Leave And License Agreement Drafting For Residential Property

If you are dealing with leave and license agreement drafting for a residential property, this guide sets out the legal position, the documents you will need, the usual steps and the mistakes that cost people time. The firm of Advocate B.K. Singh handles this work from offices in Dwarka, New Delhi and Vaishali, Ghaziabad.

In short. A leave and license agreement gives a person permission to use property for a fee without transferring any interest in it, under section 52 of the Indian Easements Act 1882. Courts look at substance, not the title: if it grants exclusive possession like a lease, it may be treated as one. Good drafting keeps control with the owner and states clearly how the licence ends.

A leave and license agreement is the document owners use when they want someone to occupy their premises for a fee but do not want that person to become a tenant. The licensee gets permission to use the space; the owner keeps possession in law and can revoke the permission on the terms agreed. Done properly, it makes getting the premises back simpler and keeps rent control and tenancy claims away.

Done badly, it is a lease with a different heading. Courts in India have long held that the label on the document does not decide its nature; what matters is what the parties actually intended and what the document actually grants. Drafting a leave and license agreement is therefore less about filling in a format and more about making the terms and the conduct of the parties match the label. This page explains the law, the clauses that matter, and how the drafting changes for different kinds of property and parties.

Law

Indian Easements Act 1882 (s.52 licence, s.56 to 64 assignment, revocation and licensee's rights); Transfer of Property Act 1882 s.105 (lease) for contrast; Indian Contract Act 1872; Indian Stamp Act 1899 and state stamp laws; Maharashtra Rent Control Act 1999 s.24 and s.55 for property in Maharashtra.

Who signs

The owner or all co-owners as licensor, or an attorney with a specific power; the occupant or its authorised signatory as licensee; two witnesses.

Registration

Not compulsory in Delhi or Uttar Pradesh for a genuine licence, because no interest in property passes; compulsory in Maharashtra under s.55 of the Maharashtra Rent Control Act.

Stamp duty

Payable under the state stamp law; the article applied depends on the state and how the document is framed, so check the current schedule or seek adjudication.

Typical term

Eleven months is common in Delhi NCR, but longer terms are lawful; the term should fit the use, not just the habit.

If the licensee overstays

Revocation notice, then a civil suit for possession, injunction and damages for use and occupation; in Maharashtra, a summary application before the Competent Authority.

What a leave and license agreement is

A leave and license agreement is a written permission from the owner to another person to use immovable property for a fee, without transferring any interest in the property. Section 52 of the Indian Easements Act 1882 defines a licence as a right to do something on another's property that would otherwise be unlawful, where that right does not amount to an easement or an interest in the property. The fee is usually called a licence fee or compensation, not rent, and the parties are the licensor and the licensee.

A lease is different. Section 105 of the Transfer of Property Act 1882 defines a lease as a transfer of a right to enjoy property for a term in return for rent or premium. The lessee gets an interest in the property, which can usually be transferred, survives a sale by the lessor, and can be ended only in the ways the law allows. A licensee gets only a personal permission. Under section 56 of the Easements Act it cannot be assigned unless the terms allow, and under section 59 a person who buys the property is not bound by the licence as such.

Owners like licences because they keep control. Occupants accept them because they are quicker, cheaper to document and often suit short or shared arrangements. The difficulty is that many documents called leave and license agreements give the occupant everything a tenant has, and then the label does not help the owner.

Lease or licence: the label does not decide

Courts decide whether a document is a lease or a licence by looking at its substance. The main question is whether the occupant was given exclusive possession of a defined space for a term in return for periodic payment, with the owner keeping no real control. If so, the arrangement is likely to be treated as a lease, whatever the heading. If the owner keeps genuine control, such as access, the right to shift the occupant within the premises, management of the space, and services provided along with the use, the arrangement looks more like a licence.

Exclusive possession is not conclusive by itself. A licence can give exclusive use of a room, and a lease can include shared facilities. The court reads the whole document and looks at what the parties did afterwards: who held the keys, who paid the electricity bill in whose name, whether the occupant put up its own signboard, whether the owner ever exercised the access the agreement reserved. Conduct that contradicts the document can undo careful drafting.

The consequences matter most where a rent control law applies. A tenant protected by the Delhi Rent Control Act 1958 or by a state tenancy law can be evicted only on the grounds that law allows, while a licensee can be asked to leave when the licence ends. In Delhi the Rent Control Act does not apply to premises let at more than β‚Ή3,500 a month, so most current arrangements are outside it, but the distinction still affects notice periods, transfer, the rights of a buyer and the remedies available to recover possession.

The legal provisions behind a leave and license agreement

When a licence is the right document, and when it is not

A leave and license agreement fits arrangements where the owner genuinely keeps control or the use is limited. Common examples are a desk or cabin in a business centre or co-working space, a paying guest room in a house where the owner lives, a shop-in-shop counter inside a larger store, a pharmacy or diagnostic counter inside a hospital, an ATM site in a building, a kiosk in a mall corridor, a terrace given for a telecom tower or signboard, a company guest house used by employees, and short-term use of a hall or ground. In each, the owner runs the premises and the licensee uses part of it.

It fits less well where an occupant takes a whole shop, floor, warehouse or factory shed for several years, puts up its own name, pays its own utilities and keeps the only keys. Calling that a licence is common in Delhi NCR, and in many cases it works because nobody challenges it. But if the occupant later disputes eviction, the owner may find the court treating the arrangement as a lease, possibly an unregistered one, which brings its own problems.

The honest drafting advice is to use a licence where a licence is real and a properly registered lease where it is not. A well-drafted lease with a clear term, lock-in and termination clause, registered at the Sub-Registrar, often protects the owner better than a licence that will not survive scrutiny.

Clauses every leave and license agreement needs

• Parties and authority. Full names, addresses and identity details of licensor and licensee, with the basis of the licensor's right to grant (ownership, lease with permission to license, or power of attorney).
• Premises. A precise description with address, floor, area and boundaries, plus a plan if only part of a building is licensed, and a list of fixtures and furniture handed over.
• Purpose. The specific permitted use, such as residence for named persons, a clinic, an office or storage, and a ban on any other use, including illegal or hazardous activity.
• Term and lock-in. The start date, the end date, any lock-in period during which neither side may end the licence without paying compensation, and what happens at expiry.
• Licence fee and escalation. The monthly fee, due date, mode of payment, escalation on renewal, and consequences of delay, with interest at a reasonable rate.
• Security deposit. The amount, that it carries no interest unless agreed, what may be deducted, and that it will be refunded on vacant handover.
• No tenancy and no interest. A clear statement that no tenancy, sub-tenancy or interest in the property is created, and that possession in law stays with the licensor, supported by clauses that make this true in practice.
• Access and control. The licensor's right to enter at reasonable times, to keep a set of keys where appropriate, to manage common areas, and to relocate the licensee within the premises if that suits the arrangement.
• Alterations. No structural work or permanent fixtures without written consent, and an agreement that any work done does not make the licence irrevocable under section 60 of the Easements Act.
• Revocation and exit. Notice periods for either side, events that end the licence immediately such as non-payment beyond a set period or illegal use, the time to vacate, overstay compensation, and handover condition.
• Dispute resolution. Jurisdiction of the courts where the property is, and an arbitration clause if both sides want it.

Drafting the clauses that decide disputes later

The no-tenancy clause is useful but weak on its own. A sentence saying "this is a licence and not a lease" will not survive if the rest of the document gives exclusive possession for years with no licensor control. When Advocate B.K. Singh drafts a leave and license agreement, the first thing he checks is whether the access, keys and services clauses back up that sentence, and whether the parties will actually follow them. If the owner will never visit and the occupant will run the space as its own, the drafting should say so honestly and the owner should consider a lease instead.

The term and lock-in need thought. An eleven-month term is popular because it is short, but a licensee investing in fit-outs will want a longer commitment and may insist on a lock-in. A lock-in protects both sides only if it states what happens on early exit, usually payment of the fee for the remaining lock-in period. Without that, a lock-in clause invites argument. Renewal should be by fresh agreement, not by an automatic clause that keeps rolling the licence forward and makes it look like a long tenancy.

The overstay clause should be realistic. Many formats provide for double or triple the fee per day of overstay. Courts apply section 74 of the Contract Act and award reasonable compensation, so a figure close to the market fee with a modest addition is more likely to be enforced. Pair it with a clear statement that the security deposit is not a substitute for vacating and that continued occupation after revocation is unauthorised.

The deposit clause should say exactly when the deposit is refunded and what can be deducted: unpaid fee, unpaid utility bills, damage beyond normal wear and tear, and the cost of restoring alterations. A vague deposit clause is the commonest reason licensees refuse to vacate; they hold the premises as security for their own money.

Revocation, notice and getting the premises back

A licence ends on expiry, on revocation under the agreement, or on any event listed in section 62 of the Easements Act, such as the destruction of the premises or the end of the licensor's own interest. After that, section 63 gives the licensee a reasonable time to leave and remove its belongings. The agreement should define that time, for example fifteen or thirty days after expiry or revocation, so there is no argument about what is reasonable.

A licence may become irrevocable under section 60 if the licensee, acting on it, builds something of a permanent character and spends money on it. This is why the alterations clause matters. Require written consent for any construction, state that consent does not make the licence irrevocable, and provide for removal or handover of fixtures at the end. Keep correspondence that shows any work was temporary or at the licensee's own risk.

If the licensee does not leave, the owner should not use force, cut utilities or lock the premises. Courts protect settled possession even of an occupant whose right has ended, and self-help can lead to police complaints and injunctions against the owner. The proper course is a written revocation notice, followed if necessary by a civil suit for possession, a permanent injunction and damages for use and occupation. In Maharashtra, section 24 of the Maharashtra Rent Control Act gives a faster route before the Competent Authority for a registered licence.

How we draft a leave and license agreement

The steps below apply whatever the property. The time each takes depends mostly on how quickly the parties share papers and agree commercial terms.

1. Confirm the licensor's right

   Check the title deed, lease or power of attorney under which the licensor holds the premises. If the property is leasehold from an authority or a cooperative society, read the lease or bye-laws for any restriction on parting with possession or licensing. If the property is mortgaged, check the loan terms, since some lenders require consent before the property is let out.

2. Fix the commercial terms

   Agree in writing the area, use, term, lock-in, licence fee, escalation, deposit, maintenance and utilities. Decide who pays society or market charges, property tax and repairs. Short term sheets prevent drafts going back and forth.

3. Decide lease or licence honestly

   Look at how the space will actually be used. If the owner will keep control and the use is limited, draft a licence. If the occupant will run the space as its own for years, discuss a registered lease, and explain the trade-offs to the client before drafting.

4. Draft the agreement

   Prepare the draft with the clauses listed above, tailored to the property and parties. Attach a plan and an inventory where relevant. Use plain language, because both sides need to understand what they are signing.

5. Review and negotiate

   Share the draft with the other side and their lawyer, mark changes, and resolve open points. Watch especially for changes to access, alterations, lock-in and deposit refund, which shift the balance most.

6. Stamp and sign

   Pay stamp duty on e-stamp paper in the state where the property is, under the correct article. Both parties sign each page, with two witnesses, and identity proofs are kept on file. Where an NRI or company is a party, check the authority document first.

7. Register if required

   In Maharashtra, register the agreement, which can be done through the online leave and license registration facility. Elsewhere, registration of a genuine licence is optional, but where the term is long or the line between licence and lease is close, registering can avoid later evidentiary problems.

8. Complete compliance and handover

   Submit tenant or licensee verification to the local police, inform the society or maintenance agency, record meter readings, and hand over keys against a signed inventory. Keep a scanned set of everything in one place.

Lease and leave and licence compared

Stamp duty and registration in Delhi, Uttar Pradesh, Haryana and Maharashtra

Stamp duty must be paid on every leave and license agreement under the law of the state where the property is. In Delhi, the Indian Stamp Act as applicable to Delhi applies, and in Uttar Pradesh and Haryana their own amended schedules apply. Depending on how the document is framed, it may be charged under the lease article or an agreement article, and duty for lease-type documents is usually linked to the term, the fee and the deposit. If there is doubt, section 31 of the Indian Stamp Act allows the document to be presented to the Collector of Stamps for adjudication.

Registration is not compulsory for a genuine licence in Delhi, Uttar Pradesh or Haryana, because no interest in property is created. The risk is that if a court later decides the document was really a lease for more than a year, the lack of registration means it cannot be used to prove the terms under section 49 of the Registration Act. For long or high-value arrangements, registering the document removes that argument.

In Uttar Pradesh, the Regulation of Urban Premises Tenancy Act 2021 requires written tenancy agreements and information to the Rent Authority. A document called a licence that is really a tenancy may be treated as a tenancy under that Act, so owners in Noida, Greater Noida and Ghaziabad should keep the licence genuine or comply with the tenancy law. In Maharashtra, registration is compulsory, the owner is responsible for it, and an unregistered agreement can let the occupant's version of the terms prevail.

Tax, police verification and other compliance

Licence fees are income of the licensor and taxable as such. A licensee paying fees above the threshold under income tax law may have to deduct tax at source, and the agreement should say who handles TDS certificates. Where the premises are commercial and the licensor is registered under GST or crosses the threshold, GST usually applies to the fee; where residential premises are given to a GST-registered business, reverse charge may apply. The agreement should state whether the fee is inclusive or exclusive of GST, and the parties should confirm the position with their chartered accountant.

Delhi Police and the police in Gautam Buddh Nagar and Ghaziabad require owners to have tenants, licensees and paying guests verified, usually through an online form or the local police station. Not doing so can be treated as disobeying a lawful order. Verification also gives the owner a record of the occupant's identity and permanent address, which helps if the occupant later disappears with dues unpaid.

Check the building's own rules. Cooperative group housing societies often require intimation or a no-objection letter before a member licenses a flat, and some charge a non-occupancy fee where their bye-laws and the cooperative law allow it. Authority leases in Noida and Greater Noida may restrict letting or parting with possession of commercial and industrial plots without permission. Licensing in breach of these rules can put the owner's own lease at risk.

How the drafting changes with the property and the parties

For a residential flat or house, the agreement should name the persons allowed to live there, restrict use to residence, and deal with society rules, parking and maintenance charges. For a paying guest room in an owner-occupied house, the licence is usually genuine and the agreement can be short. For a commercial shop or office, the purpose clause, signage, opening hours, fit-outs and lock-in need more care, because the licensee's investment and goodwill make it more likely to resist leaving.

For an industrial shed or warehouse, add safety and pollution compliance, power load, hazardous materials and insurance, and check that the authority lease allows the use. For hospital property, such as a pharmacy, diagnostic lab or canteen inside a hospital, the licence should tie the use to the hospital's operations and licensing, and end automatically if the licensee loses its own licence. For a resort or hotel, licences for shops, spas or event spaces should match the hotel's operating rules. For a school, licences for canteens, bookshops or after-hours coaching should respect the recognition conditions under which the school uses its land.

Where the property is jointly owned or inherited, all co-owners should sign as licensors, or those not signing should give a written consent or power of attorney. A licence granted by one heir alone binds only that heir and invites disputes with the others. An NRI owner should act through a power of attorney that specifically covers licensing, receiving fees and suing for possession, executed and attested properly abroad and stamped in India within the time allowed.

A company, LLP or startup acting as licensee should sign through an authorised signatory backed by a board resolution, and the licensor may want a personal undertaking or a higher deposit if the business is new. Investors who buy units to license out should keep the paperwork uniform across units and diarise renewals. A bank taking space for a branch or ATM usually has its own format; the owner should read it closely, because bank formats often run for long terms with renewal rights that look more like a lease. A bank as lender to the owner may need to be told, or its consent obtained, before the mortgaged property is licensed.

Documents needed to draft the agreement

Common mistakes in leave and license agreements

• Copying an online format. Generic formats often contain clauses meant for Maharashtra, mix lease and licence language, or say nothing about the property's own restrictions. A borrowed format is the commonest source of later trouble.
• Calling a lease a licence. If the occupant gets the whole premises, its own keys and its own signage for years, the label may not survive. Draft what is real.
• Leaving out co-owners. One heir licensing a jointly held property without the others creates a dispute on day one.
• Allowing permanent works without protection. Consent to construction without a clause preserving revocability gives the licensee an argument under section 60.
• Unrealistic overstay charges. A clause demanding several times the fee per day is likely to be cut down to reasonable compensation. In licence disputes that reach Advocate B.K. Singh's office, the overstay clause is often the part the court enforces least.
• Skipping stamp duty and police verification. An under-stamped agreement causes delay when it has to be produced in court, and an unverified occupant is hard to trace later.

Before you sign

• Check the licensor's title or authority to license, including society or authority restrictions.
• Decide honestly whether the arrangement is a licence or a lease.
• Agree term, lock-in, fee, escalation, deposit and refund conditions in writing.
• Include access, keys, alterations and revocation clauses that match how the space will be used.
• Pay correct stamp duty in the state where the property is.
• Get all co-owners, or their attorneys, to sign.
• Complete police verification and hand over against a signed inventory.

Related work and getting the draft checked

A leave and license agreement often sits beside other documents. Where the arrangement is really a tenancy, use rent agreement drafting or lease deed drafting with registration at the Sub-Registrar. Stamp duty questions are worth settling through stamp duty advice or e-stamp assistance. An NRI owner will usually need power of attorney drafting before anything is signed.

If a licensee will not leave, the next steps are a notice to vacate, a suit for possession and a claim for mesne profits for the period of overstay. Commercial licences with larger stakes may also need commercial contract review of the surrounding arrangements.

If you want the draft or the other side's format checked before you sign, the team of Advocate B.K. Singh at Legals365 can review it and tell you what to change. Talk to a lawyer with the title papers and the agreed terms ready.

Residential property: what changes

Residential property covers houses, builder floors, flats in group housing societies and apartments in developer projects. It is the property people care about most, and the law gives it more protection than commercial premises: consumer remedies against builders, rent control for old tenancies, special rules for senior citizens and family members. It also carries more family disputes than any other kind of asset.

The documents depend on the type. For an independent house or builder floor in Delhi, ask for the chain of sale deeds or the conveyance deed from DDA, the sanctioned building plan, the completion certificate, mutation in MCD records, the latest property tax receipt and electricity and water bills. For a flat in a cooperative group housing society, ownership runs through membership: the share certificate, the society's NOC and the Registrar of Cooperative Societies' approval of the transfer matter as much as the deed. For a flat in a developer project in Noida, Greater Noida or Gurugram, check the RERA registration, the builder-buyer agreement, the occupancy certificate, the tripartite sub-lease or conveyance deed, and whether the builder has paid the land dues to the authority, since unpaid dues have held up registration for thousands of buyers.

Stamp duty is charged on the higher of the price and the circle rate. Delhi charges women buyers a lower rate, and joint purchases fall in between; Uttar Pradesh and Haryana have their own concessions. Registration is at the sub-registrar office for the area, with both parties and two witnesses present. After registration, mutation in the municipal or authority record should be applied for, since it governs property tax and later dealings, even though mutation is not proof of title.

Disputes tend to fall into a few groups. Against builders: delayed possession, reduced area, poor construction and missing amenities, which go to the RERA authority or the consumer commission at the buyer's choice. Between landlord and tenant: old tenancies with rent up to β‚Ή3,500 a month in Delhi are governed by the Delhi Rent Control Act 1958, where eviction for the landlord's bona fide need under section 14(1)(e) is the usual route; newer tenancies are contractual and go to the civil court or the rent authority under any new tenancy law the state has adopted. Within families: partition, wills and succession, and disputes over who may live in the house. Senior citizens can approach the Maintenance Tribunal under the Maintenance and Welfare of Parents and Senior Citizens Act 2007, which in appropriate cases has ordered children to vacate a parent's house. A wife's right to reside in the shared household under the Domestic Violence Act 2005 can also affect who stays in a property.

A few habits prevent most problems. Never buy on a GPA and agreement to sell alone. Insist on the occupancy or completion certificate. Keep original documents safe and certified copies handy. And put family arrangements about a house in writing, ideally a registered partition or family settlement, before a death or a marriage breakdown turns them into litigation.

Frequently asked questions

What is the difference between a rent agreement and a leave and license agreement?

A rent agreement or lease transfers an interest in the property to the tenant for a term. A leave and license agreement gives only permission to use, with no interest passing. Courts look at what the document actually grants, not its title.

Is registration of a leave and license agreement compulsory in Delhi?

No, not for a genuine licence, because no interest in property passes. Stamp duty must still be paid. For long terms, registration can help if the nature of the document is later disputed.

Is an 11-month leave and license agreement valid?

Yes. Eleven months is a common term in Delhi NCR because it is short and avoids debates about registration, but any term is lawful. The term should fit the use, and renewals should be by fresh agreement.

Can a licensee claim to be a tenant?

A licensee can argue that the arrangement is really a tenancy, and courts will decide on the substance. If the licensee had exclusive possession with no licensor control, the claim may succeed. Clauses on access, keys and services, followed in practice, make the licence harder to challenge.

How much notice is needed to revoke a licence?

The notice period stated in the agreement applies. After revocation, section 63 of the Easements Act gives the licensee a reasonable time to leave, which the agreement should define. Without a clause, the reasonable period depends on the facts.

Can the owner change locks if the licensee overstays?

No. Self-help such as changing locks or cutting power can lead to police complaints and court orders against the owner. The safe course is a revocation notice followed by a suit for possession and damages.

Who pays stamp duty on a leave and license agreement?

The agreement decides; often the licensee pays, or the cost is shared. The duty depends on the state and how the document is framed. Pay it before or at signing on e-stamp paper.

Do I need police verification for a licensee?

Yes. Delhi Police and the police in Noida and Ghaziabad require verification of tenants, licensees and paying guests. Skipping it can be treated as disobeying a lawful order.

Can a jointly owned property be given on leave and license by one owner?

It should not be. All co-owners should sign, or the others should give written consent or a power of attorney. A licence by one co-owner alone invites a dispute.

Is GST payable on licence fees?

Often yes for commercial premises where the licensor is registered or crosses the threshold, and reverse charge may apply where residential premises are given to a registered business. State in the agreement whether the fee includes GST. Confirm the position with a chartered accountant.

Can an NRI give property on leave and license from abroad?

Yes, through a power of attorney that specifically covers licensing, collecting fees and suing for possession. The power should be executed and attested properly abroad and stamped in India within the time allowed.

What happens to the licence if the owner sells the property?

Under section 59 of the Easements Act, the buyer is not bound by the licence as such. The agreement should deal with sale, for example by giving notice to the licensee. A lessee, unlike a licensee, usually continues against a buyer.

Should I go to RERA or the consumer commission against my builder?

You can choose either, as the Supreme Court held in Newtech Promoters v State of UP (2021), but not both for the same relief. RERA is often quicker for refund or delay interest under section 18; the consumer commission can also award compensation for deficiency in service. The choice depends on the amount, the relief you want and how far the project has progressed.

Can my son be evicted from my house if he harasses me?

In many cases, yes. The Maintenance Tribunal under the Senior Citizens Act 2007 has power to protect a parent's property and life, and courts have upheld eviction orders against children in suitable cases. The parent's ownership of the house and evidence of ill-treatment are the key facts.