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Leave and licence agreements
Source : The Hindu Property Plus Published On : 2008-01-26 City : Chennai

Leave and Licence Agreements can be stated to be an offshoot of alternative attempts made to get out of the rigours of landlord-tenant relationship

 

Many types of Agreements are made for occupation of property. These are typically Lease Deeds, Lease Agreements, etc. If a lease is for a term of one year or more, then the same has to be registered. A lease creates a transfer of interest in the property. The process of eviction of tenants is generally difficult. The law is titled in favour of the tenant for various purposes. Contextually, several alternative approaches have been attempted to get out of the rigours of landlord-tenant relationship. Leave and Licence Agreements can be stated to be an offshoot of such attempts. It may be useful to understand that the background of how this has evolved over a period of time.

     The word “Leave” has many meanings. In Leave and Licence Agreements, it is used to indicate “Permission”. The occupancy is in essence a permission granted by the landlord or owner to use and occupy the property concerned.

     “Licence” is a grant by one person to another or to a definite number of persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful. If the right granted as licence does not amount to an easement or an interest in the property, then it would be a licence.

     A lease, on the other hand, is a transfer of a right to enjoy the immovable property concerned. It may be for a specified period, express or implied. The price or payment of money is usually referred to as the “Rent”.

     As per provisions of law applicable in Tamil Nadu, if a lease or tenancy is created in respect of a building which is five years old or more, then the tenant becomes a statutory tenant who can be evicted only under certain specified provisions of law.

    
Bombay Rent Act
 

     In Mumbai, the provisions contained under the then Bombay Rents Hotel and Lodging House Rates Control Act, 1947, popularly known as the “Bombay Rent Act” were considerably in favour of the tenants. Further, Tenancy or Lease Agreement had to be stamped and registered. Even if the Agreements were duly stamped and registered, the eviction of tenants were still a very tough and time consuming procedure.

     With the hope of getting over the stamp duty and registration requirements and also with the view of not creating any tenancy, which will be covered by the said Act, a practice of entering into “Leave and Licence Agreements” was adopted. However, by virtue of an amendment to the said Act in 1973, those who were in occupancy of premises under Leave and Licence Agreements as on the specified date, became statutory tenants under the provisions of the said Act. Provisions were also introduced to protect the landlords, in as much as a person was in occupation of premises under Leave and Licence Agreements, on termination of licence, such person was liable to be summarily evicted. There is no corresponding provision or amendment in the Tamil Nadu Buildings Lease and Rent Control Act, 1960, till date. However, the practice and entering into “Leave and Licence Agreement” following the Mumbai pattern, came into vogue.

     Furthermore, the nature and character of the transaction will determine the actual relationship between the parties and not mere wordings. For this, the terms contained in the document would be the guiding factor in deciding whether the grant is a licence or leave and licence or a lease.

     If the intention of the parties is to operate the transaction as a lease, but the title and wordings employed in the document, refer to the transaction as leave and licence, then this may not help in construction of the document as a “Leave and Licence Agreement”. On the other hand, not withstanding the use of title or wordings otherwise, if there is no transfer of right in the property concerned and the grant does not amount to any easement, then the same may still be a licence.

     There are several indications to discern whether a right has been created in the property or not. The substance of the Agreement or Arrangement and the character of the transaction and the operative intent of parties have to be looked into. It has to be seen whether the permission is in the nature of a right to use the property concerned. The real intention of the parties must be gathered. It has to be seen whether an interest has been created in the property, in which case, it will be a lease. However, if only a permission to make use of the property has been granted, then it would be a licence.

     An important factor is whether the nature of possession of the person in whose favour a lease or licence may be granted. If the circumstances are such that it was the intention of parties to create a tenancy, then the transaction may amount to a lease. If there is no intention to create a tenancy, but the grant is restricted to make use of the property, then the same will be a licence.

Possession and occupation

 

     In law, there is a distinction between possession and a mere occupation. “Possession” implies control of the property. It could be actual or possession in law. On the other hand, the term “Occupation” is understood in the sense of a physical presence in the premises concerned, usually for a period of times. At times, occupation may amount to possession also; but possession need not always be accompanied by occupation of the premises concerned. There are also other characteristics of concepts of “Possession” and “Occupation” which are complex and are not immediately relevant for the purposes of this discussion. It is sufficient if the difference is known.

     Matters like restrictions imposed on usage of the property, restrictions on timings for use of property, control of the premises by one party or the other, conditions for termination, consideration or price or compensation for the transaction, manner of payment and acknowledgement of such consideration or price or compensation and the circumstances governing the relationship between the parties have to be looked into to ascertain the true nature of the relationship between the parties. Further, the rights of the person to grant or create tenancy or otherwise, should also be looked into.

     “Leave and Licence Agreement” have to be examined in the above background. While, it is difficult to change the mind set of parties, one has to look into the above basic facts to check as to whether any intended dealing is merely a camouflage or the underlying operative understanding. Whatever may be the case, if you are involved in such dealings, it is better to have an understanding of what it is all about.

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