Leave and License Agreement in India: A Practical Guide

In Mumbai, Pune, Bengaluru and most large Indian cities, residential tenancies are increasingly documented as leave and license agreements rather than leases. The reason is not fashion. A leave and license agreement creates a licence to occupy, not a tenancy, and that distinction changes stamp duty, registration requirements, eviction procedure and the parties' rights on termination. Drafting the wrong instrument, or drafting the right instrument badly, is one of the most common causes of landlord-tenant litigation in India.

Licence versus lease: the legal difference

A lease transfers an interest in immovable property. The lessee has a right to occupy the property for a defined term and, in many cases, protection under state rent control legislation. A licence merely grants permission to occupy; it does not transfer any interest in the property. The licensor retains possession in law, and the licensee occupies on permission.

The consequences are significant. A lease can attract rent control protection in states that still have it, making eviction slow and difficult. A licence can be revoked according to its terms, and a licensee who does not vacate after revocation can be removed through a summary procedure under the Specific Relief Act, 1963, rather than a full civil suit for possession.

However, Indian courts look at substance over form. If a document labelled a leave and license agreement gives exclusive possession for an indefinite period at a monthly payment, with no real power of revocation, a court may hold that it is in fact a lease. Calling a lease a licence does not convert it. The drafting must reflect the actual arrangement.

What makes a valid licence

The document should show the elements of a licence:

• Exclusive possession is not granted in the absolute sense; the licensor retains a right of inspection and entry in defined circumstances.
• The licence is for a defined term, typically 11 months.
• The licence fee is stated as a licence fee, not rent.
• The licensor has an express right to revoke on notice and on breach.
• The licensee has no right to transfer, sublet or assign the licence.
• The licensee acknowledges that the licensor is in possession and that the licensee occupies only with permission.

An 11-month term is common because a lease for 12 months or more attracts compulsory registration in most states, while many states exempt licences of 11 months or less from registration, though stamp duty is still payable. The exemption is not uniform; Maharashtra, for example, has specific provisions for leave and license agreements.

Stamp duty and registration

Stamp duty on a leave and license agreement is a state subject. Rates differ substantially. In Maharashtra, the duty is typically a percentage of the total licence fee plus a deposit component, with a minimum amount; in Karnataka and Delhi the rates differ again. Under-stamping is risky because an insufficiently stamped document can be impounded and cannot be relied on in evidence until the deficit and penalty are paid.

Registration requirements also vary. Many states require registration of licences above a certain term or value. An 11-month licence is commonly executed on stamp paper without registration, but where the state requires registration or where the parties want a public record, the document should be registered within the prescribed period under the Registration Act, 1908.

Clauses that prevent disputes

Licence fee, escalation and deposit

State the monthly licence fee, the due date, the mode of payment and the consequences of late payment. Specify whether the fee escalates annually and by how much. The security deposit should be stated separately, with the conditions for its refund and the permissible deductions — unpaid fees, damage beyond normal wear and tear, and utility arrears.

Term, renewal and termination

State the start date and the end date precisely. An 11-month term with a renewal option is standard. Termination should be permitted on a defined notice period by either side, and immediately on breach. Crucially, the clause should state that on expiry or termination the licensee must vacate and hand over vacant possession, and that continued occupation after termination is unauthorised.

Purpose of use

Restrict the use to residential purposes, or to a specified commercial purpose. A change of use without written consent is a breach and, in commercial licences, can affect the licensor's property tax and zoning compliance.

Maintenance and repairs

Allocate responsibility clearly. Typically the licensor handles structural repairs and the licensee handles day-to-day maintenance. Specify who pays society maintenance charges, property tax, electricity and water. Ambiguity here causes more disputes than any other clause in residential agreements.

Inventory and condition

Attach a schedule listing furniture, fixtures and their condition at handover, with photographs. This protects both parties at the time of deposit refund.

No subletting, no assignment

Expressly prohibit subletting, assignment, transfer or granting possession to any third party. Also require the licensee to disclose all persons who will reside in the premises.

Entry and inspection

Give the licensor a right to inspect on prior notice, and to enter without notice in emergencies such as fire, flood or gas leak. This clause also supports the licence characterisation, because a lessee with exclusive possession would not normally grant such a right.

Compliance and indemnity

Require the licensee to comply with society rules and local law, and to indemnify the licensor against claims arising from the licensee's use. Add a clause on police verification of tenants, which many housing societies and some state regulations require.

Revocation and summary eviction

State the licensor's right to revoke the licence on breach or on expiry. Under Section 6 of the Specific Relief Act, 1963, a person dispossessed without due process can seek summary restoration within six months, so the licensor should never take back possession by force. The correct route is a written revocation, a notice to vacate, and then a civil suit or an application under the applicable state law.

Is an 11-month licence a way to avoid rent control?

It can be, and that is why the format is popular. But it is not a guarantee. Courts examine whether the arrangement was genuinely temporary and revocable. Repeated renewals over many years, combined with exclusive possession and no real licensor control, may lead a court to hold that the relationship is a lease in substance. Landlords who rely on the label alone can find themselves in a rent control dispute with a sitting tenant.

Checklist before signing

• Confirm the licensor's title or authority to grant the licence — ask for the sale deed or the society share certificate.
• Verify that the property tax and society dues are current.
• Check the stamp duty rate for your state and the term you are using.
• Attach the inventory and photograph the premises at handover.
• Record the meter readings for electricity and water on the start date.
• Complete police verification and society formalities before occupation.
• Keep a signed copy with each party and preserve payment receipts.

Frequently asked questions

Is a leave and license agreement better than a rent agreement?

For short-term occupation in states with rent control, a properly drafted licence is easier to terminate. For long-term tenancies where the tenant wants security of tenure, a registered lease may be more appropriate. The choice depends on the intended duration and the state's rent control law.

Does an 11-month agreement need registration?

In many states it does not, but stamp duty is still payable. Some states require registration above specified terms or values. Confirm the position in your state before execution.

What happens if the licensee does not vacate after expiry?

The licence is revocable and occupation after expiry is unauthorised. The licensor should send a written notice to vacate and then proceed through the civil court. Self-help eviction is illegal and can expose the licensor to a summary restoration application under Section 6 of the Specific Relief Act.

Can the licence fee be increased mid-term?

Only if the agreement provides for escalation. Without a clause, the fee remains fixed for the term.

Society formalities and police verification in practice

In a housing society, the legal document is only half the process. Most societies require the licensee to submit a copy of the agreement, identity proof, photographs and a police verification form before granting a gate pass or access to facilities. Some societies also charge a transfer fee or a non-occupancy charge, and some require the licensor to obtain a no-objection certificate before letting the flat. These requirements are contractual, not statutory, but ignoring them delays occupation and can expose the licensor to society penalties.

Police verification has become standard in most metros. The licensee submits a verification form at the local police station or through the state police portal, and the licensor should keep a copy of the acknowledgement. Where the licensee is a foreign national, additional reporting requirements apply under the Foreigners Act and the licensee must register with the Foreigners Regional Registration Office where required. For commercial premises, the licensor should also confirm that the society or the landlord's association permits the intended business use.

Commercial leave and license agreements

Commercial licences differ from residential ones in three important ways. First, the term is usually longer — three to five years with a lock-in period — which almost always requires registration and higher stamp duty. Second, the agreement must address fit-out works, signage, business permits and restoration of the premises at handover. Third, the fee structure often includes a fixed licence fee plus a percentage of revenue or a periodic escalation tied to an index.

A commercial licence should also allocate responsibility for statutory approvals — shops and establishments registration, fire safety, trade licence, GST registration of the business address — and should state whether the licensor's consent is required for structural changes. Where the licensor is not the owner but a lessee granting a sub-licence, the head lease must be examined to confirm that sub-letting is permitted. A sub-licence granted in breach of the head lease can be terminated along with the head lease, leaving the licensee without premises.

Drafting support

If you need a Leave and License Agreement drafted, our drafting team prepares it in your state's format with correct stamp duty guidance, inventory schedule, revocation and handover clauses, ready for execution.