Lease Agreement Or License Agreement - What Should I Opt For?

1.   Major Differences:

There are several crucial differences between a lease and license agreement.

a)   Under license agreements, the legal ownership and the possession of the property remain with the licensor.  Under a lease agreement, the tenant generally has exclusive possession to the property. In other words, a license does not create any interest or control on the premises in favor of the licensee.

b)   A licensee cannot give the premises on rent to a third party under any circumstances. On the other hand, a tenant can sub-let the premises to a third party, unless the rental agreement says otherwise.

c)   A license agreement is easier to terminate than a rent agreement. License agreements are terminable, whereas lease agreements are generally not.

d)   The amount payable towards stamp duty is more for a lease agreement as compared to a leave and license agreement. But for a duration of more than three years, the stamp duty payable is the same for both.

e)   In case of a lease agreement, if the agreement is for a period of less than 12 months, it does not have to be registered. However, a lease agreement for 12 months and beyond has to be compulsorily registered. In many states, a license agreement does not have to be registered.

 2.   What do you recommend I should enter into? A Lease Agreement or a License Agreement?

Let us take the example of a person who wants to occupy a property in a shopping mall. In this situation, it is advisable to enter into a lease agreement than a leave and license agreement, because you will then have an interest in the property. In other words, you will have more control over the property.

It is a common practice among owners of shopping complexes and malls to give out parts of the property on leave and license basis, so that they can have more control over their property.

If the rental amount and the license fee that you have to pay is the same (like you have mentioned in your question), it is better to enter into a rental agreement with the owner of the shopping complex. In some States like Maharashtra, you will also receive the protection of the Maharashtra Rent Control Act, which is a tenant-friendly legislation. 

Source:PropertyBeat