Things you can’t afford to miss about before Renting your Property in India!

November 1, 2018

The property renting business in India is vast. According to the 2011 Census, about 27.5% of the Urban population lives in rented accommodations, which means nearly 1/3rd of the real estate in cities is engaged in the renting activities.

Despite being such a large proportion, the property renting mechanism in Tier 2 and 3 cities is highly informal.

This is because, when someone gives their property on rent in India, they use generic contracts and renting lease agreements. The actual picture is much bigger, wherein you need to understand your and the tenants right clearly.

If you aren’t aware of things like Leave and license agreement format or the difference between renting a property and giving it on a license, you need to go through this article right now!

What is Leave and license Agreement in India?

Leave and license agreement refers to an agreement made between the owner (licensor) of the property and the tenant (licensee) for a limited period of time where the latter uses the property for residential or commercial purposes.

The owner receives compensation for the license in the form of “license fee” which is otherwise regarded as “rent”.

This agreement usually lasts for 11 months of tenure and has to be registered with the sub-registrar of the locality.

The agreement is a form of license distribution mechanism that gives the tenants some rights over the property they’re going to use. The agreement also lays down various clauses and permissions that the owner of the property wants to be obeyed by.

One may think that this agreement is similar to what we call as a rent deed or lease agreement, but it is quite different from that. The Leave and license agreement format is pretty different from a rental agreement, which is why people in India refrain from giving their property on rent in India.

Difference between a Rental Agreement and a Leave and license Agreement

Legal Acts

The primary difference between the two can be inferred by the legal acts through which these two agreements came into existence.  

The Rental Agreement works under the Maharashtra Rent control Act, 1999, wherein a separate body of jurisdiction controls the rules associated with the act.

On the contrary, the Leave and license Agreement abides by the Indian Easements Act,1882 wherein the owner licenses the property to a befitting licensee, who exercises limited control over the property.

Rights Of the Owner

The Rental Agreement act is somewhat partial towards the tenants as it has rules that favor the tenants more in the case of a dispute. For instance, the property owner can’t revoke the amenities provided to the owner even if the rent remains unpaid.

This is one of the main reasons why 11 million units in India stay unused because the owners are not ready to give them on rent!

Whereas the other act is evenly paced for both the tenants and the owners. It makes sure that the transfer of interest taking place it between the two parties isn’t partial to any of them.

In case, any of the terms mentioned in the Leave and license agreement are not met, the owner reserves the right to evict the premises under the law.

Transfer of Interest

In a rental arrangement, the owner transfers the rights over the property to the tenant for a limited period of time as mentioned in the agreement. While the tenant has occupied the property, the rights are reserved for the tenant and the owner can’t possibly violate those rights until the agreement holds true.

This system clearly favors the tenants more over the owners.

In a licensing arrangement, the licensor doesn’t transfer the rights over the property to the licensee but gives them on a temporary permit. This permit allows the activities that the licensor seems befitting and nothing else. Neither is the property owner obliged to fulfill demand outside the agreement nor is it required to entertain unlawful properties.

This arrangement gives the power to the licensor in the strongest regards.

Benefits of Signing a Leave and license Agreement  

For the Owner (Licensor)

  • The provisions of the Leave and license Agreement Format work in stronger regards for the owner in case they want the premises to be evicted before the license term ends. This is hard to do in a renal contract.
  • If the tenant is unable to pay the rent to the owner, the tenant can be held punishable under law, which acts as a security for the owner while giving their property on a license.  
  • Due to the presence of such provisions, if the tenant initiates a dispute over the property, or refuses to vacant it in the contractual time, the owner will have an upper hand.
  • This increases owner confidence in the whole licensing market, further allowing them to make better-secured monetary gains from their real estate assets.

Download Maharastra Government L and L Agreement Form

For the Tenant (Licensee)

  • As the agreement is a lawful document, the same can be used anywhere in India for proof of address.
  • The tenants can be sure of the staying or working conditions that would be provided to them as stated in the agreement.
  • The agreement also protects the tenants’ interests for the security deposit, conditions of the property and allowed commercial or residential activities.
  • The tenants are also protected against any kind of fraudulent arrangements or unwarranted hike in licensing fees (rent) while they occupy the property.

Leave and License Agreement Registration Online

If you want to register online for a leave and license agreement, you can do so by visiting the registration portal.

First you’d have to submit your documents online and create a login with the website. Then your documents and case will be reviewed before the final copy of the agreement is prepared.

For instance, the e-registration portal for Maharashtra can be accessed here.  

Pre-requisites for the Leave and license Agreement

In order to sign a Leave and license agreement, you must meet a few prerequisites properly. We have simplified the process below for you.

Terms associated with the Agreement

Licensor Details

  • Name of the Owner or the Licensor
  • Permanent Address of the Licensor
  • Contact Information of the Licensor

Licensee Details

  • Name of the Tenant or the Licensee
  • Permanent Address of the Licensee
  • Contact Information of the Licensee

Agreement Details

  • Physical address of the Property
  • Length of Duration of the Agreement
  • Security Deposit
  • License Fees (Rent)
  • Additional Charges (if applicable)
  • Individual terms and clauses

Leave and License Agreement Registration Charges

There are two major types of charges involved in the Leave and License Agreement, – Registration and Stamp Duty.

The registration can be done in two ways.

Offline – You can visit a local lawyer and prepare the draft for the registration. Alternatively, you can also prepare the draft and sign it yourself.

The registration takes anywhere between 500 – 1000 INR depending upon your locality and if you’re going through a lawyer, the charges can scale up to 5000 bucks.

This method is costly but the most reliable as you’d be controlling all the phases of the registration process, you don’t have to worry about anything going wrong as an actual lawyer will be reviewing the application.

You can also work with a mutual lawyer with the licensee party in order to discuss the terms correctly and come to mutual agreement about the draft.

Online – You can also create the leave and license agreement format in word and then upload send it for review via the e-registration portals. This probably won’t require you a lawyer and any extra fees.

There are several state portals that provide e-registration capabilities to the residents for doing so. You can check Maharashtra Government’s Portal here.

This is the fastest method as your file is handled online and you don’t have to run around courts for signing the deal but you don’t control most of the aspects of the process. So, if you’re completely sure of your draft, then only choose this process over the other.

The process works for leave and license agreement for commercial premises and residential premises.

Leave and License Agreement Stamp Duty Calculation

Stamp duty is the amount of money paid to the registering authorities for the stamp that validates the agreement.

The stamp duty can be calculated by the following mathematics

  • Multiply the number of months for which the agreement is to be signed with the monthly rent (licensing fees). Call it A
  • If you have paid any rent up front before the agreement initiates, call it B
  • Calculate 10 percent of the security deposit and multiply it with the number of years for which the agreement is to be signed. Call this amount as C
  • Now add A, B, and C. Call this total amount as D.
  • 0.25% of the total amount (D) is your final stamp duty.

Important Clauses that must be present in Agreement

As good practice, you can include the below-given clauses in your agreement to make it factually strong.

The date from when the license comes into practice.

Total tenure for which the property will be licensed to the licensee.

Any clause that influences the decision of renewal of the license.

Any clause that influences the decision of termination of the license.

Details of the gradual escalation in the licensing fees after a certain period of time.

List of all the charges such as maintenance, rent and other charges that may incur in special cases.

Rights and duties to the welfare of the premises of the licensee.

Rights and duties to the welfare of the premises of the licensor.

What happens if the agreement terms are not followed.  

Important Documents and Procedures for Transferring Shares in a Society

Just like shares in a company, one can own shares in a cooperative housing society but the meanings of the shares are pretty different.

In a cooperative society, shares are created by the members that form the society. These members further divide the responsibilities of the society among themselves.

If a certain member wants to transfer the shares owned by them to a new person, certain Society transfer forms are required. These forms govern the transaction as the society isn’t owned by any single authority but a committee of individuals. Hence, proper reporting to everyone is required.

We have explained some important terms related to the same below.

Application for transfer of share certificate

If you want to transfer your shares to someone in a cooperative society, you can begin the process by submitting an application. This application must abide by some given guidelines for authenticity. This application is also called request letter to society for transfer of share certificate.

Documents required for the Transfering the Shares

  • The above-mentioned application or request letter.
  • A Deed for the Transfer of Shares
  • Share Certificate or Stock Certificate originally possessed by the owner.
  • PAN Card copies of the buyer and the seller. Buyer and seller are the transferors and the transferees.
  • Address documents of the person who is submitting the application for transfer of shares.
  • A bank verification copy for the authenticity of the signature of the applicant. This copy needs to be attested by the authority attesting the copy for the applicant with the bank’s official stamp and sign.
  • An affidavit containing the signature of either of the parties.    

Society forms for transfer of flat

Society Transfer Form

In a cooperative society real estate, if you wish to transfer the ownership of a flat to someone else, you have to obtain prior permission from the managing authority of the cooperative society.

In order to make this transfer a society transfer form set is used which defines the details of the transferer and the transferee in writing.

You can find forms related to forms for transfer of flat in a cooperative housing society here.

Concluding Words

To sum up the whole article for you in fewer words;

Due to tenant favoring laws in Indian real estate system, there has been an overall decrease in confidence from the property owner’s perspective. This is mainly due to the several disputes that arise between tenants and the owners.

In order to increase this confidence, if you’re going to rent your property to someone, you can use the Leave and License Agreement which protects the owners’ rights in a better way than a rent agreement would.

There are a number of aspects related to the signing of Leave and License agreement, which must be taken care of when the draft for this agreement is being prepared.

In case you want to transfer your flat in a cooperative society, you will need a transfer application submitted to the cooperative society. A list of important documents for the same has been given in the article.

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