Maximum Period of Leave and License Agreement:

The maximum period for a leave and License arrangement in India is generally 11 months. This 11-month duration is basic for the majority of agreements, whether they are for property or industrial purposes. However, it is not vital that leave and license contract needs to be renewed for only 11 months; the tenure can be decided by the lessor and the lessee.

Difference Between Rent Agreement and Leave and Licence Agreement

On the surface area, lease and lisence arrangement and lease agreement seem the very same thing, yet there is a substantial difference between them.

Interest and Transferability:

Leave and License Agreement: A leave and license plan grants consent to utilize the residential or commercial property but does not produce an interest in the residential or commercial property itself. It's a permission-based contract that doesn't confer ownership or proprietary rights to the licensee. Additionally, leave and license arrangements typically can't be transferred to another party.

Rent Agreement Similarly, a rent contract doesn't provide ownership but permits momentary usage of the residential or commercial property. Unlike leave and license, some leases may produce a leasehold interest in the residential or commercial property, especially longer-term commercial leases. Leases can often be transferred, based on the regards to the agreement and local laws.

Term:

Leave and License Agreement: Can be signed for varying periods, consisting of shorter durations like 11 months.

Rent Agreement: Can be signed for different periods, not strictly restricted to month-to-month terms.

Assets/Property Type:

Leave and License Agreement: Typically done for immovable residential or commercial properties.

Rent Agreement: Commonly provided for movable residential or commercial properties, lands, and immovable residential or commercial properties as well.

Maintenance Responsibility:

Leave and License Agreement: Maintenance responsibilities can differ based on the terms of the arrangement.

Rent Agreement: Maintenance duties generally fall on the renter or occupant, who is responsible for the maintenance of the residential or commercial property. In leasing, especially in business leasing, the lessee might bear the upkeep problem, moving the duty to the market or company that has actually purchased the lease.

Flexibility of Terms:

Lease & License Agreement: Terms are predetermined and mutually accepted in the leasing contract.

Rent Agreement: Renting contracts can alter terms at any time, at the proprietor's discretion.

Why is a Leave and License Agreement Better for Homeowners than a Regular Rent Agreement?

Squatters are any residential or commercial property owner's greatest fear. It's quite common to hear accounts of tenants unlawfully inhabiting large homes considering that owning property is out of grab a large part of the population. If the squatter refuses to leave your residential or commercial property, it usually leads to a lengthy legal struggle, or an out-of-court settlement that might not be in your finest interests. But don't stress; there's a procedure in location to rescind the Leave and license Agreement.

You have 2 options: sign a regular rent agreement or produce a leave-and-license agreement. In either circumstance, as a residential or commercial property owner, you would wish to lease your residential or commercial property with total self-confidence that ownership will stay "vacant and unencumbered" at the end of the agreement term.

In a Leave And License Agreement, the owner accredits the residential or commercial property to the renter, and the tenant abandons the premises at the conclusion of the license period. The renter has no right to claim ownership of the residential or commercial property. The Rent Control Act does not apply to this arrangement.

But in Rental Agreement, Tenants may declare ownership of residential or commercial property after remaining for a minimum of 10 years and submitting a claim under the Rent Control Act. You have a couple of options for kicking out the occupant and raising the rent.

Choose an 11-month Leave and License agreement to make your agreement even more safe. After 11 months, extend the agreement for another 11 months. Limit your agreement to 11 months. An occupant needs to not understay or overstay his/her lease due to the fact that the lessor will need to spend for remodelling, painting, cleansing, repair work, and broker costs once again. The suggested tenancy duration is 5 years, though with renewed contracts, renters can stay as long as both celebrations concur.

Conclusion

In conclusion, understanding the difference between Leave and License Agreements and Rent Agreements is important for a smooth rental experience in India. Each type of agreement has its own distinct functions and implications, with Leave and License Agreements providing more flexibility for property owners and Rent Agreements offering additional occupant defenses under the Rent Control Act.

If these seem excessive to manage or you seek professional residential or commercial property management and rental services, Agarwal Estates stands out as an exceptional option. Their comprehensive services, consisting of guaranteed lease, utility payment handling, residential or commercial property inspections, and more, use unequaled ease and convenience for residential or commercial property holders. Tenants also take advantage of having a dedicated business cater to their requirements, guaranteeing a smooth and pleasurable tenancy experience. With Agarwal Estates as your reputable partner, navigating rental contracts ends up being worry-free, as they prioritise safeguarding your interests and ensuring a harmonious rental journey.