LEASE AND LICENCE DISTINGUISHED

By: Mohan Rijhwani

Advocate

Posted on 10th July 2002

The history of conflict in the distinction between lease and licence is as old as the history of the concept of lease itself . The relation of landlord and tenant was originally one of contract only, but from early times the contract conferred an estate in the land on the tenant without losing all its contractual characteristics . The relation arise as a rule when one party confers on another the right to the exclusive possession of land, mines or buildings, for a time which is either subject to a definite limit originally , as in the case of a lease for term of years , or which, thought originally indefinite , can be made subject to a definite limit by either party, as in the case of tenancy from a year to year . The interest in the property which remains in the landlord is called the reversion, and, as rule, there is incident to it the right to receive from the tenant payment for the use of the property in the shape of rent. In English Law a lease creates a true encumbrance ( estate in land) for the tenant cannot be ejected from the land so long as the conditions of the lease are observed. If the owner sells the land to a third party, the purchaser takes subject to the lease, whether he was aware of its existence or not. Hence if either the owner or a third party unlawfully ejects the tenant was ejected , he was confined to a claim in personam against the landlord for breach of contract . Incidentally , a tenant did not acquire possessory rights, and so wan not as well protected as in English Law. Until entry the lessee had at common law no estate, but only entry was know as an interesse termini; upon actual entry the lessee had an estate in the land, and the relationship of landlord and tenant was fully established . By the Law of property Act. 1925 , the doctrine of interesse termini was abolished and the lease takes effect as conferring in estate in the land from the date fixed for commencement without entry . Under the Transfer of Property Act 1882 , a lease of immovable property from year to year , or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument . All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivered of possession.

Section 105 of The Transfer of Property Act. 1882 defines nature of lease as follows : A lease of immovable property is a transfer of a right to enjoy such property , made for a certain time, express or implied or in propertuity , in consideration of a price paid or promised, or of money , a share of crops , service or any other thing of value , to be rendered periodically or on specified occasions to the transferor by the transferee , who accepts the transfer on such terms .

This section embodies a comprehensive definition of lease and adopts clear and precise words to express the concept of lease. The words ‘ a transfer of a right to enjoy immovable property’ are more expressive than the common law concepts of ‘ estate in land’.

NATURE OF LICENCE : As opposed to the concept of lease, the concept of licence did no more than to grant a personal privilege to do something upon, without conferring estate in the land. The classic definition of a licence was propounded by Vaughan C. J. in the seventeenth century in Thomas V. Sorrell. A dispensation or licence property passeth no interest nor alters or transfer property in any thing, but only makes an action lawful, which without it had been unlawful . Section 52 of Indian Easements Act 1882 was framed in the background of the above propositions of the learned Chief Justice and it was enacted as follows : Where one person grants to another , or to a definite number of other persons, a right to do, or continue to do, or upon the immovable property of the grantor, something which would, in the absence of such right does not amount to an easement or an interest in property , the right is called a licence.

INTRODUCTORY : A grant of lease necessarily pre-supposes grant of exclusive possession .But the converse is not always true, which means wherever exclusive possession has been granted that fact does not conclusively establish a grant of lease. At common law a tenancy ( a tenancy at will ) was ordinarily inferred whenever a person was granted exclusive possession under the circumstances when no other legal relationship could be inferred . The fact of exclusive possession was considered wholly inconsistent with the concept of licence . Therefore , tenancy at will was implied in cases of mere permissive occupation without payment of rent as also in cases where a person who entered on land with the consent of the owner under contract which did not immediately give him a definite interest in the land pending the completion of the purchase , or under a lease which should be , but is not , under seal, or under an executory agreement providing for the grant of a lease at a future date. In the above mentioned circumstances it was advantageous to claim tenancy at will for two reasons namely (1) the tenant at will could not be evicted until a demand for possession or other determination of tenancy was made (2) the status of limitation barred the ejectment action against the tenant if 13 years had elapsed from the commencement of the tenancy . And occasions of such please seldom arose for it was always in the hands of the landlords to take care beforehand to determine the lease as well as as to institute the proceedings within 13 years of the excprss or implied grant of tenancy at will. The advent of the Rent Restriction Acts which brought with them the right of a tenant to retain possession of leasehold property after determination of his contractual tenancy increased the importance of distinction between tenancy (even a tenancy at will ) and licence and the older authorities came to be regarded with some caution .