Although, a leave and license is nothing but a simple rental transaction, but given the complexities of our local laws and numerous mandatory requirements it sometimes becomes a nightmare to execute. I have seen many deals fall thru merely because of lack of awareness. Hence this Leave and License process checklist.
Download the leave & license process checklist by clicking here Given below is the explanation of the terms and process with reference to a leave and license transaction in Mumbai.
- COMMERCIAL TERMS– Agree precisely on the commercial terms of the agreement as follows:-
- Security Deposit.
- Monthly compensation (payable monthly, quarterly, half-yearly or annually). Mode of payment by post-dated cheques, RTGS or NEFT facility.
- License Period.
- Lock in period.
- Notice Period.
- Utility Charges
- Annual Maintenance Contract (comprehensive or non-comprehensive) for white goods (payable by whom?)
- Service tax (payable by whom?)
- Taxes (in case of increase beyond a certain percentage, payable by whom?)
- Stamp Duty and registration charges – payable by whom?
- Real estate advisors and lawyer fees – payable by whom?
- LETTER OF INTENT – A Letter of Intent (LOI) is also often referred to as a Term Sheet in corporate parlance. A LOI is essentially executed immediately upon freezing the commercial terms and conditions. Based on the LOI the lawyers of both the parties prepare the Leave and License Agreement. The LOI must have an exit clause, i.e. the parties are free to exit the arrangement if their respective lawyers are unacceptable to any proposed terms and conditions of the leave and license agreement. I have not come across till date a single instance when the parties being unable to arrive at a consensus of the terms and conditions of the agreement have resorted to legal recourse. Besides the commercial terms, the list of works to be done in the apartment must be clearly mentioned along with a list of furniture and fixtures.
- SOCIETY NO-OBJECTION CERTIFICATE – Although the owner does not require any permission from the Society to give his flat on a leave and license basis but it is always advisable to get a NOC from the Society in the interests of the licensee. Moving of furniture, fixtures and other household effects require permissions from the Society and in the absence of a NOC, this may pose a problem. The NOC must be obtained prior to signing of the contract and the licensee must insist on keeping the original copy.
- TITLE TO THE PROPERTY – The owner’s title to the premises must be investigated. It must be remembered that we are only doing a title search of the current owner and we need not go through the whole chain of earlier agreements to go into the root of the title. Title of the present owner may be ascertained by checking the sale deed and society share certificate. Other documents such as the latest society bill and electricity bill must also be perused.
- LEAVE AND LICENSE AGREEMENT – A well drafted leave and license agreement, keeping in mind the interests of both parties must be prepared by a qualified lawyer. This agreement must be stamped with the requisite amount of stamp duty, executed in the presence of witnesses of both parties (preferably each party’s real estate advisor must witness) and thereafter must be presented for registration in the office of the Joint Sub-Registrar of Assurances. The registered document will be returned the next day and must be carefully kept for future use. Remember that a registered agreement in conclusive proof of the transaction and will be relied upon by the Competent Authority in case of eviction proceedings. Further the Society and police station also will require a copy of the registered agreement for their reference and records.
- STAMP DUTY – Every leave and license agreement must be stamped as per the provisions of the Maharashtra Stamp Act, 1958. The tenure, annual compensation and security deposit will be taken into consideration in ascertaining the appropriate stamp duty payable on the instrument. Stamp duty payment is important as without an instrument duly stamped the same will not accepted by the registration authorities.\
- REGISTRATION – Every agreement of leave and licenses duly stamped and executed must be presented before the Sub-Registrar of Assurances for registration under section 17 of the Registration Act, 1908. Section 23 of the said Act further provides that a document must be presented for registration within a period of four months since execution. It is pertinent to note that registration is necessary as the Society as well as the Police authorities will not accept a document which is not registered. Further in case the landlord needs to file eviction proceedings before the Competent Authority, a non-registered agreement may not be admissible evidence as proof of the leave and license transaction. Even considering that the licensee needs to file a suit against the landlord for whatsoever reasons, a registered document will always score over an unregistered one.
- POLICE FILING –It is a misnomer that for executing a leave and license agreement a police no-objection certificate is required. As per the latest police circular revising the regulations, the landlord must submit a copy of the registered agreement by registered post to the concerned police station within whose jurisdiction the property is situated. The police station on receipt of the above will issue an acknowledgment receipt, a copy of which must be submitted to the society. Landlords must bear in mind provide all accurate, true and correct information as in case of any ambiguity or incorrect disclosure they would be held responsible for the same.
Advocate Rajesh Narang is our legal expert at Pro Realtors. If you have a legal query, you can ask him your question here. He answers 1 query every week and Pro Realtors members, will be given a preference.
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