“Lease” is a word which everyone is aware of, and hears it day in and day out while dealing the transactions related to immovable property. Lease can be defined as the right to enjoy an immovable property for a certain period of time, in consideration of a price paid by the person getting possession of the property.
Under Black’s Law dictionary, “Lease” can be defined as a conveyance of lands tenements to a person for life, for a term of years, or at will, in consideration of rent or some other recompense. Oxford Dictionary of Law defines it as “a contract under which an owner of property grants another person exclusive possession of the property for an agreed period, in return for rent and sometimes for a capital sum known as a premium.
Section 105 of Transfer of Property Act, 1882 defines lease and one would be easily able to derive some of the important characteristics of a lease such as transfer of an interest, parties to the lease, subject matter of lease etc. But, there is another provision or legal principle which at sometimes is confused with the concept of lease i.e. Licence.
Black’s Law Dictionary defines “Licence” in the context of property law as an authority to do a particular act or series of acts upon another’s land without possessing any estate therein. Oxford Dictionary of Law defines it as Permission to enter or occupy a person’s land for an agreed purpose.
Both the provisions look similar, then what make them different is a very important question which has to be resolved, and it is abstruse to do so. Sometimes, there arise some situations which abridge difference between them. In order to understand the difference between these two provisions and to know the situation which they may conflict, it becomes very important to understand the basic features of both Lease and Licence.
Some apparent features which can be derived out while reading the provisions relation the concept of “Lease” under Transfer of Property Act, 1882 would be as follows.
1. Transfer of an interest to the transferee. The person who is transferring an interest must possess that interest. Problem in this regard usually arises when a lessee sub-lease the property.
2. Parties to the lease. It would be very interesting to note here that parties are entering into a contract, which means they must comply with the provision mentioned under Indian Contract Act, 1872 to know the competency of the parties. It prohibits certain person to enter into a contract e.g. a minor, a person with unsound mind.
3. Subject matter of the lease. Being the most important element in order to form a lease deed, its existence becomes necessary at the time of making a lease deed. It can be any immovable property irrespective of the fact whether they are enclosed or not. It can be a land; it can be a house and similar immovable property. But, it would be also important here to note that it is interest which a person holds in this property which is transferred.
4. Another important point which has to be kept in mind in a lease deed is the form of the lease. It can be absolute, or it can be derivative. A lease which is in derivate form can be further sub-leased to another person or to a “sub-lessee”, but that doesn’t mean that lessee has been absolved from his liabilities. He still remains responsible to the head-lessor. On the other hand, a lease in absolute form cannot be sub-leased to another person. Whether the lease is derivate or absolute is a question of fact, and can only be determined from the condition and clauses mentioned under a lease deed.
5. Duration of lease is another important factor which has to be kept in mind while dealing this matter. Fixed time period is not mandatory in a lease deed, but the duration for which it has been leased out becomes very important for the purpose of a valid lease.
6. Consideration provided by the person, who is receiving the interest in the property become another important condition to be complied with. It is not a mandatory condition that consideration should be in the form of money, it can be any another manner suitable for the said purpose or which has been prescribed by law. It can be any form of service of some monetary value.
From the above points, it becomes quite clear that there are certain conditions which are to be complied with in order to form a lease. After discussing important points/features for the purpose of lease, now it would be necessary to see what are the conditions and features of a licence. It would be then become very easy to differentiate between these two concepts. Following are some of the features which can be attributed to a licence agreement
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