DIFFERENCE BETWEEN “LEASING” (TENANT) AND “LEAVE AND LICENSE”

Estimated reading time : 5 minutes

YUGEN REALTY, SURAT

When a person rents out their land/property to a third party, some individuals act negligently by not formalizing the arrangement through a written agreement, while others, being cautious, ensure that a rental or leave and license agreement is properly documented. The true significance of such agreements is often realized only when disputes arise. Therefore, it is essential and advisable to execute a legal document or agreement whenever land/property is rented or licensed for use to avoid potential conflicts and safeguard the interests of all parties involved.

In the current scenario, individuals often rent out their land/property to third parties as a means to generate additional income. However, land/property owners are often concerned about the possibility of the tenant/user wrongfully occupying the property and refusing to vacate, which may necessitate filing a lawsuit. In such cases, when disputes arise between the owner and the tenant/user, the determination of whether the property is being used as a “tenant” or as a “license holder” is made by the esteemed courts, based on the submissions of the parties, the evidence presented, and applicable legal provisions.

In such cases, when permission is granted to use the land under a leave and license arrangement without granting exclusive possession to the tenant/user, the legal outcome is classified as leave and license. In other words, if the occupier is permitted to use the property under specific conditions while the owner retains control or possession, it constitutes a leave and license. However, although exclusive possession alone is not definitive proof of a lease, if an interest in the property is created and exclusive possession is granted in exchange for payment of rent, a lease is presumed. Therefore, the distinction between “lease” and “leave and license” must be determined by analyzing the entirety of the document and the surrounding circumstances.

As discussed above, the Hon’ble Calcutta High Court (Division Bench) clarified the distinction between “tenant” and “leave and license” in Dhananjay Paul v. Mohan Kediya, First Appeal No. 24/2019, dated 03/04/2023 (Land Laws Judgments, Vol. 1, Issue 3, March 2024, Page No. 215). The brief facts of the case are as follows:

The appellant acquired the property in question through a final decree in a partition suit. The respondent was occupying a portion of the property, including the garage and/or car parking space, as a licensee. Following the death of the appellant’s father, who had granted the license, the appellant issued a notice to the respondent to vacate the property, as the license had been revoked. Despite the notice, the respondent failed to hand over possession, prompting the appellant to file a suit in the Hon’ble Civil Court. Upon dismissal of the suit, the appellant filed the present appeal before the Hon’ble High Court.

The Hon’ble High Court held that “tenant” is defined under Section 105 of the Transfer of Property Act, 1882, while “leave and license” is governed by Section 52 of the Indian Easements Act, 1882. The difference between “tenant” and “leave and license” is determined by examining the true intention of the parties, which can be deduced from the entirety of the document and the surrounding circumstances. The conduct of the parties before and after the relationship is established is crucial in understanding their intent.

In a leasehold, an interest in immovable property is created. Conversely, in a leave and license arrangement, permission is granted to use the property without transferring exclusive possession, leaving control with the owner. Thus, if the occupier’s right to use the property is conditional and the owner retains possession, it is a leave and license. However, exclusive possession does not conclusively prove a lease; a lease may be inferred if an interest in the property is created and exclusive possession is granted in exchange for rent.

In this case, no document, agreement, or rent receipt was produced by either party. The appellant asserted that his father had granted leave and license to the defendant, which was revoked after his father’s death. The defendant, however, denied this claim, stating that they were tenants. In the absence of a formal agreement, the intention of the parties must be inferred from the surrounding circumstances and their conduct.

From the combined reading of the evidence of the plaintiff’s witnesses No. 1 and No. 2, along with the report of the Partition Commissioner, it can be inferred that the defendant is one of three tenants paying a nominal rent. The appellant’s father had admitted the defendant as a tenant in the suit premises, with rent being initially collected by the appellant’s father, later by the sister of the plaintiff’s witnesses, and subsequently by their elder brother. This sequence suggests that an interest was created in the suit premises and exclusive possession was granted subject to payment of rent.

While exclusive possession is not conclusive in determining the nature of the arrangement, if it is established that a person enjoys exclusive possession, pays a fixed monthly amount, and is authorized to undertake repairs on the premises, the arrangement qualifies as a lease (tenant).

Thus, in light of the aforementioned judgments of the Hon’ble High Court, it can be concluded that the distinction between “lease” (tenant) and “leave and license” must be determined by analysing the entirety of the document and the surrounding circumstances. (Land Laws Judgments, Vol. 1, Issue 3, March 2024, Page No. 215)

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Disclaimer : This information has been collected through secondary research and Yugen Realty Newspaper is not responsible for any errors in the same.

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