Authored By: Tejas Jindal
Christ University Lavasa
Introduction
In real estate law, the concepts of lease and licence are often confused, yet they have very different legal consequences. A lease creates an interest in immovable property and grants exclusive possession to the lessee, while a licence merely permits a person to use the property without creating any such right[1]. Understanding the distinction between lease and licence is vital in avoiding disputes between landlords, tenants, and licensees.
Definition of Lease
A lease is defined under Section 105 of the Transfer of Property Act, 1882[2], as a transfer of a right to enjoy immovable property for a certain time in consideration of a price paid or promised. A lease transfers an interest in the property, thereby giving the lessee enforceable rights against the whole world, including the landlord. The Supreme Court in Associated Hotels of India Ltd. v. R.N. Kapoor[3] clarified that a lease grants exclusive possession to the tenant, which is the key element distinguishing it from a licence.
Definition of Licence
A licence is defined under Section 52 of the Indian Easements Act, 1882[4], as a right granted to a person to do something in or upon immovable property which would otherwise be unlawful, and such right does not create any interest in the property. Unlike a lease, a licence is a personal right and is generally revocable at the will of the grantor. In the landmark case of Associated Hotels of India Ltd. v. R.N. Kapoor[5], the Court observed that mere use of property without exclusive possession is indicative of a licence.
Key Differences
The main distinction between lease and licence lies in the creation of rights. A lease creates an interest in the property, whereas a licence only permits lawful use without any proprietary right. Exclusive possession is usually the test: if exclusive possession is granted, it is presumed to be a lease, unless circumstances show otherwise. For example, in Delta International Ltd. v. Shyam Sundar Ganeriwalla[6], the Supreme Court held that substance must prevail over form, and the true intention of the parties will determine whether an agreement is a lease or licence.
Practical Implications
In real estate practice, this distinction affects rights and liabilities. A lessee is protected by rent control laws and cannot be evicted easily, whereas a licensee has no such statutory protection and can be removed upon revocation of the licence. Thus, property owners often prefer granting licences to retain greater control, while tenants prefer leases for security of tenure.
Conclusion
The distinction between lease and licence continues to be a significant issue in real estate law. While both involve the use of property, a lease creates proprietary rights and protections, while a licence merely allows permissive use. Courts have consistently emphasized the need to look at the substance of the agreement and the intention of the parties rather than its label.
Reference(S):
[1] General principle distinguishing lease and licence.
[2] Transfer of Property Act, 1882, § 105
[3] . Associated Hotels of India Ltd. v. R.N. Kapoor, AIR 1959 SC 1262 (India).
[4] Indian Easements Act, 1882, § 52.
[5] Associated Hotels of India Ltd. v. R.N. Kapoor, AIR 1959 SC 1262 (India).
6 Delta International Ltd. v. Shyam Sundar Ganeriwalla, (1999) 4 SCC 545 (India).
