What you need to know about Leave and License agreement
IndianPropertyLawyers highlight the important points to keep in mind about a Rental Agreement, also called a Leave and License Agreement While dealing with Rent/Lease contract in either capacity (as a Landlord and Tenant OR Lessor and Lessee), one must avail the services of competent professional lawyer as it involves the legal provisions of the Contract Act and Transfer of Property Act.
Drafting a flawless Lease agreement requires competence, skill and complete knowledge of the legal aspects of the contract to thwart any apprehension of future complication for the either parties. Both the parties to the contract must be legally competent to enter into a contract. Some persons such as minors, undischarged insolvents, insane, bankrupts are incompetent to enter into a valid contract. Some important aspects of Rent /Lease agreement are given below.
What is a Rent/Lease Agreement?
An agreement by which the owner of an immovable property/a person duly authorized by the owner or a competent person enters into a contract with another person for possession, enjoyment and use of the said property for a specified period and purpose against valid consideration is called ''Rent or Lease Agreement.'' The owner of the property is called ''Lessor'' and the person acquiring the right to enjoy/ use the property is called ''Lessee.''
Parts of Rent/Lease Agreement
1. Consideration - Rent payable including premium (if any) is mentioned in this part.
2. Operative part - It should show clearly the Lessor divesting himself of possession and lessee coming into possession.
3. Habendum - The nature of the lease, commencement and duration of the term are specified here.
4. Reddendum - The mode of payment of consideration including time, place and installments of payment are mentioned in this part.
5. Covenants - Terms and conditions governing the lease such as purpose, payment of taxes, repairs, insurance, subletting etc are mentioned in this part.
Normal Lease agreement must contain the following clauses covering the aforesaid parts:
- Proper identification of the parties to the contract
- Clear title of the Lessor - The lessor must be the legal owner of the property or a person duly authorized by him or a person authorized by court to enter into such contract.
- Proper identification, area and demarcation of the property to be rented/leased.
- Tenure of the lease - The duration/period of the lease must be clearly mentioned with or without a provision for further renewal of the same. On expiry of the said period, the lease stands determined until and unless it is renewed further.
- Purpose of the lease - Whether the property will be used for residential, commercial or charitable purpose. Use of the property for any purpose other than as mentioned in the agreement, makes the agreement void and liable to be cancelled and compensation needs to be paid.
- Consideration - Quantum of rent payable and mode of payment must be mentioned. Normally the rent is payable on monthly basis unless it is mutually agreed otherwise.
- Enhancement of the rent payable - If the lease period is more than 1 year and it is agreed that rent payable will increase in subsequent year (s) then such increase should be mentioned in the agreement. Normally it is as a percentage of the rent paid in the current year.
- Security deposit or Advance Rent - The agreement must specify any security deposit or advance rent payable by the lessee, time and mode of refund of the deposit or adjustment of the advance rent. Normally deposits are interest free. In case it is agreed otherwise, the rate of interest and mode of payment thereof should be mentioned in the agreement.
- Other charges - Any other charge(s) such as for maintenance, security, electricity, water, gas etc or for any other facility, payable by the tenant/lessee, must be specifically mentioned in the agreement to spare both the parties any heartburn later on.
- Access to common/ancillary facilities - The agreement must specify the availability or otherwise, of the other facilities such as use of common passage, roof, park, swimming pool, car parking, library, club, gymnasium etc besides the demised and demarcated property, and charges payable (if any) for such facilities.
- Furnished flats - In case of furnished flats the agreement must contain the complete list of furniture/appliances/gadgets etc with respective specifications. Quantum of compensation for loss or damage to such furniture/appliances must be provided for in the agreement to avoid any miscommunication later.
- Maintenance of the lease property - Normally this requirement arises when the property is leased for a very long period. In such cases, the onus of repairing/maintenance of the property must be clearly spelt out. The agreement must also contain, in such cases, liability of the defaulting party to compensate the other party, for the losses and damages.
- Determination of Lease - It may occur in any of the following ways and must be reflected in the agreement.
A) By efflux of time - On expiry of the lease term
B) By notice - After expiry of the notice period served by the either party
C) By express or implied surrender by the lessee
D) By Forfeiture - By violation of the terms and conditions, by purchase of the property by the lessee, when lessee becomes incapable of entering into contract
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