Leave and License Agreement : Why Eleven Months only?
By SRELJ Bureau
There is a practice prevalent in Maharashtra that a Leave & License Agreement in respect of a residential premises is, usually, entered into and executed for a period of 11 months. The question arises whether it can not be for more than 11 months, if both the parties are interested in a much longer period.
A license has been defined in Section 62 of the Indian Easement Act, as a right to do or continue to do something in or upon an immovable property. It does not transfer the interest or create any interest in the immovable property, like a ‘LEASE’, as defined in Section 105 of the Transfer of Property Act, as a right to enjoy property for a certain period in consideration of the price paid. Provisions of Section 62 of the Indian Easements Act do not prescribe, any minimum or maximum period for which a license may be granted.
A lease of an immovable property in Maharashtra used to be governed by the provisions of the Bombay Rents, Hotel & Lodging House Rates Control Act, 1947 (Popularly known as Bombay Rent Act,) which did not provide, prior to 1.2.1973, for giving a residential premises on Leave & License basis. Nevertheless, a practice was in vogue to give the residential premises on Leave & License basis. An instrument creating a lease of immovable property for a term of one year and above is required compulsorily to be registered by virtue of provisions of Section 17 (d) of the Indian Registration Act.
Therefore, Leave & License Agreements were being executed for a period of 11 months with the intention with the intention to avoid the stamping and registration of such agreements and treating such. Agreements as a Lease of the immovable property. So that the occupiers of such premises could not invoke the provisions of the said Bombay Rent Act against their eviction. Secondly in respect of Flats in a registered Co-Operative Housing Society, period of sub-letting was restricted to eleven months with the provision of extension for similar period of part thereof, as per Bye-law 45 © of the old Model By-laws.
In the year 1973 an amendment was carried out in the said Bombay rent Act by the State of Maharashtra, whereby section 15A was introduced therein providing that any person in occupation of any premises as a License on 1.2.1973 shall be deemed to have become a tenant in respect of the premises in his occupation as licensee as on 1.2.1973, and by a stroke of pen they all became the statutory tenants of the premises with the benefit of protection against vacation of the premises, expect in accordance with the provisions of the said Bombay Rent Act. Thus an illegal practice of creating Leave & License in respect of residential premises, which was contrary to the provisions of the said Bombay Rent Act. Thus an illegal practice of creating Leave & License in respect of residential premises, which was contrary to the provisions of the said Rent Act, converted such occupation into tenancy. Therefore, the Landlords, who did not require the premises for their own use, were not willing to give the premises to others, which created scarcity inasmuch as on the one hand sufficient real estate stock was available and on the other, people were not getting the accommodation, albeit for temporary period. These were being held back by the owners because of the apprehension of not getting the premises back, when they needed in view of the protection provided to the tenants by said Bombay Rent Act.
In the circumstances and as a practical solution to this problem, a specific provision was made by way of Section 13A2 in said Act for giving the residential premises on license basis, which also provided that in case of the failure of the licensee to deliver the possession of the licensed premises on the expiry of the period of license, the licensee could be summarily evicted from the premises by the Component Authority as per the provisions of Section 31D of the said Bombay Rent Act. This Section 13A2 did not provide for any specific period of a license and further clarified that an Agreement of License in writing shall be conclusive evidence of the fact of the License.
Be that as it may. With a view to unify, consolidate the laws prevailing in the different parts of the State, the Bombay Rent Control Act of 1947, has been repealed and replaced by the Maharashtra Rent Control Act, 1999, (Act No: 18 of 2000) w.e.f. 31st March, 2000, wherein a Licensee means a person in occupation of the premises under a subsisting agreement for license given for a license fee or charge and notwithstanding the protective provisions of the said Act, a licensee has to deliver possession of the licensed premises to the landlord on the expiry of the period of license and failing which Section 24 thereof, empowers a landlord to recover possession of the premises through summary proceedings before the Competent Authority and till the date of dispossession, a licensee is liable to pay damages at double the rate of the license fee or charge of the premises fixed under the Agreements of License.
As per the provisions of the said Act in Section 43 and 44, a licensee in such proceedings has to first satisfy the Competent Authority about the grounds on which he seeks to contest the eviction proceedings and obtain the permission to contest the same. The order of recovery of possession of the premises made by the Competent Authority is non-appealable, though a revision application may be filed within ninety days with the State Government.
As there is a thin difference between a Tenancy Agreement and License Agreement, it is provided in Section 55 of the Act, that such an Agreement has to be in writing and registered under the Registration Act and it shall be the responsibility of the landlord to register it, failing which the contention of the tenant or the licensee about the terms and conditions on which a premises has been give to him, shall prevail, unless proved otherwise. The failure of a landlord to register the Agreement may also attracts punishment of imprisonment up to three months or fine not exceeding rupees five thousand or both. The State Government has issued an Notification on the 8th June, 2000, prescribing the registration charges as Rs. 1000/- in respect of the premises in the limits of the Municipal Corporation and Rs. 500/- in other areas irrespective of the amount of the license fee or the term of the Agreement. In either the old Rent Act of 1947 or the present Act of 1999, there is no restriction on the term for which a premises may be given on license basis and Bye-law 43 © of the new Model Bye-laws of the Co-Operative Housing Societies, circulated by the State Government for adoption by the Societies, now also provides the period as eleven months or for more period, which may be extended for similar period or part thereof. Thus none of the legal provisions put any restriction of eleven months on the period of license agreement and it can legally be for a longer period or term and the non-occupancy charges in respect of the premises in a registered Society has been restricted to 10% of the service charges (excluding property tax) by Government Notification dated 1st August 2001, whose validity has been finally upheld by the Hon’ble Bombay High Court on 2nd March 2007, in the case of Palm Beach Riviera CHS and other Societies.
In addition to the Registration of an Agreements of License, it has be stamped as per the provisions of Article 36-A of the Bombay Stamp Act at the rate depending on the yearly amount, period of license and the location of the premises. In the said provision team of an agreement has been described as twelve months, but not exceeding sixty months with or without the renewal clause. Where the team of a Leave and License Agreement exceeds sixty months, it has to be stamped at the rate applicable to a ‘Lease Agreement’ under Article 36 of the said Act.
In the ultimate analysis, the period of eleven months has now no relevance and the way the law has evolved during the past three decades on the subject, it is entirely safe to give premises on leave and license basis for a longer period say up to sixty months, with renewal clause and option of termination by notice, provided bot the parties agree and a proper Leave and License Agreement is drawn, stamped and registered and nearest Police Station is apprised of about the antecedents of the licensee, as per the Order issued by the Police Commissioner. Needless to add that a little temptation in saving expenses on stamping and registration and giving the premises by way of distorted agreements known as Care Taker Agreement and so on may land the landlord in trouble, particularly, keeping in view the experience of the year 1973, as aforesaid