Transfer of Property Act

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Lease and Licence

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26-Apr-2024

Transfer of Property Act, 1882 (TOPA)

Introduction

A right in property is generally created through the sale of such property. However, lease and license are exceptions to this rule where a right in the immoveable property is created without selling it.

Lease

Section 105 of the Transfer of Property Act, 1882 (TPA) defines lease.
It states that a lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Licence

According to Section 52 of the Indian Easements Act, 1882 where one person grants to one or more than one person a right to do in or upon a certain immovable property something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right thus created is called a license.

Factors for Determination

The following factors must be taken into account while determining whether there is a lease or licence:
- Exclusive possession is itself an indication of a lease, however such possession may be subject to certain reservation.
- Whether the agreement contains terms usually found in a lease.
- Expression actually used by the parties to describe the transaction.
- Existence of some special relationship between the parties.
- A servant in occupation of premises belonging to his master may be a tenant or a licencee.
- Degree of control exercised by the owner over the premises.
- Degree of formality surrounding the transaction, greater the formality the more the inference of tenancy.

Difference Between Lease and Licence

Lease	Licence
It is the transfer of a right to enjoy the premises.	It is a privilege to do something on the premises which would otherwise be unlawful.
It is a transfer of interest in the property.	It is a permission to occupy the property and no transfer of interest.
If during the continuance of the lease, any accretion is made, such accretion is comprised in the lease.	It has no interest in the land and therefore, he acquires no right by accretion.
It is transferable and heritable.	It is non-transferable and non-heritable.
It can be terminated by forfeiture.	There can be no termination by forfeiture.
It can be terminated by the ways given under Section 111 of the TPA.	It is usually revocable at the pleasure of the grantor.
Interest of the lessee is not defeated by a subsequent transfer of the property.	A subsequent transfer of the property terminates a licence immediately.
Death of either party does not affect a lease.	It is usually terminated by death of either party.
Right to protect possession of the property exists.	No right to defend the possession of the property.