The two main forms of contractual arrangements that might exist between the owner (landlord/lessor) of the property, and the person (tenant/lessee) who wants to utilize that property or premise for residential or commercial purposes are – lease or leave and license.
What is “Lease” and “License”?
The Transfer of Property Act, 1882 defines lease. It is defined as “a transfer of immovable property for a specific amount of time for consideration for which the transferee accepts the terms of the agreement”.
According to Section 52 of the Indian Easement Act of 1882, a license is a right granted by one person to another, or to a specific number of persons, to do or continue to do something in or on the grantor’s immovable land.
Let us understand the general legal differences between a lease and a license:
We must know the lease and license difference. So let us discuss them below:
|Rights available||A transfer of the right to enjoy the property for a certain period of time or forever||A license is a specific right to use given to a tenant to do something in or on the landlord’s property for a temporary period of time|
|Example||XYZ is given a two-year lease on ABC’s house. XYZ will pay monthly rent in exchange for having sole possession of that home.||For a period of 11 months, Sam permits Roop to occupy the property and reside there.|
|Transfer of Interest||When the property is given to the lessee for possession. Therefore, the interest in property is transferred to the lessee. During the time of the lease, the lessor gives up his right to use the property, and the lessee receives that right.||However, there is no such transfer of interest in this case.|
|Transfer of right||As per the Transfer of Property Act, the lease is heritable or transferable such as leasing property management||But, a license is non-transferrable.|
|What happens when there is a sale of property or death of the party/parties||Lease is not affected by it||In these cases, the license will be terminated|
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Which option is better?
The choice between a Lease or Leave and Licence agreement depends on the situation. It also depends on the intentions of the parties.
As a landlord, it would be preferable to consider Leave and licence agreement as there is no transfer interest in the property. Also, the licensee does not have the right to keep using it.
A lease might be advantageous from the perspective of a licensee if he needs to utilize the property for a long time or wants to invest in it.
The licensee, in this situation, has the advantage of having more rights and interest in using the property while also reducing the danger of being evicted. So, the decision of whether to opt for Lease or Leave and Licence agreement, it all depends on the parties and their preferences.
Know more: Housewise offers property management services in India