Know the Difference Between Lease and Licence!
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While dealing with the transactions of immovable properties many times you hear the word “Lease”. Lease can be defined as a right to enjoy an immovable property for a specific period of time by paying charges for the use of the property or assets. However, there is another legal term which is many times confused with Lease and that is Licence.
Lease and Licence may sound like having same meaning and you may have heard these terms being used interchangeably. But these two terms – Lease & Licence – are separate legal concepts offering different duties and rights. Hence, here we have tried to explain all the basic difference between lease and licence.
It is important to understand the basic features of both the Lease and Licence. Let’s have a closer look.
What is Lease?
- According to Section 105 in The Transfer of Property Act – 1882, of Government of India, Lease of immovable property is defined as transfer of right to the potential lessee to use the property for a certain period of time in consideration of amount to be paid at defined time.
- The amount decided needs to be paid to the lessor by the lessee on the decided date.
- In simple words, it is defined as a contract under which the owner of the property permits other person the possession of property for a specific period of time in return of payment and sometimes for a capital sum known as premium.
- There are various essential and important terms involved in lease such as transfer of interest, parties involved in the lease agreement, subject matter of the lease, types of lease and duration of the lease agreement etc.
- A lease generally considers the following factors: (a) demise of the owner or the transfer of right to enjoy the property, (b) for a term perpetuity and (c) consideration of the price paid or decided or of money, a share of the crop or services or other things of value to be rendered periodically from the lessee to the lessor.
- Consideration for lease may be in form of rent plus premium, rent alone or premium alone.
- For a lease, there must be a consideration (charges) fixed which may be in form of money, money’s worth such as share of crops service or any other thing having a value which needs to be taken on a periodical basis by the lessor from the lessee.
What is Licence?
- According to Section 52 The Indian Easements Act 1882: Licence is defined as a transfer of right where one person allows another one or to a definite group of persons, a right to do or continue to do, in or upon the immovable property something which is lawful and which does not amount to an interest in the property.
- In simple words, licence in context of property law is defined as an authority to carry out a particular act or series of acts upon another’s land without getting the possession of any estate/property.
Now let us see the differences between them in detail.
Difference between Lease and Licence
01. A Lease is the transfer of an interest in an immovable property whereas Licence is just permission without any transfer of interest.
02. A lease is transferable as well as heritable. A sub-tenancy can be made by the tenant and on the death of the concerned tenant, the tenancy can be transferred to his/her legal heir while licence is neither transferable nor heritable. However, transfer of lease shall be subject to covenants of the lease agreement.
03. A lease does not come to an end on either the death of the lessor or lessee whereas the licensee comes to an end with the death of either grantor (licence holder) and or the grantee (permitted to use licence).
04. In case of lease, it creates an interest in favour of the lessee with regards to the property but in case of licence, it does not create such interest or right in favour of the licensee.
05. Lease can come to an end only as per the terms and conditions mentioned in the lease agreement wherein licence can be withdrawn at any time depending upon the pleasure of the grantor (owner of the license).
06. In case of a lease, the lessee has the right to protect the possession in his favour. Whereas in case of licence the licencee (to whom the licence is granted for use) cannot defend his possession in his own name as he does not have any ownership rights in the property including the right to possession.
07. In case of lease, it remains unaffected by the transfer of the property by sale in favour of the third party. The right continues and the purchaser has to wait till the time period for which the tenancy was created before he can get the possession while in case of a licence, when the property is sold to the third party it comes to an end immediately.
08. A lessee in possession of property may or may not have the permission to make any improvement to the property while in case of licence a grantee cannot do so, nor does have such permission.
In brief, the lease is much extensive as compared to licence and it provides a great amount of right to the lessee. A person signing and entering the lease deed cannot terminate the lease agreement easily but in case of licence the grantor has the right to end the licence to the grantee. If you think some points missed out or you want to share your views on this topic please do share it in the comment box given below.