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