A Lease, defined under Section 105 of The Transfer of Property Act, 1882, is a transfer of the

right to enjoy the concerned property for a pre-defined time period or in perpetuity. The
lessor (owner of the property) gives the lessee (the one leasing the property) such
consideration periodically, usually at the beginning or end of a lease agreement.

License is defined in Section 52 of the Indian Easements Act,1882. License does not allow
any interest in the premises on the licensee's part. It merely gives the licensee the right to use
and occupy the premises for a limited duration.
Decisions of the Supreme Court in Associated Hotels of India Ltd. vs. R.N. Kapoor [AIR
1959 SC 1262] summed the concept of License as under:

“… Under the aforesaid section, if a document gives only a right to use the property in
particular way or under certain terms while it remains in the possession and control of the
owner thereof, it will be a license. The legal possession, thereof, continues to be with the
owner of the property, but the licensee is permitted to make use of the premises for a
particular purpose. But for the permission, his occupation would be unlawful. It does not
create in his favour any estate or interest in the property.”

It important to take note of essential features of license as under:

1. A license is not connected with the ownership of land / property but creates only a
personal right or obligation;
2. A license cannot be transferred or assigned;
3. License is purely permissive right arising only by permission, express or implied,
and not by adverse exercise or in any other way;
4. It only legalize a certain act which would otherwise be unlawful and does not confer
any interest in the property itself in or upon or over which such act is allowed to be done;

In a Leave and Licence Agreement, the juridical possession of the premises is deemed to
remain with the licensor and the licensee is said to be in constructive possession of the said
premises. Thus a leave and licence does not create any interest in the premises in favour of
the licensee but gives the licensee the mere right to use and occupy the premises for a
temporary period.

Transfer of Interest in lease agreements and no transfer of interest in the property in leave and
license agreement.

In deciding whether to give out premises on leave & licence basis some of the factors to be
considered are as follows:
— Possession: In a leave and licence agreement, the owner is deemed to be in
legal or judicial possession of the premises and the licensee is in constructive
possession of the premises.
— Income Tax: In a leave and license agreement the owner has to pay the
applicable rate of tax.
— Municipal Tax: In a leave and license agreement the Municipal Authorities may charge
taxes as applicable in the area and if there is a security deposit amount sometimes the
Municipal Authorities may calculate a notional interest on the securities deposit amount and
charge tax thereon.

A lease is unaffected by the transfer of the property by sale in favour of a third party. It continues and the purchaser
has to wait till the time period for which the tenancy was created is over before he can get the possession, whereas, in
case of a licence, if the property is sold to a third party, it comes to n end immediately.

. A lease is both transferable and heritable, a sub tenancy can be created by the tenant and on the death of the tenant,
the tenancy can be inherited by his/her legal heir, whereas, licence is neither transferable nor heritable.

4. A licence comes to an end with the death of either the grantor or the garantee, since it is a personal contract, but a
lease does not comes to an end on either the death of the grantor or grantee.