Difference between licensing and renting a property
ess
(Querist) 18 November 2013
This query is : Resolved
Pl. advise what is the difference between licensing and renting a commercial or residential property.
I have been advised by someone that I should enter into a licence agreement while giving property on rent.
Which is the best course ?
Thanks a lot.
ABDUL RAZIQUE
(Expert) 18 November 2013
A tenancy has the legal effect of passing an interest in land from the landlord to the tenant. It means that the tenant is given the right of occupation. If a landlord is in breach of a tenancy document, then the tenant can claim damages (compensation) against the landlord and continue to occupy the property in question.
In contrast, a licence creates no interest in land. The licensor only allows the licensee to use the land, not to exclusively occupy it. The licensee’s remedy against the licensor’s breach of the licence may lie only in claiming damages, but not in occupation of the property. Therefore, a licence is typically used for short-term occupation (e.g. for several weeks or months) or where the licensee does not have exclusive occupation of the property, e.g. a car parking space , a newsstand or a “kiosk” in a shopping mall .
To demonstrate the concept of “interest in land”, it is worth noting that there is no interest in land in the external walls of a building because a wall, being a vertical surface, is not land. Therefore, the owner of the rights and interests in the external walls of a building cannot let the walls to another party, but can only license the rights to use the walls.
It should also be noted that as a licence does not transfer any interest in land, it is not liable to stamp duty. However, it would be futile to label a document as a licence just to avoid stamp duty. Whether a document creates a tenancy or a licence does not depend on the name of the document, but on the factual circumstances evidenced by the document. A major factor in differentiating between a tenancy and a licence is to see whether the user has exclusive occupation or possession of the property. Subject to facts that will vary from case to case, the law generally accepts that a grant of exclusive occupation (the user can occupy the property solely and privately) for a term at periodic payments creates a tenancy.
In case of a leave and licence agreement, there is no transfer of interest, but only a permission is granted. If the property is given on tenancy, there is an element of irremovability of the tenant by the owner except on the grounds of eviction mentioned under the Rent Act.
License is defined in Section 52 of the Indian Easement Act. Every license is governed by the provisions under this Act. When any property is given on leave and license, the agreement is known as leave and license agreement. This agreement is valid in every State.
In case the property is given under a leave and license agreement, it can be terminated according to the terms of the agreement, and the owner can demand the possession back from the licensee. The nomenclature of the agreement may be either leave and license or tenancy agreement. The intention of the parties is significant.
Whether an agreement to occupy the premises between the landlord and person allowed to occupy was an agreement to lease or an agreement of leave and license has been a subject of many judgments in Courts. Ever since the introduction of the Rent Acts and security of possession given to the tenants by law, agreements of license have come to be viewed with suspicion that they are a camouflage adopted by the landlords. Simultaneously, some licensees have borne the brunt of such interpretation. The law does not impute an intention to enter into legal relationship where the circumstances and conduct of the parties negate any intention of the kind. The real nature of the transaction has to be determined through a proper construction of the document as a whole and not based on particular words used in the document.
Termination is easy in case of a leave and license agreements and therefore it is preferred by landlords.
ajay sethi
(Expert) 19 November 2013
agree with abdul
