Clauses in Online Rental Leave & License Agreement
Leave and License Agreement is a mutual contract between the Licensor and the Licensee and parties can add terms and conditions that best suit their mutual Agreement. There is no fixed format for this, however, the following are the basic clauses that are covered in the format of online rental leave and license agreements in Maharashtra.
Important Points
Start and End Date –
Parties should mention the start and end date to fix the duration of the Agreement. The first clause of the Leave and License Agreement should outline the duration of the agreement. It confirms that the licensor, who is the owner of the property, is granting the license to the licensee, who is the tenant, to occupy the licensed premises for a specific period of months. This period can be between one month to 60 months. It also states that the agreement does not create any tenancy rights or any other rights, title, or interest in favor of the licensee. Further, this clause mentions that the agreement is revocable, meaning that the licensor can cancel the agreement at any time. This clause sets the foundation for the agreement and establishes the period of the license, making it clear for both parties.
License Fees (rent) and Increment –
Parties should mention the License Fees, the due date for its payment, and the penalty in case of nonpayment within the due date. There is no standard practice or rule for the increment. It depends upon the party’s mutual understanding. Ensure that both parties are clear on the increment to avoid future problems.
This clause is important as it shows the amount of money that the Licensee must pay each month toward rent. The compensation amount is either a fixed amount per month for the entire period of the license or is divided into different amounts for different periods. The deposit amount, on the other hand, is a refundable or non-refundable amount that the Licensee must pay at the beginning of the agreement. This amount is meant to cover any damages that may occur to the licensed premises during the Licensee’s occupancy. As per this clause, the compensation amount must be paid within the first five days of each month of the license.
Delay in rent –
Parties can mutually decide the penalty and consequences if there is a delay in the payment of monthly compensation, like the owner’s right to cancel the agreement without notice if the tenant continues to delay in payment for certain months.
Payment of Deposit –
This clause outlines the amount and the payment method for the deposit, which is a necessary component of the Leave and License Agreement. Here, the parties have the option to choose between cash payment, demand draft, cheque, or online transfer. The amount of the deposit, as well as the details of the payment method, will be specified in this clause. The method of payment will be selected by the parties while entering into the agreement, ensuring that the payment process is clear and unambiguous for both the Licensor and the Licensee.
Duration of the Agreement –
As per the law Leave and License Agreements can be done for up to 5 years. Avoid choosing 11 months duration as there is no logic in choosing that duration if the agreement is going to be registered. If Licensee is intending to live for a longer duration and Licensor also does not have any objection then the duration can be extended. A longer duration is beneficial for both parties as it saves processing costs and future work.
Maintenance Charges –
This can be borne by any party, again it depends on the mutual understanding of the parties.
The “Maintenance Charges” clause of the agreement clarifies the responsibility for paying various fees and charges related to the property. For example, parties can decide that the Licensor is responsible for paying all fees and charges, including maintenance charges, rates, taxes, levies, assessments, and non-occupancy charges, or that the Licensee is responsible for paying the maintenance charges, while the Licensor is responsible for paying all other fees and charges. This clause will depend on the parties’ agreement.
Other Charges –
Other charges may include piped gas, water, etc. parties should be clear on the responsibility of payment of these charges. Usually, the licensee is responsible for paying these bills directly and must provide the original receipts to the licensor to show proof of payment.
Use of Premises & Recovery of Damages –
In this clause, Licensor can impose conditions regarding the use of the premises like the licensee’s responsibility not to create any nuisance, illegal activities, etc.
It specifies that the premises can only be used for either residential or non-residential purposes, depending on the choice made by the parties. The clause also mentions that the licensee is responsible for maintaining the condition of the premises and for repairing any damages caused by them, except for normal wear and tear. Furthermore, the clause prohibits the licensee from engaging in any activities that may cause a nuisance to others or violate state or central government laws. Further, parties can decide the way of recovery of damages in case of any damage done by the Licensee, etc.
Internal and External Alteration
In this clause, parties can outline the restrictions on the alterations that the licensee may make to the licensed premises. For example, parties can mention in the agreement that the licensee is not allowed to make any changes or additions to the construction or arrangements of the licensed premises without obtaining prior written consent from the Licensor.
No Tenancy –
This clause restricts the Licensee to transfer, assign, and sublet or grant any license or sub-license, raising a loan against the property or mortgage. This clause can be specified like this – that the licensee shall not assert any tenancy rights over the licensed premises and shall not have the right to transfer, assign, sublet, or grant any license or sub-license with regard to the licensed premises or any part of it. The licensee also cannot mortgage or secure any loan against the licensed premises.
Inspection –
Parties can mention the owners’ or their representatives’ right to inspect the property at reasonable intervals. It states that the Licensor shall have the right of access to the premises either personally or through an authorized representative, with reasonable notice given to the Licensee. This clause ensures that the Licensor can monitor the condition of the premises and ensure that the terms of the agreement are being followed.
Furniture and Appliances –
In this clause, an owner can mention the list of furniture, fixture, and existing condition of the premises and make conditions on the way of the usage of the same and what kind of damages would be restored or compensated by the tenant. Tip: Either parties can take photos of the premises at the time of handing over the possession and share with another party via email. This can minimize the chances of future conflicts.
Lock in Period –
This clause restricts both parties from canceling the Agreement for a specific period, if one party breaks this clause then he will need to compensate to other party. This clause is optional and if added, it sets a lock-in period for the duration mutually agreed by the parties. During this time, neither the Licensor nor the Licensee is allowed to terminate the agreement. In spite of this condition, even if the Licensee vacates the premises before the end of the lock-in period, he will have to pay the Licensor a fee for the remaining time, while if the Licensor asks the Licensee to vacate the premises, he will have to compensate the Licensee for any loss or inconvenience caused.
Cancellation –
Time of notice period from both sides for the cancellation of the Agreement. For example, parties mention this clause like this – Subject to the condition of the lock-in period (if any), the Licensor may revoke or cancel the license by giving one month’s notice, if the Licensee fails to make regular and punctual payments of the monthly compensation or breaches any of the terms, covenants, and conditions of the agreement. Similarly, the Licensee has the right to cancel the agreement and vacate the premises by giving a one-month advance notice in writing. Additionally, this clause also mentions that if any legislation prohibiting the Leave and License is imposed, the Licensor will be entitled to revoke or cancel the license.
Possession –
In this clause, the licensor should mention the penalty and the legal provision in case the Licensee fails to hand over the peaceful possession of the premises after the expiration of the Agreement. This clause sets the terms for the licensee’s vacating of the licensed premises upon the expiration, termination, or cancellation of the agreement. It should state that the licensee must immediately vacate the premises upon the end of the agreement, along with all their goods and belongings. In the event of the licensee failing to do so, the licensor has the right to recover damages or remove the licensee and their belongings from the premises. The rate of damages is specified as double the daily amount of compensation per day. The clause can also mention that the licensor can do this without recourse to the court of law.
Miscellaneous
The Miscellaneous clause allows the parties to add any miscellaneous clauses or provisions that are not covered by the previous clauses in the agreement. This clause provides flexibility and the opportunity for the parties to include any specific terms or conditions that are important to them and unique to their agreement.
Stamp Duty & Registration Cost
This clause specifies who will be responsible for paying the costs associated with registering the agreement with the relevant government authority, the cost includes Stamp Duty and Registration Fees. The clause specifies whether the costs will be shared equally between the licensee and the licensor or if one party will bear all the costs.