The
landlords have to take all necessary precautions to protect their rights
through appropriately worded contractual documents called Leave and licence
agreements.
What is a
licence?
Licence
agreement is a document granting permission to use a land without a right to
exclusive possession and such transactions are governed by section 52 of the
Easement Act; however the Transfer of Property Act does not refer to leave and
licence as a mode of Transfer of Property.
Section 52
of the Indian Easement Act, defines licence as where the grantor grants to
another person or number of other persons, a right to do, or continue to do in
the immovable property of the grantor, something which would, in the absence of
such permission, be unlawful and such a right does not amount to an easement or
an interest in the property, the right is called a licence.
A licence is
notionally created where a person is granted the right to use the premises
without being entitled to exclusive
possession of the premises or the circumstances and conduct of the parties show
that all that was intended was that the grantee should be granted a personal
privilege with no interest in the property. Thus, if the agreement is merely
for the use of the property in a certain way and on certain terms, while the
property remains in the owner’s possession and control, the agreement will
operate as a licence agreement.
The person
who grants the right to do something on his immovable property is called
grantor or licensor and the person who gets the right is licensee. Licence is a
personal right given to the licensee and therefore cannot be transferred by the
licensee or exercised by his servants and agents Thus, the licence is the grant
of permission to do something upon the immovable property, however it does not
create any right in the immovable property in favour of the person, who does
something. It is different from lease, which is a mode of Transfer of Property,
where the lessee gets certain rights including the possession to do something
that is occupying or residing. Even the possession is not exclusive, in leave
and licence but deemed to the joint possession of both, the licensor or
licensee. It is not an easement right and is in fact akin to residing in a
lodge on payment of charge. The charges paid for occupation is called
compensation.
Similarly,
where the licensor transfers the immovable property to another person by way of
sale, gift, etc., the transferee is not bound by the licence. This is not so in
case of rented or leased property, where the transferee is bound by the terms
of agreement made between the lessor and lessee.
Leave and
Licence Agreements:
Though there
are definite legal provisions, which separate licence agreements from lease
agreements or tenancy agreements, often it is confusing leading to litigation.
Outwardly both lease and licence seem similar. In lease or renting, a property
is given to some other person for definite period on payment of some specified
amount, which may be lump sum, or periodical called lease amount or rent.
Similarly in leave and licence also property is given to some other person for
use on payment of compensation. The real determining factor is the creation of
interest in the property. It has been held in many cases that the intention of
the parties and their conduct are important to determine whether a particular
case is licence or lease.
Principles
for Licence:
In another
case, the court has laid down the following principles for determining the
agreement as licence:
a. The
agreement is signed by the licensee only.
b. The
licences for carrying the business stand in the name of licensor.
c. Both the
parties have control over the property,
d. Admission
made by the licensee in subsequent correspondence indicating that the agreement
is a mere licence
It has also
been held that, if the licensee under the terms of licence constructs any
structure of permanent nature and the construction made by the licensee with
the knowledge and consent of the licensor; the licence cannot be revoked,
likewise the licence cannot be revoked, when coupled with transfer of property
and such transfer is in force.
a. The
period of licence should not be more than 11 months; even if feasible no
definite period should be mentioned.
b. There
should not be provision to extend the agreement with mutual consent.
c. The
licence should be liable for cancellation without assigning any reason.
d. The
possession should not be exclusive.
e.There
should not be any provision for termination of licence or re-entry, if
mentioned it would amount to exclusive possession and transfer.
f. There
should not be any clause about keeping property in good and tenantable repairs,
which is an indication of tenancy.
g. Avoid
mentioning clauses pertaining to the payment of taxes, rates by the licensee.
h.Avoid
mentioning clauses pertaining to letting or subletting, since license does not
confer such rights on the licensee.
Contents of
the Agreement:
Just
incorporating the words licence, licensor and licensee in an agreement, does
not make a document a leave and licence agreement, but the contents, intention
of parties and their conduct determine the nature. Courts are inclined to treat
the documents as that of lease, in case of any doubt as to whether a document
is a leave and licence agreement.
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