When it comes to renting out or using a property in India—whether it’s a house, shop, or office—understanding the type of agreement you sign is crucial. The two most common agreements are the Lease Agreement and the Leave and License Agreement.
At first glance, they might sound similar. But legally and practically, they differ in very significant ways. Knowing these differences can save both landlords and tenants from future disputes.
What is a Lease Agreement?
A Lease Agreement is a formal contract in which the property owner (lessor) transfers the right of exclusive use and enjoyment of a property to another person (lessee) for a fixed period (usually one year or more) in return for rent.
This arrangement is defined under Section 105 of the Transfer of Property Act, 1882, and is also governed by:
- The Transfer of Property Act, 1882
- The Indian Contract Act, 1872
- The Registration Act, 1908
Key Features of a Lease Agreement:
- Duration: Typically 12 months or more.
- Exclusive possession: The lessee gets complete control of the property during the lease period.
- Tenant protection: Lessees enjoy strong protection under the Rent Control Act, making eviction difficult without valid legal grounds.
- Termination: Landlords cannot easily terminate the agreement before the lease expires.
- Registration: Mandatory if the lease exceeds 11 months.
Example: Suppose Mr. X rents a flat for 2 years through a lease agreement. During this period, he has the right to live in it without disturbance. The landlord cannot let anyone else occupy the flat until the lease ends, unless Mr. X agrees.
What is a Leave and License Agreement?
A Leave and License Agreement is a simpler arrangement where the property owner (licensor) allows another person (licensee) to use the property temporarily. Unlike a lease, it does not transfer any ownership or interest in the property.
This agreement is governed by Section 52 of the Indian Easements Act, 1882.
Key Features of a Leave and License Agreement:
- Permission, not possession: The licensee only gets permission to use the property without gaining legal tenancy rights.
- Short duration: Commonly used for 11 months or less.
- Revocability: The licensor can easily revoke the agreement.
- Non-transferable: The licensee cannot sublet or transfer the property.
- No tenancy rights: If the property is sold, the license automatically ends.
Example: A shop owner gives Mr. X permission to use the shop for 11 months under a leave and license agreement. The owner can ask him to vacate on short notice, and Mr. X has no legal tenancy rights.
Lease vs. Leave and License Agreement: A Quick Comparison
| Factor | Lease Agreement | Leave & License Agreement |
| Legal Act | Transfer of Property Act, 1882 | Indian Easements Act, 1882 |
| Possession | Exclusive possession with lessee | Licensor retains control |
| Duration | 1 year or more | Usually 11 months |
| Transfer of Interest | Creates a legal interest | No interest, only permission |
| Registration | Mandatory if over 11 months | Not mandatory (state-specific) |
| Eviction | Difficult, requires legal process | Easy, licensor can revoke |
| Transferability | Transferable & inheritable | Non-transferable, non-inheritable |
| Nature | Creates legal tenancy | Creates only a personal right to use |
Usage in Practice
- Lease Agreements are more common for long-term rentals where tenants need greater stability and rights.
- Leave and License Agreements (typically for 11 months) are popular with landlords because they are flexible, easier to terminate, and avoid complications under the Rent Control Act.
Landmark Case Laws
- Associated Hotels of India Ltd. v. R.N. Kapoor (1959): The Supreme Court clarified that the real test is the intention of the parties, not just the wording. Exclusive possession is strong evidence of a lease but not conclusive.
- V. Kalpakam Amma vs. Muthurama Iyer (1994): Clarified that destruction of a building doesn’t automatically end a lease if the land itself is leased.
- Srinivas Shenoy vs. Vasudeva Shenoy (1994): Dealt with premature lease termination in absence of a forfeiture clause.
- Planet M. Retail Ltd. v. Select Infrastructure (2014): Reiterated that a license does not create tenancy rights; it only grants permission.
Conclusion
In simple terms:
- A Lease Agreement gives the tenant legal rights and interest in the property for a longer period. It is suitable when security and exclusive possession are required.
- A Leave and License Agreement provides temporary usage rights without creating tenancy, making it flexible and convenient for landlords.
Disclaimer: The content shared in this blog is for general informational purposes only and should not be considered as legal advice. Laws may vary depending on specific circumstances, and professional guidance is essential before making any legal decisions. Readers are advised to consult qualified legal experts, such as Bisani Legal, for personalized advice tailored to their situation. The author and publisher disclaim any liability arising from reliance on the information provided herein without professional consultation.
Published by: Mr. Saket Bisani
Date: 22/08/2025
