The difference between lease and licence agreements

So as to advance rental lodging in India, the legislature, in 2019, passed the Draft Model Tenancy Act, 2019. The focal rendition of the model law, which would in the end be recreated by states, attempts to protect the enthusiasm of landowners, just as occupants. In any case, it is urgent for the two gatherings (landowners and inhabitants) to acquaint themselves with certain particular terms that they would run over, at the hour of going into a tenant contract. It is in this setting we ought to talk about the contrast between a leasing and licence.

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What is a rent in property leasing?

At the point when a land owner, however an enlisted understanding, gives an occupant certain rights on his resolute property for a particular period, as a byproduct of the installment of lease, this game plan is known as leasing in legitimate speech.

The term has been characterized in Section 105 of the Transfer of Property Act, 1882. “A rent of immoveable property is an exchange of an option to appreciate such property, made for a specific time, express or inferred, or in interminability, with regards to a cost paid or guaranteed, or of cash, a portion of harvests, administration or some other thing of significant worth, to be rendered occasionally or on indicated events to the transferor by the transferee, who acknowledges the exchange on such footing,” says Section 105.

What is a licence in property leasing?

At the point when a landowner, for a particular reason, awards impermanent convenience of his property to another gathering however an agreement, it is finished by giving a licence, as a byproduct of the installment of lease. In contrast to a rent, a licence doesn’t give the other party any restrictive belonging directly over the premises.

The term has been characterized in Section 52 of the Indian Easements Act, 1882. “Where one individual awards to another, or to an unequivocal number of different people, an option to do, or keep on doing, in or upon the steadfast property of the grantor, something which would, without such right, be unlawful, and such right doesn’t add up to an easement or an enthusiasm for the property, the privilege is known as a licence,” peruses Section 54.

Nature of ownership

The key distinction between the two plans lies in the way in which the occupant is permitted to utilize the leased premises. The responsibility for said property keeps on lying with the landowner under a rent, just as permit understanding. Nonetheless, while a rent gives the inhabitant a specific option to utilize the reason for a particular period, a permit just guarantees the momentary inhabitance or utilization of the reason by the occupant. Except if you have the composed consent of the proprietor to do as such, possessing someone else’s property is illegal. Along these lines, a lease understanding is essentially a rent, while the authorization to utilize a feast lobby for a wedding function is a licence.


Present moment as they seem to be, licenses lose legitimacy when the particular assignment for which it was drafted, is finished up. Then again, a rent could be finished paperwork for a wide scope of periods – from one year to interminability. It is likewise critical to note here that a rent reaches a conclusion, simply after the period determined in the understanding and the landowner for the most part can’t repudiate it before this period. The equivalent isn’t valid for permit understandings. They can be renounced as and when the landowner regards fit. A permit is an individual agreement and ends, if either party bites the dust.


Renting is consistently a money related exchange. Permit understandings could likewise be marked with no money related trade included.


Under the 2019 draft law, a lease authority should be set up, which will assist landowners with looking for ousting of occupants. In a permit, on the grounds that there is no ownership by the occupant, the requirement for removal doesn’t emerge.


A rent can be moved to outsiders and legitimate beneficiaries, while a permit can’t be moved. On the off chance that a property is moved to another proprietor while it is leased, the new proprietor is obliged to follow up on the terms and conditions recommended in the rent understanding. The converse is likewise evident.