Essential Clauses in a Leave & License Agreement By DHARANI KUMAR - March 6, 2016 Last Updated at: May 19, 2020 21103 In leave and license the owner gives mere permission to the licensee (the holder of a license) without the transfer of interest of property by the owner. … The License is to occupy and use the premises in the mentioned duration on mutually agreed terms of the agreement. The Leave and License Agreement generates certain rights that place obligations on you and the property owner. Without a contract to decide what happens when one of these rights are breached, or obligations not performed, problems are likely to ensue. If you’re not familiar with the procedure, you should pay a lawyer to take you through it. A range of disputes could arise from a badly drawn-out Leave and License Agreement. The contract should address all the key issues and state what the consequences will be in case of a dispute. Can leave and license agreement be for more than 11 months? Most of the rent agreements which are signed for 11 months so that the stamp duty and other charges can be avoided. We all know that leave and license agreement comes under which act. According to the Registration Act, 1908, lease agreement registration is compulsory if the leasing period is 12 months or more than that. Leave and License Agreements have similar elements, but what’s important is the wording. Also, there are a few leave and license agreement case laws, which you should know. So don’t just check to see it’s all there, read carefully to check its meaning. Here’s what you need to look out for. Learn more now Names: Always look for the names mentioned in the agreement. The names of the licensor and the licensee should, of course, be mentioned. Ensure that the person presenting himself as the owner genuinely is the owner. One way to check this is to ask to see the purchase agreement of the flat/house you are going to be renting. Also, ensure that the agreement doesn’t create a relationship with any other person or entity. Address: In agreements of immovable property, the address is always described in a detailed manner. The full address of the property, a description of the house and the surrounding areas are a must. Term of agreement: The term is the period of the license. It’s usually 11 months, but can be increased to five years as well: there isn’t any restriction on the time. There may also be a mention of a lock-in period. For example, the tenant may be penalized – and some, or all, of their deposit, withheld – for terminating the agreement too soon (usually six months). Lock-in periods aren’t enforceable in court, but if you sign a contract that stipulates a lock-in period, you are bound to abide by it. Repairs: The agreement should clearly mention the condition the apartment should be in. This is important because the landlord then has to maintain and repair the home as and when necessary. The rental agreement should mention a clause for proper maintenance of the property. Tenants are usually expected to take care of minor repairs, so it’s important to look at the shape the property is in before taking possession. Find out if electrical and water connections are in working condition by turning on the faucets and switching on the lights. Alterations: Tenants can’t make any change to the property: there must be guidelines as to what can and can’t be done. Usually, structural changes are not allowed. Contracts of over 11 months or those that are renewed every 11 months could also specify how often the flat needs to be painted. Mode of payment: Some landlords prefer cheques post-dated by a few months – or sometimes by the duration of the lease. The agreement should mention the amount to be paid and when it needs to be paid. Preferably, make all payments by cheque so that transactions are recorded and transparent. In case of a leave and license agreement dispute, the owner cannot allege nonpayment or late payment. The agreement should also mention the penalty payable in case of delays in payment of rent. Security deposit: There’s always a deposit to be paid – usually to the tune of two months’ rent. This money is security for the landlord to dissuade the tenant from causing damage or leaving before the notice period. As far as possible, pay this amount by cheque. Returning your deposit: Some owners may deduct a certain sum when you want to move out, so find out how much – and under what circumstances – the money can be deducted. The landlord is also obliged to return the security deposit within a certain number of days. Both these points could also be specified in the agreement. Notice period: If either you or the landlord wishes to terminate the contract, a notice period, usually of one month, needs to be served. Some agreements, however, may specify a longer time period. Always send your notice in written communication, with the date mentioned clearly. Escalation clause: There’s usually a clause in the agreement that the rent will be revised upwards annually. A 5%-10% increase is normal, but this depends on the prevailing market rate in your city.