DIFFERENCE BETWEEN LICENSE AND LEASE

In a layman meaning we find Lease and license are the same concept. However these both terms are two different legal concept which has different meanings, rights and duties. A lease is an agreement between a landlord and tenant which gives the hum a exclusive right to use. On the other hand, the license is permission gives by the owner to licensee to conduct an action the owner’s property.

LEASE

The lease defined in the Section 105 of the Transfer of Property Act, states that . A lease of immovable 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.” 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.

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. “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.

THE ESSENTIAL CHARACTERISTIC OF A LEASE ARE :-

Transfer of an interest :- 
A lease a transaction with respect to immovable property and creates a right to enjoy such property for a certain term and for consideration on the conditions mentioned in it. The right to possess and enjoy the property is transferred in favour of the lessee and he acquires this interest through the conveyance of the lease. After the creation of such an interest, a tenant or a sub-tenant is entitled to remain in possession thereof until the lease is duly terminated and eviction takes place in accordance to law. The relationship of landlord and tenant can come into existence only after the transfer of an interest in immovable property pursuant to a contract and creates a right in rem. Where there is no transfer of interest there is no lease. Further, if an option is given to the lessor by the lessee himself to resume the leasehold, it is a personal covenant and does not create an interest in the land.

1. Parties in Lease :- The parties to the lease are the transferor, who is called the lessor or landloard, and the transferee, who is called the lessee or tenant. Both the parties must be competent to contract. The lessor and the lessee cannot be the same person, they have to be two different persons. A lessor can be an absolute owner of the land or a joint tenant or a lessee himself but above all must be competent to contract. Thus minors, or unregistered associations cannot be lessees.
2. Subject Matter of Lease :- The subject matter of a lease is a specific immovable property such as land, houses, factories, shops, minerals, buildings etc. Usually a lease of a house and a shop includes not only the superstructure but also the site, unless the same is specifically excluded from the definition of the land in the lease deed. However, terrace and air space above a tenanted multi-storeyed building are not included in lease.
3. Duration of Lease :- The lease need not be for fixed period but its duration should be definite. An uncertainty as to the duration of the term will be detrimental to the lease. When the lease is for specific period, its period cannot be infinite by mere provisions of renewal every year.
4. Consideration for Lease :- There must be a consideration fixed for lease for lease that may be in the form of:

• money;
• money’s worth such as a share in crops;
• service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee.

Consideration may be termed as rent plus premium as well as rent alone or premium alone. Also, a lease without consideration is invalid.

LICENCE

A licence is a right to do or continue to do, in or upon the immovable property of the grantor, something which would in the absence of such right is unlawful, and such right does not amount to an easement or an interest in the property. Further, it is an authority to do a particular act or series of acts upon another’s land without possessing any estate therein.

Section 52 of the Easements Act, 1882: “Licence, Defined. Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, 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 is called, a 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.

Thus, the primary distinction between a lease and a licence is that the lease is a transfer of a right in a specific immovable property, whereas, licence is a bare permission and a licensee is not entitled to notice to quit before evidence.

PRIMARY DISTINCTIONS BETWEEN LEASE AND LICENCE :-

• A lease is a transfer of an interest in a specific immovable property, while licence is a bare permission, without any transfer of an interest.
• A lease creates an interest in favour of the leassee with respect of the property, but a licence does not create such an interest.
• A lease is both transferable and heritable, a sub tenancy can be created by the tenant and on the death of the tenant, the tenancy can be inherited by his/her legal heir, whereas, licence is neither transferable nor heritable.
• A licence comes to an end with the death of either the grantor or the guarantee, since it is a personal contract, but a lease does not comes to an end on either the death of the grantor or grantee.
• A licence can be withdrawn at any time at the pleasure of the grantor but the lease can come to an end only in accordance with the terms and condition stipulated in the contract of tenancy agreement.
• A lease is unaffected by the transfer of the property by sale in favour of a third party. It continues and the purchaser has to wait till the time period for which the tenancy was created is over before he can get the possession, whereas, in case of a licence, if the property is sold to a third party, it comes to n end immediately.
• A lessee has a right to protect the possession in his own right. Whereas, a licensee cannot defend his possession in his own name as he does not have any proprietary right in the property.
• A lessee in possession of the property is entitled to any improvements or accessions made to the property, while a licensee is not.

Cases :-

Associated Hotels of India Ltd. vs. R.N. Kapoor, [1960] 1 SCR 368 (Supreme Court, 1959) A lease is a transfer of an interest in land. The interest transferred is called the leasehold interest. The Lesser parts with his right to enjoy the property during the term of the lease and the lessee gets that right to the exclusion of the Lesser.

In case of license, the legal possession continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission his occupation would be unlawful. It does not create in his favour any estate or interest in the property.

Municipal Corporation of Delhi vs. Pradip Oil Corporation and Anr., 100 (2002) DLT 442 (Delhi High Court, 2002) A mere license does not create interest in the property to which it relates. Lease on the other hand, would amount to transfer of property. License may be personal or contractual. A licensee without the grant creates a right in the licensor to enter into a land and enjoy it. By reason of a license, no estate or interest in the property is created.

A license, inter alia, (a) is not assignable; (b) does not entitle the licensee to sue the stranger in his own name; (c) it is revocable and (d) it is determined when the grantor makes subsequent assignment.

Madhu Behal and Anr. vs. Rishi Kumar and Anr., (2009) 3 PLR 628 (Punjab & Haryana High Court, 2009) It is never a nomenclature in the document that governs the decision as to whether a document as a ‘lease’ or a ‘licence’. The essential feature that distinguishes a lease from licence is always a transfer of interest in the demised property in a transaction of lease while a licensee does not involve any such transfer of interest. The lease is heritable while license is personal to the grantee.

The legal possession of the property is inevitably transferred to a tenant under lease while in a transaction of license the legal possession continues with the licensee and the licensee has a mere right of user of the premises in a particular fashion mentioned under the document. 

CONCLUSION :-

The important recent judgment of the hon’ble Supreme Court on the distinction between lease and licence is Bharat Petroleum Corp. Ltd. v. Chembur Service Station wherein the court observed that Licences can be of different kinds. Some licences with reference to use of immovable property may be very wide, virtually bordering upon leases. Some licences can be very-very narrow, giving a mere right enabling a person to visit a premises – say a museum or a lecture hall or an exhibition. In between are the licences of different hues and degrees. All licences cannot be treated on the same footing.