Leave and License agreement is a formal binding contract which lays down the length and scope of the License along with other terms of License. It is usually signed for a period of 11 months and can be renewed once the term expires depending upon the mutual understanding of the Licensor and Licensee.
A license is defined in section 52 of Indian Easements act 1882 where it states that the License is granted for the specified purpose and duration and anything done which is not mentioned in the agreement is termed as unlawful.
Major Differences between the License and Lease Agreement
a) In a Lease agreement the Lessee gets an exclusive possession of the premises leased out to him. The tendency of Lessee is to get the Lease executed for a longer period running in years because the terms of Lease cannot be altered by the Lessor in between.
b) On the other hand, a License agreement can be renewed after every 11 months or so which is the standard term. In the License agreement, the legal possession remains with the Licensor which means there is no transfer of interest from the Licensor to Licensee.
c) The Licensee doesn’t have the right to further sublicense whereas the Lessee has the right to further sublease it to the third party.
d) The stamp duty payable in the Lease is generally more than the License.
e) A Lease agreement can be made for a period less than 12 months and in that case, the registration is not compulsory. A Lease agreement of more than 12 months is required to be compulsorily registered along with the presence of two witnesses.
Elements of an ideal Leave and License Agreement
Upon receiving an order, we regularly speak to our esteemed customers to understand their needs. Amongst various other customized elements that can be incorporated in a Leave and License Agreement, some most important and
compulsory elements are listed below: –
a) Names and addresses of the parties – Full names and addresses of the parties is required to be mentioned in the agreement. Both current and permanent address details of the tenant are required.
b) Rent and Tenure of the agreement – The rent to be paid by the Licensee to the Licensor along with the payment date and penalty details are mentioned under separate heads. The duration of the License agreement is usually for 11 months but it can be renewed after the expiry of the mentioned period.
c) Yearly increase in rent – There is usually a clause in the License agreement regarding the yearly increase in the rent. It is usually between 5 to 10 % but it may vary depending on the mutual understanding between the Licensor and Licensee.
d) Security amount– The Licensor usually requires the Licensee to pay few months’ security in advance. If the security amount is going to be deducted due to non-payment of rent, then the agreement must have a room for such provision.
e) Carrying out repairs and maintenance in the premises – The premises let out on License have a clause regarding the permission to carry out any repairs or alteration. The costs of such repairs can either be adjusted from the security deposit or reimbursed from the Licensee, depending upon the understanding between the Licensor and Licensee.
Apart from that, the Licensor may also put a clause stating that the premises are to be maintained in a proper manner and penalize the Licensee if any furnishing or fixture is found out of order. The penalty could be credited from the security or it could be over and above the security amount depending on the loss incurred.
How can you have a well-drafted Leave and License Agreement?
The language of a License agreement is very crucial to set it different from other rental and lease agreements. We at, Docket Tech Solutions take it as our personal endeavor to cater to all the customized needs of our customers. Kindly get in touch with us at email@example.com