Before using this commercial licence agreement
A leave and licence arrangement permits the licensee to use premises on agreed terms without, by itself, transferring an interest in the property. Section 52 of the Indian Easements Act, 1882 describes a licence as a permission relating to immovable property that does not amount to an easement or an interest in the property. By contrast, section 105 of the Transfer of Property Act, 1882 defines a lease as a transfer of a right to enjoy immovable property.
Registration and stamp duty: current legal position
For a lease, section 107 of the Transfer of Property Act, 1882 provides that a lease from year to year, for any term exceeding one year, or reserving yearly rent can be made only by a registered instrument. Section 17 of the Registration Act, 1908 also specifies categories of documents for which registration is compulsory. A genuine licence is legally distinct from a lease because it does not create an interest in the immovable property, but merely describing a document as a "licence" will not control its legal character if its terms operate as a lease.
Stamp duty is not a universal flat amount. It is determined by the applicable stamp law and rates in the State or Union Territory, having regard to the true nature of the instrument, term, licence fee or rent, security/premium where relevant, and other prescribed factors. For premises in Delhi, verify the current duty, registration requirements, e-stamping procedure and Sub-Registrar process with the Department of Revenue, Government of NCT of Delhi before execution.
COMMERCIAL LEAVE AND LICENCE AGREEMENT
This Leave and Licence Agreement ("Agreement") is made at on this day of , 20.
BETWEEN
Sh./Smt./M/s , son/daughter/wife of / a company, LLP, firm or other entity acting through its authorised representative , having address/registered office at , hereinafter referred to as the "Licensor" (which expression shall, unless repugnant to the context, include the person/entity lawfully entitled through or under the Licensor);
AND
M/s , a company/LLP/partnership/proprietorship/other entity acting through its authorised representative Sh./Smt. , having its registered/principal office at , hereinafter referred to as the "Licensee" (which expression shall, unless repugnant to the context, include its lawful successors and permitted representatives).
The Licensor and Licensee are individually a "Party" and collectively the "Parties".
Recitals
A. The Licensor represents that the Licensor is lawfully entitled to grant permission to use the commercial premises described as , situated at ("Licensed Premises").
B. The Licensee has requested permission to use the Licensed Premises for the lawful commercial purpose of , and the Licensor has agreed to grant such permission on the terms below.
C. The Parties intend this arrangement to operate as a leave and licence and not as a transfer of ownership or other interest in the Licensed Premises, subject always to the true legal effect of this Agreement and applicable law.
Terms and Conditions
1. Term. The licence shall commence on and end on , unless terminated earlier in accordance with this Agreement. Any renewal or extension shall be only by a fresh written agreement or written renewal signed by both Parties and shall be subject to applicable stamp and registration law.
2. Licence Fee. The Licensee shall pay the Licensor a monthly licence fee of ₹ (Rupees only), payable on or before the day of each month by bank transfer, account-payee cheque or another lawful traceable mode agreed by the Parties.
3. Security Deposit. The Licensee shall pay an interest-free refundable security deposit of ₹ . Subject to adjustment of unpaid licence fee, utility charges and the reasonable cost of repairing damage beyond normal wear and tear, the balance shall be refunded within days after peaceful handover of the Licensed Premises and return of keys/access devices.
4. Utilities and Common Charges. Electricity, water, internet, common-area maintenance and other consumption or service charges attributable to the Licensee's use shall be paid by in accordance with bills, sub-meter readings or the agreed allocation stated in Schedule A.
5. Permitted Use. The Licensed Premises shall be used only for and for no unlawful, hazardous, prohibited or nuisance-causing activity. The Licensee shall obtain and maintain licences, registrations and permissions required for its business.
6. Access and Working Hours. Subject to building rules and applicable law, the Licensee may access the Licensed Premises during . Emergency access and reasonable access by the Licensor for inspection, repair or compliance shall be permitted after reasonable notice, except in an emergency.
7. No Transfer or Sub-Licence. The Licensee shall not assign, transfer, part with use, create third-party rights or sub-license the Licensed Premises without the Licensor's prior written consent.
8. Alterations and Fit-outs. No structural alteration shall be made without prior written consent and all approvals required by law. Removable furniture, equipment and approved non-structural fit-outs may be installed subject to building/fire/safety rules and restoration obligations.
9. Safety and Prohibited Materials. The Licensee shall not store explosives, prohibited goods or hazardous/inflammable substances except items lawfully required for ordinary business use and stored in full compliance with fire, safety and environmental requirements.
10. Compliance with Law. The Licensee shall comply with applicable laws, municipal and fire-safety requirements, building/society regulations and lawful directions of competent authorities relating to its occupation and business. For Delhi premises this may include applicable requirements of the Municipal Corporation of Delhi or other local authority, Delhi Fire Service, pollution-control authorities and the relevant building/maintenance body, where applicable.
11. Taxes and Business Liabilities. Each Party shall bear taxes and statutory liabilities legally attributable to that Party. The Licensee shall be responsible for GST, income-tax compliance, registrations, employee-related obligations and other statutory liabilities arising from its own business, to the extent applicable. Nothing in this clause shifts a statutory liability that law places on the other Party.
12. Maintenance and Damage. The Licensee shall keep the Licensed Premises reasonably clean and shall be responsible for damage caused by its negligence, wilful act, employees, contractors or visitors, excluding normal wear and tear and structural defects not caused by the Licensee.
13. Licensor's Title and Peaceful Use. The Licensor represents that the Licensor is legally competent to grant the licence. So long as the Licensee complies with this Agreement, the Licensee shall be permitted to use the Licensed Premises in accordance with the agreed terms without unlawful interference.
14. No Tenancy Intended. The Parties record that the permission is intended as a licence and not as a tenancy, lease, sub-tenancy, easement or transfer of proprietary interest. However, the legal nature of the arrangement shall be determined by applicable law and the substance of the rights and obligations, not merely by the label used in this Agreement.
15. Termination for Convenience. Either Party may terminate this Agreement without assigning cause by giving days' prior written notice, unless a lock-in period is expressly stated in Schedule A.
16. Termination for Breach. If either Party commits a material breach, the non-defaulting Party may give written notice specifying the breach and allowing days to cure it where cure is reasonably possible. If the breach is not cured within that period, the non-defaulting Party may terminate the Agreement and pursue remedies available under law.
17. Non-payment. If the licence fee or other undisputed amount remains unpaid beyond days from its due date, the Licensor may issue written demand and, subject to this Agreement and applicable law, terminate the licence and seek recovery of dues and possession through lawful means.
18. Handover on Expiry or Termination. On expiry or lawful termination, the Licensee shall remove its movable goods, clear undisputed dues, return access devices and hand over the Licensed Premises peacefully in the condition required by this Agreement, reasonable wear and tear excepted. Neither Party is authorised by this Agreement to use force, unlawfully dispossess any person, seize property without legal authority or bypass remedies prescribed by law.
19. Indemnity. Each Party shall indemnify the other against direct loss arising from its own material breach, unlawful act, fraud, wilful misconduct or negligence, subject to applicable law. The Licensee shall remain responsible for claims arising from its business operations in the Licensed Premises.
20. Insurance. The Licensee shall maintain insurance required by law or reasonably appropriate for its stock, equipment, employees and business risks. Building insurance, where applicable, shall be maintained by the person legally or contractually responsible for it.
21. Notices. Notices shall be in writing and delivered by hand, recognised courier, registered/speed post or email to the addresses stated below or to any updated address notified in writing. Electronic service shall be subject to proof of transmission and applicable law.
22. Force Majeure. Neither Party shall be treated as in breach for delay caused solely by an event beyond reasonable control to the extent performance is legally or physically prevented, provided the affected Party promptly informs the other and takes reasonable steps to mitigate the effect. Payment obligations already accrued shall not automatically be waived.
23. Entire Agreement and Amendments. This Agreement, together with its schedules, records the agreed terms concerning the licence. Any amendment shall be in writing and signed by both Parties and shall comply with applicable stamp and registration requirements.
24. Severability. If any provision is held invalid or unenforceable, the remaining provisions shall continue to operate to the extent permitted by law.
25. Governing Law and Jurisdiction. This Agreement shall be governed by the laws of India. Courts and competent forums at , subject to applicable rules on territorial and subject-matter jurisdiction, shall have jurisdiction over disputes arising from this Agreement.
26. Stamp Duty and Registration. The Parties shall pay stamp duty and registration charges, if applicable, in the manner agreed in Schedule A and as required by the law in force where the Licensed Premises is situated. The Parties shall not rely solely on the duration or title of the document to determine whether stamping or registration is required.
Schedule A - Commercial Particulars
Licensed Premises:
Permitted Business Use:
Term:
Monthly Licence Fee: ₹
Security Deposit: ₹
Notice Period: days
Lock-in Period, if any:
Utility/CAM Allocation:
Licensor Notice Address/Email:
Licensee Notice Address/Email:
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date and place first written above.
Name:
Date:
Name & Designation:
Date:
1. Name, address and signature:
2. Name, address and signature:
Frequently asked questions
Does every 11-month commercial licence agreement in Delhi avoid registration?
No. The legal effect and substance of the instrument matter. A genuine licence does not create an interest in immovable property, while a lease does. If the arrangement is in substance a lease, the registration rules applicable to leases must be considered. State-specific rules should also be checked before execution.
Can every commercial licence agreement be executed on ₹100 stamp paper?
No. Stamp duty depends on the applicable law, the true nature of the instrument, its term and consideration, and current State/UT rates. For Delhi, verify current requirements through the Department of Revenue before purchasing e-stamp paper or presenting a document for registration.
What is the difference between a lease and a licence?
A lease transfers a right to enjoy immovable property. A licence is permission to use property without creating an easement or an interest in it. Courts and authorities may examine the actual rights created and the parties' conduct rather than only the heading of the document.