Leave and License Agreement – All you need to know!

A leave and license agreement is done because the owner or the licensor wants to retain more control over his flat premises. So, in a leave and license agreement, the legal ownership and possession is with the owner who is the flat premises’ licensor. Here the licensee or the tenant is just using the premises for a specific period. Before you execute or register a leave and license agreement, you have to draft that agreement, and you have to give at least seven days of intimation to the society in which your flat is situated.

Partha Saarathi Legal LLP is one of the most well-known law firms in Navi Mumbai. Here in this article, we will understand the concept of leave and license agreement. 

It is popularly known as a rent agreement. So, first, we will understand why in the first place a leave and license agreement is done and why not a long-term lease or a long-term rent agreement is done. 

A leave and license agreement is done because the owner or the licensor wants to retain more control over his flat premises. So, in a leave and license agreement, the legal  ownership and possession is with the owner who is the flat premises’ licensor. Here the licensee or the tenant is just using the premises for a specific period. 

What is the procedure for making a Leave and License?

Before you execute or register a leave and license agreement, you have to draft that agreement, and you have to give at least seven days of intimation to the society in which your flat is situated. 

After you agree, you have to submit a copy of the leave and license agreement and the police verification document to the cooperative housing society.

Remember, this is not permission you seek from society, but you are just giving an intimation to the Society about your agreement.

Let’s see the execution and the registration part:

A leave and license agreement is to be compulsorily registered. Nowadays, we see that many times a leave and license agreement is notarized. But I would recommend that if something goes wrong in the future, then a registered leave and license agreement will always benefit you. 

The Maharashtra rent control Act 1999 states that such an agreement needs to be compulsorily registered, even if the period of such license agreement is for less than one year. As it reduces future property disputes.

Legal remedy for the Owner or Licensor: 

Typical problem scenarios are:

• Tenant or the licensee is not leaving your premises.
• Tenant is also not paying the rent or the license fee to the licensor.

In this case, the owner or the licensor has the legal remedy to send the legal notice terminating the agreement. He can even file an eviction suit. He can also claim the damages, which may be almost double the license fees. It can be calculated from the date of expiry of the License till you get back your permission. 

Now we will discuss some of the essential clauses and precautions you need to take when you are drafting a leave and license agreement from the owner’s perspective as a tenant is also a consumer with rights:

Legal possession and control:

For example, If the flats have keys, then you have to make sure that one set of keys is remaining with the licensor or the owner and his family, or say if the tenant is putting up a new lock then you have to expressly state in the agreement that in case the tenant is putting up a new lock he has to hand over one set of keys to the licensor or the owner. 

Utility Bills – Gas and Electricity.

Of course, if the tenant or the licensee uses the premises, he has to pay for it. But he has to ensure that he gives those bills to the owner or Licensor. In case of any future discrepancies, the money recovery procedure is easy.

Again, certain correspondences like courier or post, all these things the tenant has to hand over to the licenser’s owner. So, this signifies that the extended possession of the property is with the licenser or the owner. 

Clause regarding visitation rights. 

You can expressly state that the licenser has the right to visit the premises and inspect

whether the property is in good condition. But that does not mean that you can randomly enter into the flat rooms. It’s always advisable that the owner and the tenant should decide on a suitable date or a specific time slot so the owner or the licenser can visit the flat premises and inspect his property. 

Purpose of usage of the flat premises: 

If the flat is rented out for residential purposes, it cannot be used for commercial purpose. Of course, there are exceptions for certain professionals like charter accountants and lawyers who can give consultations through their residential premises.

This is very important if the issue goes into the dispute in a court of Law in the future.

Fittings and fixtures:

In case the tenant or the licensee damaged specific fittings and the fixtures, the owner or the licenser has the right to recover those costs or damages from the refundable deposit that he has taken from the licensee while executing the agreement.

Expiry of Licensee/Tenant

If the licensee expires during the term of the agreement, then his legal heirs or family members cannot claim their right to the property. In this case, they have to execute a new leave and license agreement with the Licensor.

Termination Clause

The termination clause, which is very important as the contract may be terminated either by completing the tenure. If the licensee or the tenant has committed 

• The breach of the agreement if he has violated certain obligations explicitly mentioned in the contract.
• If he has disturbed society’s peace or caused some nuisance, or violated the rules and regulations of the cooperative housing society.

In above situations, the licensor can invoke this termination clause and ask for terminating this express agreement of leave and License.

Illegal resolutions. 

It is observed that many cooperative housing societies make specific resolutions say like- 

• Type of tenants that have to be inducted by the owners.
• Bachelors cannot be inducted
• People from particular religion or caste cannot be inducted

So, these kind of resolutions are illegal and can be challenged in a court of Law with proper Legal procedure.

How much does it cost to prepare a leave and License Agreement? 

The cost of preparing a leave and license agreement is somewhere around Rs. 2500 to Rs. 5000. It will all depend on the professional based on his expertise and experience. You may have observed that various agencies and shops in the local market do this kind of work. But I would recommend that such types of agreements need to be drafted and executed through a professional. So, if something goes wrong in the future, you can always rely on the agreement and its clauses. It is going to benefit you in the long term.