Find out: Difference between lease and license agreement

Sulekha.com

There are some crucial differences between a lease agreement and a license agreement.

a) Under license agreements, the legal ownership and the possession of the property remain with the licensor.  Under a lease agreement, the tenant generally has exclusive possession with respect to the property. In other words, a license does not create any interest in the premises in favor of the licensee.

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b) A licensee cannot give the premises on rent to a third party under any circumstances. On the other hand, a tenant can sub-let the premises to a third party, unless the rental agreement expressly provides otherwise.

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c) A license agreement is easier to terminate than a rent agreement. License agreements are terminable, whereas lease agreements are generally not.

d) The amount payable towards stamp duty is more for a lease agreement as compared to a leave and license agreement. But for duration of more than three years, the stamp duty payable is the same for both.

e) In the case of a lease agreement, if the agreement is for a period of less than 12 months, it does not have to be registered. However, a lease agreement for 12 months and beyond has to be compulsorily registered. In many states, a license agreement does not have to be registered.

What do you recommend I should enter into? A Lease Agreement or a License Agreement?

Let us take the example of a person who wants to occupy a property in a shopping mall. In this fact situation, it will be more advantageous to enter into a lease agreement as opposed to a leave and license agreement, because you will then have an interest in the property. In other words, you will have more control over the property.

Having said that, it is common practice among owners of shopping complexes and malls to give out parts of the property on leave and license basis, so that they can have more control over their property.

If the rental amount and the license fee that you would have to pay is working out to be the same (like you have mentioned in your question), it is better for you to enter into a rental agreement with the owner of the shopping complex. In some States like Maharashtra, you will also receive the protection of the Maharashtra Rent Control Act, which is a tenant-friendly legislation.