Licence as alternative to
lease
| One possible alternative is to consider the scheme of Leave and
Licence to balance the interests of both the landlords and the tenants,
writes C.H.Gopinatha Rao |
RIGHT TO OCCUPY: The licence creates no titles or interest for the licensee.
Landlords and tenants are always at loggerheads and suffer mutual suspicion
when it comes to working out an agreement regarding rent or lease of immovable
property. It is often said the present methods to lease (the term lease also
includes rent) is unfriendly to property owners and discourages rental housing
stock to be added to the city.
Is there an alternative method that would help both the
parties the owners and the tenants?
One possible alternative is to consider the scheme of leave
and licence to balance the interests of both the landlords and the tenants. The
right to occupy the premises under a lease agreement is governed by the
provisions of Section 105 of the Transfer of Property Act which states:
"A lease of immovable property is a transfer of right to
enjoy such property, made for a certain time expressed or implied, or in
perpetuity, in consideration of a price paid or promised or of money, a share of
crops, service or any other thing of value to be rendered periodically or on
specified occasions to the transfer by the transferee who accepts the transfer
on such terms."
While the right to occupy by licence system is governed by
Section 52 of the Indian Easement Act which is defined as "when one person
grants to another or to a definite number of other persons, a right to do or
continue to do in or upon the immovable property of the grantor, something which
would, in the absence of such right be, unlawful and such right does not amount
to easement or right in the property.
The intention of a licence is that the licensee has a
personal privilege with no interest in the property. A licence is a personal
right, the licensee cannot transfer the licence or exercise it through an agent.
The licence is of personal nature and when the licensor transfers the property
the licence comes to an end.
The licence creates no titles or interest for the licensee.
The licensee only gets the right to enter and use the premises for a limited
period. The licence can be terminated at the discretion of the landlord.
Revocation
A licence is revocable and stands revoked when the licensor
ceases to have any interest in the property or the licensee releases the licence
or the period of specific act for which the licence was granted is over. In
addition, if the purpose of the licence becomes impracticable or abandoned or
the employment, office or character for which the licence was given ceases to
exist or for more than 20 years the licensee used ceased to use the property,
the licence is revocable.
On the other hand, the Transfer of Property Act creates an
interest in the property for the lessee for the duration of lease. The lessee
can hold the property even after the expiry of the lease.
The provisions of leave and licence system are now prevalent
in Maharashtra and have been included in the Maharashtra Rent Control Act 1999.
The Maharashtra Rent Control Act applies to both leased
premises and also to licensed premises. Under the provisions of the above Act,
competent authority is created by the Government and the authority has judicial
powers to order for eviction of defaulting tenants or licensees only when the
agreement between the parties is registered.
The responsibility of registering the agreement between the
parties lies with the property owners and in case of default the owners can be
sentenced to imprisonment or fined a minimum of Rs.5,000 with no upper limit
fixed. Further the owner will be debarred from filing eviction suit.
Any amount can be taken as licence fee by the owner and the
licensee has no right to go to court and till the licence fee is revised. The
owner can take any deposit without interest. If the licensee does not deliver
the possession after stipulated period he would have to pay double the licence
fee till the competent authority vacates him. If the licensee has given the
premises to a third party, the third party has no right. The competent authority
should finalise the matter within six months.
Damages
The court will interpret the agreement of licence taking into
consideration all the acts and surrounding circumstances to come to a conclusion
as to whether it is a licence or lease. Therefore the leave and license
agreement may not be exclusive of the relationship between the parties to the
agreement, but the wordings of the agreement are the most important.
Any licensee, who does not deliver possession of the premises
to the landlord on expiry of the period of licence and continues to be in
possession of the licensed premises till he is dispossessed by the competent
authority, shall be liable to pay damages at double the rate of the licence fee
or charge of the premises fixed under the agreement of licence.
The stamp duty to register a lease document is relatively
higher than the cost incurred to register the licence document.
In Maharashtra, to register the leave and licence system, the
duty varies from Rs.500/ to Rs. 2000/.
However, the licence term cannot exceed three terms - one
term is not more than 11 months.
C.H. Gopinaha Rao, former National President, Institution
of Valuers.
Courtesy: Property Plus, The Hindu
http://www.hindu.com/pp/2007/04/08/stories/2007040800120600.htm
