Difference between Lease and License
The article brings forward the concept of lease and license in very simple language so that it is easy to understand not only the technicalities hidden in the concept but also the difference between the concepts.
The article brings forward the concept of lease and license in very simple language so that it is easy to understand the technicalities hidden in the concept and the difference between the concepts. It seems as if these concepts are overlapping but there exists a lot of differences between them and hence, it becomes essential to understand the difference between them for a better understanding of the concept. Introduction The concepts of lease and license are completely different...
The article brings forward the concept of lease and license in very simple language so that it is easy to understand the technicalities hidden in the concept and the difference between the concepts. It seems as if these concepts are overlapping but there exists a lot of differences between them and hence, it becomes essential to understand the difference between them for a better understanding of the concept.
Introduction
The concepts of lease and license are completely different regarding the rights and duties of an individual arising out of a contract. For instance, a contract is signed between the landlord and tenant to grant him an exclusive interest in the property. Such a contract is known as a lease. But if an owner merely provides permission to the person to perform a particular action on the property, such an arrangement is known as a license, and the latter is known as a licensee.
Legal Definitions
The Transfer of Property Act, 1882 speaks of the lease[1] as a right provided for a particular period of time to an individual to enjoy an immovable property. The person who is the property's original owner is known as the lessor, while the person who gets the property for his enjoyment is known as the lessee. The lessee must pay some consideration, in monetary terms or in kind, for taking the property on lease.
A lease is also defined under Black’s Law Dictionary as a transfer of land for enjoyment to an individual for a particular period of time or for the whole lifetime for some consideration in the form of rent or in kind. Further, Oxford Dictionary has defined a lease as a contract by virtue of which an owner provides the right of exclusive possession with respect to the property for a particular period of time to some other individual in return of some consideration, whether in monetary terms or kind.
On the other hand, the Transfer of Property Act also defines a lease.[2] A lease can be easily recognized by an individual if there is any kind of transfer of interest, there exist parties to the lease, there is a subject matter of the lease and so on. However, there is another concept of Property Law known as License which people thinks overlaps with a Lease.
The Indian Easement Act, 1882 provides for the definition of License[3] and states that if a person provides the right to use an immovable property to an individual or a group of people for such an act that the performance of which on the land without that right becomes unlawful. However, such a right does not imply to the existence of any interest or easement in the property.
License in terms of property law is also mentioned by the Black’s Law Dictionary as the authority of a person to perform a certain kind of act or series of acts on the land owned by someone else for a particular time period. Further, when the owner of a property grants permission to some other person to occupy the land for some purpose agreed between the parties.
Difference between Lease and License
On the bare reading, both concepts might appear the same to an individual, and hence, it becomes quintessential to understand the key difference between them same. Let us discuss the criteria to differentiate between the two concepts.
1. Agreement between the Parties
For a lease, it is necessary to have an agreement, whether written or oral, between the two parties, namely, the tenant and landlord. The Agreement empowers the tenant to take the land into his possession and use the property or land the way he wants to, subject to the terms and conditions stipulated in the Agreement.
On the other hand, there is no requirement of any kind of agreement for a license and the license cannot be provided by any person other than the owner of the property or land. The licensee is required to use the property for a particular period of time and does not enable the licensee to take the property into his possession as was held in the matter of Associated Hotels of India Ltd. v. R.N. Kapoor.[4]
For instance, an individual goes on to purchase a movie ticket. Here, this ticket provides him with the license to go into the movie hall for a particular purpose at a particular time period. He had accepted the terms and conditions of the movie hall as soon as he bought the ticket though he never got to visit the original owner of the movie hall.
2. Interest embedded in the Real Property
A contract creates a lease over the property, which, in turn, creates an interest in the property. Such an interest which gets transferred by virtue of the lease created is known as leasehold interest, as was held in the matter of Associated Hotels of India Ltd. v. R.N. Kapoor.[5]
The lessee is deemed to be as the owner of the property for the period described in the lease agreement. Also, during this lease period, the lessee can file a suit for trespass against the original owner as well if he tries to trespass upon the property.
However, any interest in the property is not created by the license as was determined by the court in Municipal Corporation of Delhi v. Pradip Oil Corporation and Anr.[6]. Going by the above-mentioned example of the license, the movie ticket neither leads to the creation of any license nor it gives the right to file a suit for trespass against anyone.
3. Transferability
Since the lessee is deemed to be the owner of the property for the lease period, he is empowered to sublease the property to any third party.
On the other hand, a license cannot be passed on further to any other person. For instance, the movie ticket bought in the name of A can be used by him only and he cannot ask B to go and watch the movie in the hall on the basis of his ticket.
4. Revocability
As per the terms and conditions stated in the lease agreement, an owner of the property in cannot revoke the lease after creating it in the name of the lessee. For instance, if the lease is created for a time period of 2 years, the lesser cannot go on to revoke the lease after the completion of one year. However, the once creating the license in the name of some other person has the right to revoke it, as was held by the court in the matter of Municipal Corporation of Delhi v. Pradip Oil Corporation and Anr.[7]
5. Terms of the Contract
The mode of presenting the contract also tells a lot about the lease and license. There has to be the presence of a contract, whether oral or written, for the creation of lease over a property. The contract should include some terms viz., first being the terms of the lease, second being the extent of the property and description of the bound being leased, third being the consideration for the lease, i.e. rent of the property and last being the mode of payment of the rent.
It is not important that any agreement containing these terms has to be the lease agreement by default. The catch for classifying the agreement to be lease is that the lessee should be in control of the property and not the original owner.
On the other hand, it is not necessary to create any agreement for the license. Moreover, a license can be created even when there is no direct contact between the original owner of the property and the licensee.
6. Intention of the parties
Furthermore, intention forms another important characteristic to determine whether the contract is a lease or a license. The Supreme Court held in the matter of C.M. Beena v. P.N. Ramachandra Rao[8] that it becomes quintessential to determine the intention of the parties, which can be figured out by reading the agreement made by the parties.
Also, the Hon’ble Supreme Court held in Rajbir Kaur v. S. Chokosiri and Co.[9] that the surrounding environment of the parties to the agreement has to be looked into to determine the interest. The Supreme Court, in the matter of Achintya Kumar Saha v. Nanee Printers[10] went on to hold that conduct of the parties after and before the creation of such an agreement can also be taken into consideration for determining the real intention of the parties.
Lease v. License: A Summary
| Lease | License |
| There is a transfer of interest | Merely permission to use the land for a particular purpose without transferring any interest |
| It is both heritable and transferrable | No such right is available |
| It can be terminated only as per the terms stated in the agreement | It can be terminated at the pleasure of the licenser |
| The lessee can improve the property | No such right is available |
| It does not get affected even if the property gets sold to a third party | It gets terminated as soon as the property gets sold to a third party |
| The lessee is deemed to be the owner of the property for the lease period | No such right is available |
| It does not get terminated just by the death of the lesser. | It gets terminated as soon as the licenser dies. |
[1] Section 52 of the Indian Easement Act, 1882
[2] Section 105 of Transfer of Property Act, 1882
[3] Ibid
[4] [1960] 1 SCR 368
[5] Ibid
[6] 100 (2002) DLT 442
[7] Ibid.
[8] AIR 2004 SC 2103
[9] AIR 1988 SC 1845
[10] AIR 2004 SC 1591