Insight on Indian Law: Leave and License Agreement
THE DEFINITION OF LICENSE UNDER INDIAN LAW
"License" in immovable property can be summarized as a personal (In-Personam), permissive, nontransferable and unassignable contractual right to use a property in a certain agreed way for a certain agreed purpose.
According to some scholars, the legal instrument of "License" in immovable properties was developed to deal with the legal complications of lease and rental rights under Indian law. In particular, this legal instrument was developed to enable property owners to restrict lessees and evict them more easily. The main difference between a license and a lease is that a license does not create a right in property itself, therefore eviction is practically immediate and hassle free.
Still, many property owners that intended to protect themselves by entering a leave a license agreement (i.e. a license agreement to use an immoveable property for a certain purpose), find themselves facing court decisions ruling that their agreement was in fact a lease agreement. Some of the mistakes made by such property owners may be avoided.
The first thing to do is to understand what a license really is.
THE LEGAL DEFINITION OF LICENSE
The Indian legislator defined the legal definition of "license" in section 52 of The Indian Easement Act, 1882, as follows:
"Where one person grants to another, or to a definite number of other persons, a right to do or continue to do, in or upon immovable property of the grantor, something which would, in the absence of such rights, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license."
The Indian Supreme Court filled this definition with essence in the famous decision of Associated Hotels of India Ltd. vs. R.N. Kapoor [AIR 1959 SC 1262] as follows:
"Under the aforesaid section [*section 52 of The Indian Easement Act], if a document gives only a right to use the property in particular way or under certain terms while it remains in the possession and control of the owner thereof, it will be a license. The legal possession, thereof, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission, his occupation would be unlawful. It does not create in his favour any estate or interest in the property".
According to the above, the main characteristics of license are: License does not generate a proprietary right (In-Rem) in the property, but only a personal-contractual right; license may not be transferred or assigned; License can be created by permission only, whether express or implied; License does not create any estate or interest in the property.
GRANTING A LICENSE
Two preliminary questions that rise when entering into a Leave and License agreement are who can grant a license and how a license is granted.
The first question is answered in section 53 of The Indian Easement Act, 1882, that states that a licensee may be granted by anyone in the circumstances and to the extent in and to which he may transfer his interests in the property affected by the license. In other words, one cannot grant a license and one cannot receive a license if the licensor does not possess a sufficient lawful interest in the property.
The second question is answered in section 54 of The Indian Easement Act, 1882, that states that a the grant of a license may be express or implied from the conduct of the grantor, and an agreement which purports to create an easement, but is ineffectual for that purpose, may operate to create a license. This definition is very important. Owners of properties should mind that their behavior may create a license, even without a formal license agreement.
TERMINATION AND REVOCATION OF LICENSE
The Indian Easement Act, 1882, includes several important clauses related to the termination and revocation of a license.
The first important clause is section 59 that states that when the grantor of the license transfers the property, the transferee is not bound by the license.
Another important clause is section 60 that states that a license may be revoked by the grantor, unless it is coupled with a transfer of property and such transfer is in force, or if the licensee, acting upon the license, has executed a work of a permanent character and incurred expenses in the execution.
Another important clause is section 60 that states that a revocation of a License may be express or implied. According to this section, the grantor may revoke the license by simply preventing the access to the property or by transferring the property.
Section 62 to The Indian Easement Act, 1882, further state several occurrences that are deemed as revocation of license, including (but not only) the following occurrences: when the grantor ceases to have any interest in the property due to a cause preceding the grant; when the licensee releases the license, expressly or impliedly; where the period of the license ended; where the license was acquired on condition and the condition is fulfilled; where the property is destroyed or permanently altered by superior force I a way that the licensee can no longer exercise his right; where the Licensee becomes entitled to the absolute ownership of the property; and where the license is granted for a specified purpose and the purpose is attained, abandoned or becomes impracticable. As per the other occurrences, please review the act.
LICENSEE'S RIGHTS ON REVOCATION
The Indian Easement Act, 1882, includes several clauses that are intended to protect the licensee's reasonable expectations where a license in revoked. The first important clause is section 63 that states that the licensee is entitled to receive a reasonable time to leave the property and to remove any goods that he was allowed to place on the property. The other important clause is section 64 that states that the licensee is entitled to recover compensation from the grantor where a license that has been granted for a consideration was revoked by the grantor before the licensee not due to a fault of the licensee before he had fully enjoyed the license,.
WORDING A LEAVE AND LICENSE AGREEMENT
Considering the various instructions of The Indian Easement Act, 1882, it may be concluded that a Leave and License Agreement should, among others, include the following clauses:
A. the Leave and License Agreement should explicitly state that the possession of the property shall remain with the grantor during the term of the agreement.
B. the Leave and License Agreement should explicitly state that there is no transfer of rights and interests in the property to the licensee.
C. the Leave and License Agreement should explicitly state that the granted license is an exclusive and personal license and may not be transferred or assigned by the licensee to any third party without the prior written consent of the grantor.
D. if the license is granted for a certain period or for a certain purpose or is subject to a certain condition, the Leave and License Agreement should explicitly state these period, purpose and condition.
Insight on Indian Law: Leave and License Agreement
By: India Contract
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