The Statutory Framework

Provision	What it governs
Indian Easements Act, 1882 — Section 52	Definition. A licence is a right to do something on the grantor’s property which would otherwise be unlawful, and which does not amount to an easement or an interest in the property
Indian Easements Act — Section 53	A licence may be granted by anyone in the circumstances and to the extent in and to which he may transfer his interest in the property affected
Indian Easements Act — Section 54	A licence may be granted expressly or by implication from the conduct of the grantor
Indian Easements Act — Section 56	Unless a different intention is expressed or implied, a licence to attend a place of public entertainment may be transferred, but every other licence is not transferable
Indian Easements Act — Section 60	A licence is revocable at the grantor’s will, except where it is coupled with a transfer of property and that transfer is in force, or where the licensee, acting upon the licence, has executed a work of a permanent character and incurred expense in doing so
Indian Easements Act — Section 62	Deemed revocation — when the grantor’s interest ends, when the licensee releases it, on expiry of the period or happening of the condition, when the property is destroyed or permanently altered, when the licensee ceases to have the interest to which the licence was attached, or where a licence for a specific purpose is not used for twenty years
Indian Easements Act — Section 63	On revocation, the licensee is entitled to a reasonable time to leave the property and to remove his goods
Indian Easements Act — Section 64	Where a licence is revoked before the licensee has enjoyed the benefit he was led to expect, and he has not been in default, he is entitled to compensation
Transfer of Property Act, 1882 — Section 105	Definition of a lease as a transfer of a right to enjoy immovable property — the boundary the licence must not cross
Transfer of Property Act — Section 107	Leases from year to year, exceeding one year, or reserving a yearly rent, require a registered instrument. If the arrangement is characterised as a lease, this is the provision that has been breached
Registration Act, 1908 — Sections 17(1)(d) and 49	Compulsory registration of qualifying leases, and the bar on an unregistered instrument being received as evidence of the transaction
Indian Stamp Act, 1899	Stamp duty is assessed on the substance of the instrument, not its title. A document that is in substance a lease is chargeable as one, and a deficiency attracts penalty on impounding
Delhi Rent Control Act, 1958 — Section 3(c)	The Act does not apply where monthly rent exceeds ₹3,500. Below that figure the tenant protections are substantial, which is one reason the lease or licence characterisation matters so much for low-rent residential premises
Specific Relief Act, 1963 — Section 6	A person dispossessed of immovable property without his consent, otherwise than in due course of law, may recover possession by suit. This is what a licensor faces if he changes the locks
Income-tax Act — Section 194-I / 194-IB	Deduction of tax on rent, including the provision applicable to individuals and Hindu undivided families not liable to audit. Licence fee for use of premises is treated as rent for this purpose

Lease, Licence and the Test the Courts Apply

	Lease	Licence
Nature	Transfer of an interest in the property — Section 105 TPA	Permission only, creating no interest — Section 52 Easements Act
Possession	Exclusive possession passes to the lessee	Legal possession remains with the licensor; the licensee has use
Right to exclude	The lessee may exclude the world, including the lessor	The licensor retains a right of entry and control
Transferability	Assignable and heritable unless restricted — Section 108(B)(j) permits it by default	Personal and not transferable — Section 56 Easements Act
Death of a party	The lease continues and devolves	Generally determines; the licence is personal
Sale of the property	A registered lease binds the purchaser — Section 109 TPA	Determines when the grantor’s interest ends — Section 62(a) Easements Act
Revocability	Determines only under Section 111 TPA	Revocable at will, subject to the Section 60 exceptions
Registration	Compulsory above one year	Not a registrable interest — but characterisation governs, not the label

What the courts weigh, in substance: whether exclusive possession was given; whether the grantor retained a genuine and exercised right of entry and control; whether the arrangement is personal to the occupier; the duration and whether renewal is contemplated; whether the occupier may make alterations; and the conduct of the parties after execution. A clause reserving a right of entry that is never exercised, in a document granting a self-contained unit for years, is treated as what it is — a device.

When a Licence Is Genuinely the Right Instrument

• Shared premises — a desk, cabin, chamber or room within a larger space that the licensor continues to occupy and control
• Paying guest arrangements — where the owner or family remains in occupation and provides services, and access and house rules are retained
• Business centres and managed offices — where the operator retains possession, provides services and can relocate the occupier within the premises
• Short-term and project use — film shoots, exhibitions, events, pop-up retail, training programmes, temporary storage
• Kiosks, counters and shop-in-shop — a defined area within premises operated by the licensor, on the licensor’s terms and hours
• Hoardings, signage, telecom towers and rooftop installations — a right to place and maintain equipment, with access rights, where no possession of the premises passes
• Parking bays and storage areas — where use is permitted but possession is not given
• Accommodation for employees or contractors — where occupation is incidental to the engagement and ends with it

What these have in common is that the licensor genuinely retains possession and control, and the permission is genuinely personal. Where that is true, a licence is not a workaround. It is the accurate instrument, and drafting it as a lease would give away rights the licensor never intended to part with.

Revocability: The Point Everyone Gets Wrong

Licensors rely on revocability. It is the whole reason the instrument is chosen. But Section 60 makes a licence revocable at will only where two exceptions do not apply, and both are met more often than clients expect.

Exception one — a licence coupled with a transfer of property. Where the licence is granted alongside a transfer of an interest in property and that transfer remains in force, the licence cannot be revoked at will.

Exception two — permanent works executed on the faith of the licence. Where the licensee, acting upon the licence, has executed a work of a permanent character and incurred expense in the execution, the licence becomes irrevocable. This is the one that catches licensors out. A licensee who has installed partitions, flooring, air-conditioning ducting, a modular kitchen, fixed cabling or a permanent structure — with the licensor’s knowledge — may hold an irrevocable licence, notwithstanding a clause in the document saying the licence is revocable at will.

And even where revocation is available, it is not self-executing. Section 63 entitles the licensee to a reasonable time to leave the premises and remove his goods. Section 64 entitles a licensee who has not been in default to compensation where the licence is revoked before he has enjoyed the benefit he was led to expect. A licensor who revokes and immediately changes the locks has not exercised a right; he has committed a dispossession, and Section 6 of the Specific Relief Act allows the occupier to recover possession by suit without even proving title.

Section 62 also determines the licence automatically in circumstances the parties often do not anticipate — most importantly when the grantor’s own interest in the property ends. A licensee occupying under a licence granted by a tenant loses the licence when that tenancy ends, whatever the licence document says about its term.

The Eleven-Month Question: An Honest Assessment

Residential and small commercial arrangements in Delhi NCR are almost always documented for eleven months, on either a licence or a short lease form. The reasoning is never explained to the party carrying the risk, so here it is.

What it achieves. Below twelve months there is no compulsory registration under Section 17(1)(d) of the Registration Act, and stamp duty is lower than on a longer term. For a genuine short arrangement, this is sensible and there is nothing to criticise.

What it does not achieve. It does not convert a lease into a licence. If exclusive possession is granted, the arrangement is a lease of eleven months — a perfectly valid unregistered lease, since eleven months falls below the compulsory registration threshold — but it is a lease, and the licensor’s assumption of revocability at will is wrong. Determination is then governed by Section 111 of the Transfer of Property Act and by the notice provisions of Section 106, not by Section 60 of the Easements Act.

The rolling renewal problem. Where the same arrangement is renewed on fresh eleven-month papers year after year, or simply continues without fresh execution, the position drifts. Continued possession with rent accepted after expiry engages Section 116 of the Transfer of Property Act and can produce a month-to-month tenancy on the old terms. Long occupation on rolling short papers is not the safe position licensors believe it to be.

Where the rent is low, the stakes are higher. Under Section 3(c) of the Delhi Rent Control Act, premises at a monthly rent above ₹3,500 fall outside the Act. Below that figure, the tenant protections are substantial and the lease or licence characterisation becomes materially more consequential for a landlord.

Our position. Choose the instrument that matches the arrangement, and then decide separately whether to register. If the occupier will have exclusive possession, draft a lease and price the stamp duty honestly. If the licensor will genuinely retain possession and control, draft a licence and make the document consistent with that reality — because a licence that is contradicted by how the parties behave is not a licence.

What a Well-Drafted Licence Contains

• Parties and the licensor’s authority — how the licensor holds the premises, and where he is himself a lessee, whether his lease permits him to grant a licence at all
• The licensed area — identified precisely, and where it is part of larger premises, shown on a plan, with the licensor’s retained areas and access rights described
• An express statement that no interest in the property passes, that possession and control remain with the licensor, and that the licence is personal to the licensee
• The licensor’s right of entry — stated, and meaningful in practice. This clause is only worth what the parties’ conduct makes it worth
• Term — with the expiry date, and an express provision that continued occupation after expiry does not create a tenancy or renew the licence
• Licence fee — amount, due date, mode, taxes, and interest on delay. Deliberately described as a licence fee rather than rent throughout
• Deposit — amount, permitted deductions stated exhaustively, refund within a fixed number of days from vacating, and interest on delayed refund
• Permitted use — narrow and specific, matched to the sanctioned land use, with the number of permitted occupants where residential
• No alterations without written consent — this clause does real work, because permanent works executed on the faith of the licence engage the Section 60 exception and can make the licence irrevocable
• No transfer, assignment, sub-licence or sharing — consistent with Section 56, and expressly stated rather than left implied
• Services and utilities — what the licensor provides, what the licensee pays, and how it is metered or apportioned
• Revocation and exit — the notice period on each side, the events of immediate revocation, and a defined handover process. Drafted in the knowledge that Section 63 gives a reasonable time to vacate and Section 64 may give compensation
• Handover condition and schedule of condition — recorded with photographs at the start, so the exit position is measured against a defined baseline
• House rules, society rules and compliance, and the licensee’s undertaking to comply with them
• Police intimation and identity verification where the local police require tenant or occupier verification
• Indemnity, dispute resolution and governing law

Stamp Duty, Registration and Tax

• Stamp duty is payable on a leave and licence agreement, and is assessed on the substance of the instrument. A document that is in substance a lease is chargeable as a lease, and an under-stamped instrument is liable to be impounded with penalty under the Stamp Act. The rate and the basis differ between Delhi, Uttar Pradesh and Haryana, and we compute the position for the specific agreement before execution
• Registration of a genuine licence is not compulsory, since no registrable interest is created. Note that this is not the position everywhere in India — Maharashtra, for instance, requires registration of leave and licence agreements by statute — so precedent and templates drawn from other States should not be assumed to apply here
• Where the arrangement is in substance a lease, the registration requirements of Section 107 of the Transfer of Property Act and Section 17(1)(d) of the Registration Act apply, and the Section 49 evidentiary bar follows non-registration
• TDS — licence fee for the use of premises is treated as rent for the purposes of Section 194-I, with Section 194-IB applying to individuals and Hindu undivided families not liable to audit. The thresholds have been revised recently and should be confirmed for the current year
• GST — licensing of commercial premises is a taxable supply on the same footing as renting, including the reverse charge position where the licensor is unregistered and the licensee registered. Residential use has its own treatment

Common Mistakes

• Titling a document “Leave and Licence” while granting exclusive possession of a self-contained unit for a fixed term, and assuming the label controls the characterisation
• A licensor relying on revocability at will, without regard to the Section 60 exceptions
• Permitting the licensee to carry out fit-out or install fixtures, and thereby engaging the permanent works exception that can make the licence irrevocable
• Reserving a right of entry in the document and never exercising it, so that the retained-possession case fails on the conduct
• Revoking and changing the locks, when Section 63 gives the licensee a reasonable time to vacate and Section 6 of the Specific Relief Act allows him to recover possession by suit
• Overlooking Section 64, under which a licensee not in default may claim compensation where the licence is revoked early
• Granting a licence where the licensor is himself a tenant, without checking whether his own lease permits it — and without appreciating that Section 62(a) determines the licence when the licensor’s interest ends
• Using the words “rent”, “tenant” and “lease” throughout a document intended to be a licence, which is the first thing a court reads
• No express clause providing that continued occupation after expiry does not create a tenancy, leaving Section 116 of the Transfer of Property Act to operate
• Rolling the same arrangement forward on fresh eleven-month papers for years, and treating long occupation as though it were short
• Under-stamping on the assumption that a licence attracts nominal duty, when duty is assessed on substance and an impounded instrument attracts penalty
• Applying Maharashtra practice — where registration of leave and licence agreements is compulsory by statute — to Delhi NCR without checking
• A deposit refundable on “settlement of accounts” rather than within a fixed period from vacating
• No schedule of condition with photographs at the start, so damage and reinstatement are argued at exit against an undefined baseline
• Ignoring the Delhi Rent Control Act position where the monthly rent is at or below ₹3,500
• Failing to complete police verification of the occupier where the local police require it

How Delhi Legal Company Assists

• Instrument selection — an honest assessment of whether the arrangement is a licence or a lease, before anything is drafted, and advice on the consequences of each
• Drafting — leave and licence agreements for residential, paying guest, shared office, business centre, kiosk, signage, telecom site, parking, storage and event use
• Vetting — review of the counterparty’s draft with a written note on what it gives away, what is missing, and whether it will survive characterisation as a licence
• Making the document consistent with the reality — retained possession, access rights, restrictions on alterations and transfer, drafted so that the licence holds rather than collapsing into a lease
• Stamp duty — computation on the correct basis for the specific instrument, and e-stamping
• Registration — where the parties choose to register, or where the arrangement is in substance a lease and must be registered
• Commercial premises — where the occupier will hold exclusively and invest in fit-out, we advise on and draft a commercial lease instead
• Verification of the licensor’s position — title or tenancy, authority to grant, society and building rules, land use, and any restriction in a head lease
• Renewal, variation and revocation — renewal documentation, revocation notices drafted with Sections 60, 62, 63 and 64 in mind, and documented handover with deposit settlement
• Disputes — recovery of possession, licence fee arrears, deposit recovery, resistance to claims of irrevocability, and defence against unlawful dispossession
• Compliance — police verification, society intimation, TDS under Sections 194-I and 194-IB, and the GST position for commercial arrangements

Frequently Asked Questions

1. What is a leave and licence agreement?

A. An agreement by which the owner permits another person to use premises without transferring any interest in them. Under Section 52 of the Indian Easements Act, 1882 a licence is a right to do something on the grantor’s property which would otherwise be unlawful, and which does not amount to an easement or an interest in the property. Legal possession remains with the licensor.

2. How is it different from a lease?

A. A lease under Section 105 of the Transfer of Property Act transfers an interest in the property; a licence creates none. The practical consequences follow from that — a lease gives exclusive possession, is assignable and heritable unless restricted, binds a purchaser of the property where registered, and can only be determined under Section 111. A licence is personal, non-transferable under Section 56, and revocable subject to the exceptions in Section 60.

3. Can I call it a licence to avoid registration?

A. Not effectively. Courts determine the character of the arrangement from its substance, and the weightiest indicator is exclusive possession. Where exclusive possession is given for a term at a rent, the arrangement is a lease however the document is titled, and the parties are left with an unregistered lease — losing the revocability the licensor wanted and running into the evidentiary bar in Section 49 of the Registration Act.

4. What is the test the courts apply?

A. Substance over form. Whether exclusive possession was granted; whether the licensor retained a genuine and exercised right of entry and control; whether the permission is personal to the occupier; the duration and whether renewal is contemplated; whether alterations are permitted; and the conduct of the parties after execution. A right of entry that exists only on paper does not save a licence.

5. Is a licence always revocable?

A. No. Section 60 of the Easements Act makes a licence revocable at will except in two cases — where it is coupled with a transfer of property that remains in force, and where the licensee, acting upon the licence, has executed a work of a permanent character and incurred expense in doing so. The second exception is met more often than licensors expect.

6. My licensee has installed partitions and fixtures. Can I still revoke?

A. Possibly not. Permanent works executed on the faith of the licence, with expense incurred, engage the exception in Section 60 and can make the licence irrevocable notwithstanding a clause to the contrary in the agreement. This is precisely why a well-drafted licence prohibits alterations without written consent.

7. Can I revoke and change the locks?

A. No. Section 63 entitles the licensee to a reasonable time to leave the premises and remove his goods. Locking out an occupier is a dispossession otherwise than in due course of law, and Section 6 of the Specific Relief Act allows him to sue for restoration of possession without even having to prove title. It also damages the licensor’s position in any subsequent proceeding.

8. Does the licensee have any claim if I revoke early?

A. Section 64 entitles a licensee who has not been in default to compensation where the licence is revoked before he has enjoyed the full benefit he was led to expect. This is a further reason to fix the term and the notice period expressly rather than relying on revocability at will.

9. What happens if I sell the property?

A. Under Section 62(a) the licence is deemed revoked when the grantor’s interest in the property ends. A licensee therefore does not have the protection a registered lessee has under Section 109 of the Transfer of Property Act, which is one of the substantive differences between the two instruments.

10. I am a tenant. Can I grant a licence over part of my premises?

A. Only if your own lease permits it, and Section 53 of the Easements Act limits a grantor to the extent to which he may transfer his interest. Note also that the licence will determine under Section 62(a) when your tenancy ends, whatever term the licence document states.

11. Can a licensee transfer the licence or bring in someone else?

A. No, unless the agreement permits it. Section 56 provides that every licence other than a licence to attend a place of public entertainment is not transferable unless a different intention is expressed or implied. The prohibition should still be stated expressly, including on sharing and sub-licensing.

12. Does a licence have to be registered?

A. A genuine licence creates no registrable interest and registration is not compulsory in Delhi NCR. Note that this is a State-specific position — Maharashtra requires registration of leave and licence agreements by statute — so templates and advice drawn from other States should not be assumed to apply.

13. Is stamp duty payable on a leave and licence agreement?

A. Yes, and it is assessed on the substance of the instrument. A document that is in substance a lease is chargeable as a lease. An under-stamped instrument is liable to be impounded with penalty, so the assumption that a licence attracts only nominal duty should be checked rather than relied on.

14. Why is everything done for eleven months?

A. Because below twelve months there is no compulsory registration under Section 17(1)(d) of the Registration Act, and stamp duty is lower. For a genuinely short arrangement that is sensible. What eleven months does not do is convert a lease into a licence — an eleven-month grant of exclusive possession is simply a valid unregistered lease.

15. What if the occupier stays on after the term ends?

A. If the arrangement is in substance a lease, Section 116 of the Transfer of Property Act can renew the tenancy on the same terms where the landlord accepts rent or assents to continued possession. A licence should therefore contain an express clause providing that continued occupation after expiry creates no tenancy and does not renew the licence, and the licensor should act on expiry rather than drift.

16. We have renewed the same eleven-month agreement for six years. Is that safe?

A. Less safe than it appears. Long occupation on rolling short papers, particularly where fresh documents were not executed each time and rent continued to be accepted, invites the argument that a periodic tenancy has arisen. The pattern of conduct over six years carries more weight than the heading on the latest document.

17. When is a licence genuinely the right instrument?

A. Where the licensor really does retain possession and control — shared premises, a room or cabin in premises the owner occupies, paying guest arrangements with services, business centres, kiosks and shop-in-shop counters, signage and rooftop installations, parking and storage, event and shoot use, and accommodation incidental to employment.

18. I am taking a licence for my business. What should I be careful about?

A. That the instrument matches your exposure. If you will occupy exclusively and spend on fit-out, a licence gives you a revocable right for an irrecoverable investment and no protection against a sale of the property. In that situation a registered lease is the correct instrument, and the additional stamp duty is small against the fit-out at risk.

19. Does the Delhi Rent Control Act apply?

A. Under Section 3(c) it does not apply where the monthly rent exceeds ₹3,500, which excludes most arrangements. Where the amount is at or below that figure the Act’s protections may apply if the arrangement is a tenancy, which makes the characterisation materially more consequential for the owner.

20. Do I need to deduct TDS on a licence fee?

A. Licence fee for the use of premises is treated as rent, so Section 194-I applies above the prescribed threshold, and Section 194-IB applies to individuals and Hindu undivided families not liable to audit. The thresholds have been revised recently and should be confirmed for the current year before the first payment.

21. Is GST payable?

A. Licensing of commercial premises is a taxable supply on the same footing as renting, including the reverse charge position where the licensor is unregistered and the licensee registered. Residential use is treated differently. The position should be confirmed before the first invoice.

22. Do I need to do police verification?

A. Where the local police require verification of tenants and occupiers, yes, and it is the owner’s practical responsibility. It is straightforward, it is frequently overlooked, and it matters if there is later a dispute or an incident at the premises.

23. How do I make sure the deposit comes back?

A. Fix a number of days for refund running from the date of vacating, not from “settlement of accounts”. Close the list of permitted deductions and require supporting documents. Record a schedule of condition with photographs at the start so that damage is measured against a defined baseline. And provide for interest on delayed refund.

24. The licensee is not paying and will not leave. What are my options?

A. Issue a revocation notice drafted with Sections 60, 62, 63 and 64 in mind, allow the reasonable time to vacate that Section 63 requires, and proceed to recover possession and arrears through the appropriate proceeding. Do not resort to locks, or to cutting power or water — it converts a recovery action into a dispossession claim against you.

25. Can you tell me which instrument I should be using?

A. That is usually the most valuable part of the engagement. We look at who will possess and control the premises, for how long, whether the occupier will invest in it, and what each party needs to be able to do at the end — and then recommend a licence, a lease, or a services arrangement, and draft it so that it holds.

26. Can you review an agreement I have already been given?

A. Yes. We mark it up and return a written note on what it gives away, what is missing, and — most importantly for this instrument — whether it will actually be treated as a licence, or whether it is a lease wearing the wrong title.