Distinction under the law between “Lease” and “Licence”
By Sanjay Chaturvedi
Under a lease an interest in property is created under the transfer of Property Act and is required to be registered.
The Bombay Rent Control Act, 1947 also made a distinction between a Lease and Leave & Licence which is however a personal facility given in accordance with the Easements act and does not amount to any interest in the property and therefore need not be registered.
The principle of charging of any stamp duty on licence or security deposit by treating it as a right or interest, compounded by the charging of stamp duty on a Supplementary Security Deposit Agreement created in respect of the same premise is without any basis. It should also be clarified that Security Deposit Agreement related to Leave & Licensee Agreements should be outside the purview of stamp duty and such Security Deposit agreements are of financial nature containing finance terms and are supplementary to Leave and Licence Agreements.
Tenancy agreements to be compulsorily registered under new Maharashtra rent control act.
By M.S. Khan, Advocate, (Ex.Competent Authority,
Rent Act, Konkan Division, Mumbai).
At last, the new unified Maharashtra Rent Control Bill has been passed by the Maharashtra Legislature. It is learnt that the bill is sent for the assent of the President. After the signature of the President of India, it will become and Act and will come into force on such date as may be notified by the Government in the Gazette.
Under Section 55, all tenancy agreements, including leave and licence agreements, must be in writing and are to be compulsorily registered after the commencement of the Act. It will be the responsibility of the landlord to get such written agreements registered. If he fails to get the agreements registered, the contention of the tenant about its terms and condition shall prevail, unless proved otherwise. Further, if the landlord fails to register the agreement, he shall be punished with imprisonment which may extend to three months or with fine upto five thousand rupees or with both, under Sub-Section (3) of the said Section 55.
The Joint Committee on the Bill, in its Report dt. 20th April 1999, has also observed that the Committee has unanimously decided to protect all the existing tenancy before the date of commencement of this Act, but after the commencement of this Act, there should be no tenancy without agreement. Every such tenancy agreement has to be registered and the responsibility of getting such agreements registered should be on the landlord. If the tenancy is created without registered agreement, there will be no protection of law and the landlord contravening these provision on conviction be punished with imprisonment as laid down in Section 55 (3) of the Act.
This appears to be a major departure from the previous provisions relating to the agreements of tenancy and the leave and licence agreements. The prosecution and punishment for non-registration of agreements by the landlords appear to be very harsh. No landlord would be pleased to give his hard earned flat to the tenant/licensee and would like to go to jail for non-registration of the agreement. He will rather be happy to keep the premises vacant instead of giving it either on rent or on leave and licence basis. This will cause acute shortage of the stock of houses available. There is every possibility that if the landlord has given the premises without registration of agreement, he will try to use force to get back the possession. The litigation in the Court may be minimised, but lawlessness is likely to be increased which is not healthy a sign between the relationship of landlords and tenants. Another difficulty in registration of such agreement would be that so many leave and licence agreements are executed each day. The office of the Sub-Registrar is already over burdened. The office takes sufficient long time for the return of registered documents, and these agreements registration will be then additional burden. No machinery is provided in the act for registration of such agreement with penalty may adversely effect their relations. I think, other States have not made such provision in their respective Rent Act legislations for the compulsory registration of tenancy agreement with penalty. If any other state has enacted such provisions, it would be useful to examine its result and consequences in relation between the landlord and the tenant.
Maharashtra rent control act
The Maharashtra rent control act, 1999 (Mah. 18 of 2000) has received Presidents assent on the 10th March, 2000. One of the important provisions made under the said Act which was not there in Bombay Rent Act, 1947 is section 55 of the New Act.
The Section 55 of the said Act read as under :-
“55 Tenancy agreement to be compulsorily registered.
(1) Notwithstanding anything contained in this Act or any other law for the time being in force, any agreement for leave and licence or letting of any premises, entered into between the landlord and the tenant or the licensees, as the cases may be, after commencement of this Act, shall be in writing and shall be registered under the Registration Act, 1908.
(2) The responsibility of getting such Agreement registered shall be on the landlord and in the absence of the written registered agreement, the contention of the tenant about the terms and conditions subject to which a premises have been given to him by the landlord on leave and licence or have been let to him, shall prevail unless proved otherwise.
(3) Any landlord who contravention the provisions of this section shall, on conviction, be punished with imprisonment which may extend to three months or with fine not exceeding rupees five thousand or with both”.
Under the Transfer of Property Act or the Indian Registration Act only lease of immovable. Property of one year or needs to be registered .
The Agreement of monthly tenancy does not require to be registered under the Transfer of the Property Act or Indian Registration Act.
Similarly, under the said two Acts or otherwise Leave & Licence Agreement does not require to be registered.
The Leave & Licence does not create any interest in the premises in favour of a Licensee.
The Licensee has only right to use and occupy the premises. In view thereof the monthly tenancy Agreement, if any, or Leave and Licence were not required to be registered with the Sub-Registrar of Assurances and were normally not registered with the Sub-Registrar.
As far as the tenancy was concerned, earlier in most of the cases there never used to be written Agreement.
Only rent receipt for a month and three months deposit receipts were being issued. In most of the cases there used to be these two receipts and not written contract.
However, in the case of Leave & Licence there has been always a written contract.
First and foremost under new Act Landlords or the Licensors have to execute Agreement in Writing incorporating terms agreed between them and its is required to be registered under the Registration Act,
1908 with the Sub-0REgistrar in whose jurisdiction the said property falls.
There has been responsibility cast upon the landlord to get the said agreement registered.
The said Section also makes provision as to the effect of non-registration of such tenancy or Leave and Licence Agreement. The effect are tow fold.
Firstly under sub-section 3, the Landlord who fails to register the Agreement is liable to be imprisoned which may to three months or with fine not exceeding Rs. 5000/- or with both. There never was such a penal provision, in the earlier Act. This has been introduced and provided under the said new Act.
Secondly the effect of non-registration of such an Agreement is in favour of the tenant.
In absence of such Registered Agreement, the contention of the tenant about the terms and conditions subject to which premises has been given by landlord on leave and licence or let out by him will prevail unless the landlord is able to prove otherwise. Therefore in case if there is no registered Agreement, then it is open to the tenant to contend whether the premises has been let to him or he is a Licensee.
His contention will prevail unless the landlord proves otherwise. So the burden of proof of the terms and conditions of the grant of the premises shall be on the landlord. IT would be sufficient for tenant to contend one way and Court will accept it unless the landlord provides otherwise. Looking from the provisions of the Act it will be always in the interest of the person who claims to be a tenant and not the Licenses.
As a tenant he gets absolute protection under the Act and he had better rights than the Licensee.
Therefore, even if the premises are granted on leave and licence basis, if there is no written registered agreement, then licensee can contend to be a tenant and the burden of proof would like on the landlord to prove that such person is licensee and not a tenant.
When we are talking of Leave & Licence Agreement it could be from either the Landlord himself or form the monthly tenant who is authorised under a contract to grant leave & licence of the premises or with a consent of the landlord such grants a leave and licence.
In our humble opinion the Leave & Licence Agreement between the Tenant and Licensee may not fall within the provisions of Section 55 because Section 55 (1) refers to an Agreement between the landlord and tenant or the Licensee.
A person who is a tenant and grants leave & licence is not a landlord. Therefore, such a Leave & Licence Agreement may not fall within the provisions of Section 55 (1).
The definition of landlord under Section 7(3) of the said Act also does not include a tenant who grants leave & Licence.
In the circumstances licence granted by the tenant may not fall within the provisions of Section 55 and may not require registration or for that matter not even in writing.
New provision would increase the burden of Stamp Duty and payment of Registration fees of the Licensee or the Tenant.
The provisions as to stamp duty and registration charges of such Agreement, we will deal with in the next Article.
Under section 53 of the said Act certain offences are made cognizable. The beach of the provision of Section 55 is not made cognizable offence.
Cognizable offence has been defined under section 2 (c) of the Code of Criminal Procedure, 1973 which reads as under :-
“(c) “cognizable offence” means and offence for which, and “cognizable case” means a case in which a police office may, in accordance with the First Schedule or under any other law for the time being in force, arrest without warrant.
Non-cognizable offence has been defined under section 2 (I) of the said Code of Criminal Procedure which reads as under :-
“(I) “Non-cognizable offence” means an offence for which, and “non-cognizable case” means a case in which, a police officer has no authority to arrest without warrant;
Under section 53, section 55 is not mentioned as cognizable offence. Landlord cannot be arrested by the Police Officer without a warrant.
No tax on rental income
By Staff Reporter
Draft National Housing Policy has strongly suggested that there shall not be any tax on rental income from house property in the country. The policy has also suggested that the house tax must be uniform across that country. With the intention of rationalizing the housing scenario in the country, government of India has tabled that draft National Housing Policy.
National Housing and Habitat Policy, 1998, was formulated to provide the shelter besides rationalization of Stamp Duty and strongly recommending to repeal the ULC Act. Now, the new Draft National Housing Policy has been promulgated to restore the loosing interest in housing and making affordable. The policy also has suggested that those residential properties are in use for commercial purposes shall be charged extra tax.
These tax incentives are offered to open the close doors in urban accommodation for renting. The policy has recommended that that all the state Rent Control Act must abolished.
According to the statistic of 2001 census, another 130 crore people will migrate to urban areas in next decade as employment in the agriculture sector is loosing its trend. Hence the government is planning to open the rental accommodation for the new migrants to the urban centre by way of providing the incentives to the rental income.
The draft policy also states that 15.8 million dwellings across the country remain unoccupied / locked up, thanks to the prohibitive Rent Control Act and property taxes.
As part of its attempt to free up housing, the Government intend to discourage aging couples from occupying big houses. It will encourage older people to shift to smaller houses which provide them security and just enough space to suit their needs.
Even then 3.5 per cent additional land would be needed to accommodate the swelling population. Of the additional land to be developed for new housing projects, 20-25 per cent housing stock has to be earmarked for economically backward city/ household service providers.
The draft National Housing Policy has been formulated after due delegations and research on housing status in the country.