FAQ – Rent Leave & License Agreement in Maharashtra

Listen to the audio file

What is a Leave and License Rent Agreement? 

In Maharashtra, the Leave & License Agreement more commonly known as Rental Agreement is a contract between the Licensor (Property Owner) and Licensee (a person taking property on license). It mainly contains the terms and conditions regarding starting and ending date, total duration, deposit, monthly compensation, lock-in period, usage of premises, the notice period for termination, list of furniture and fixture and maintenance of the same, etc.

In this contract or agreement, no rights get transferred that is why it is called a license. By this contract the property owner (Licensor) allows the tenant (Licensee) to use the premises, but the licensee does not get any kind of rights in the property, for example – The licensee can not sub-let the premises or he can’t take any loan on the property.

Section 52 in The Indian Easements Act, 1882 provides the definition of License – “Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license.”

To avoid any future problems, property owners and tenants should register their Leave and License Agreement / Rental Agreement and submit the tenant’s information to the nearest Police Chowki. Now for some places in Maharashtra, the department of registration have provided an option to submit the tenant’s information to the concerned police station while submitting the leave and license / rental agreement online.

Registration of Leave and License Rent Agreement

When a citizen registers the Leave & License / Rental Agreement, the Registration Office stores a soft copy of that agreement with one unique registration number. This Agreement is accessible to anyone at any time online.

What are the benefits of a registered Leave and License Agreement?

1. The duration of the agreement can be up to 60 months,
2. One copy of the agreement gets stored in the Government Database which can be accessed online with the unique document number,
3. It is a more authentic document in case of any dispute between the parties,
4. The licensee can use it as valid address proof.

Stamp Duty, Registration & DHC Charges in Maharashtra

Stamp Duty

Currently, the Stamp Duty is 0.25% on the total profit of the property owner.

Example 1 – suppose the monthly rent/license fees is Rs. 10,000/-, the duration of the agreement is 2 years and a refundable deposit is Rs, 50,000/-. The government considers approximately 10% yearly profit from the refundable deposit, in this case, it will come to around Rs. 10,000/-. So the total amount to consider for the Stamp Duty calculation is Rs. 2,50,000/-. i.e. Stamp Duty comes to around Rs. 625/-.

Example 2 – Suppose the monthly rent/license fees is Rs. 20,000/-, Refundable Deposit is Rs. 60,000/-  and the Duration of the Agreement is Two Years/24 Months. Total rent/license fees received by the Licensor will be Rs. 4,80,000 and the Government considers around 10% of the Refundable Deposit as a profit per year i.e. around Rs. 12,000/-. So, the total Stamp Duty is applicable on 4,92,000/- i.e. Stamp Duty comes around Rs. 1,230/-.

Registration Fees

The duration of the Agreement does not matter here. If the rented/licensed premises is located in the Corporation or Municipal, then Rs. 1,000/- Registration Fees are applicable, and if the rented/licensed property is located in the Rural Area then Rs. 500/- Registration Fees is applicable.

Document Handling Charges

The Registration Department has recently introduced these charges. It does not matter whether the property is located in a Corporation, Municipal or Rural area. Document handling charges of Rs. 300/- will be applicable per the Online Registration of Leave & License Agreement. For the Offline Registration Process, the Document Handling Charges will be Rs. 10/- Per page.

Online vs Offline vs Notary Leave & License Rent Agreement

The only difference is the type of process (online, offline and notary), there is no difference in terms of Legal value. In the online process, parties submit the agreement in soft form and then that agreement goes to the sub-registration office for approval. In the offline process, parties submit the agreement in hard form in person by visiting the sub-registration office and one copy of the Agreement gets stored in the Government Database with a unique registration number. In the Notarization an authorized Notary witnesses the execution (signing) of the Agreement by the parties and keep a short record in his register with one unique number.

Registration Process of Leave and License Rent Agreement

There are 2 ways to register a Leave & License / Rental Agreement in Maharashtra. First is the online process, The Government has provided an online facility to submit the Leave and License Agreement online and there is no need to visit the Registration Office for the same. The second process is offline where parties will need to prepare a Leave and License Agreement on hard paper and then visit the Registration Office for offline Registration. The outcome of both processes is the same.

Online Registration Process

The Department of Registration and Stamp has developed an online registration facility for citizens in Maharashtra. By using this facility citizens can prepare the Agreement online, execute it online and submit it online for Registration. Once the agreement gets submitted, the Sub-Registrar cross-checks the correctness and gets it registered. Once this process is done, users can download the agreement from the website directly.

The steps involved in this process are –

1. Creation of login and entering the required information like details of Parties, Witnesses, Stamp Duty, Registration Fees, and other Terms and Conditions, etc.
2. Online Execution of the Agreement (Capturing Photo and Thumb of all the Parties and Witnesses),
3. Online Admission by all the Parties and Witnesses (Biometric Verification with Aadhaar Data),
4. Online Submission for the Registration Process.

Once the document is submitted for the online registration process, it takes up to 3 working days to get it registered.

Offline Registration Process

This is a traditional way of doing the registration where Parties need to visit the sub-Registration office. Following are the steps in case parties want to go with this option –

1. Drafting a  Leave and License Agreement on the hard paper,
2. Attaching required Stamp Duty and Registration Fees and Photos, Identification Proof of all the parties,
3. Executing the Agreement by parties and two witnesses (All parties should fix a photo and sign the Agreement, witnesses photos are not required),
4. Getting an appointment in the Sub-registration Office,
5. And finally, visiting the sub-Registration office at a given time for the Registration Process.

In the offline process Agreement immediately gets registered.

Note: Aadhaar Card is compulsory for online registration and for offline registration ID Proof such as PAN Card, Passport, etc. is acceptable.

Is it compulsory to register a Leave and License Rent Agreement?

Yes, it is compulsory to register a Leave and License Agreement as per Section 55 of THE MAHARASHTRA RENT CONTROL ACT, 1999 if the duration of the agreement is equal or exceeds 12 months duration. If the duration of the Leave and License Agreement is less than 12 months then registration is optional and parties can get it notarized.

Is 11 months duration compulsory?

Keeping an 11-month duration for a Leave & License Agreement is not compulsory. Most people have a misconception that the Leave & License Agreement can be made for the duration of 11 months only, it can be registered for a period of up to 60 months.

Why do most people choose 11 months duration?

As per Section 17 (d) of the Registration Act, leases of immovable property for any term exceeding one year, or reserving a yearly rent/license fees should compulsorily be registered. Due to this rule, it became a practice to choose 11 months duration to avoid the registration process.

This duration is not mandatory, but, if parties do not want to register the Leave and License agreement then they can keep 11 months duration, pay the required Stamp Duty and get the Agreement Notarized.

Disadvantages of 11 months Agreement

Most of the time Landlord increases the monthly compensation after 11 months instead of one year. It also costs more because parties have to pay registration fees and lawyer consultation/services provider’s charges while renewing the agreement every 11 months.

Advantages of Longer Duration Agreement

The registered agreement can be done for 60 months duration. So, it is beneficial in terms of cost and time if parties choose a longer duration. To understand this we have to divide the cost in three parts i.e. Government Stamp Duty, Government Registration Fees, and Service Provider fees. If parties choose a longer duration then there will be an increase in only Government Stamp Duty. for Example – Suppose if an agreement is done for 11 months and the Government Stamp Duty comes around Rs. 300 + Government Registration Charges are Rs. 1000 + Service Providers Fees is Rs. 1500, total Cost will come around Rs. 2800. Now the same agreement can be done for the duration of 22 months and the total cost will come to around Rs. 3100

Rent increment clause in longer duration agreements

Even if the Parties choose to keep an agreement for a longer duration they can mutually decide the condition of the rent/license fees increment and mention the same in the agreement. e.g. 7% increase in the rent after every 12 months.

What is the locking period in the Leave & License Rent Agreement?

The Lockin period is a mutually decided duration between the parties under which parties are restricted to break the agreement. If any party breaks the agreement before the completion of this duration then that party will need to compensate the other party.

Is it compulsory to submit tenant information in Police Chowky?

Ans: Yes, now the Registration Department in Maharashtra has integrated this process into the eRegistration website. Now, while online registration of Leave and License Agreement the citizen has to submit the tenants’ information by default. It can be done offline by visiting police Chowky or on the website of Maharashtra Police too.

Required Information for Leave & License & Police Verification

1. Images of PAN and Aadhaar of Owner/s,
2. Images of Aadhaar of Tenant/s,
3. Image of Electricity bill OR Index II OR Tax Receipt of rented/licensed premises,
4. Images of Aadhaar of two Witnesses.
5. Agreement Duration and Start Date,
6. Deposit amount (Transferor Bank Name, Date, Transaction No or Cheque No),
7. Monthly Rent/license fees & Increment,
8. List of Furniture and Appliances.

Online Commercial Leave & License Rent Agreement

For online registration, an Aadhaar Card is compulsory as while submitting the agreement parties should verify their identity by giving thumb impressions which pulls the data from the Aadhaar Card Database. Besides the Aadhaar Card, PAN Card of Licensor is Mandatory. Other documents may be required in case parties are Proprietorship, Partnership Firm, Limited Liability Partnership, Public Limited Company, Private Limited Company, Joint Venture, Trust, Co-operative Society, Hindu Undivided Family (HUF), Limited Company, Society Limited.

Proprietorship – Required Documents

1. PAN Card and Aadhaar Card of Licensor/s (Owner of the property),
2. Aadhaar Card and/or any ID Proof of Licensee/s (Proprietor),
3. Aadhaar Card and/or any ID Proof of two Identifiers,
4. Electricity Bill OR Index II OR Tax Receipt of the Licensed Premises 

Additional Documents required for Company, & firm

You will require Index II or Tax Receipt or Electricity Bill of the Licensed Premises and the following documents of the Parties.

In case the Party is a Company – Board Resolution, Company PAN and CIN Numbers, Aadhaar of Authorized Signatory.

In Case the Party is a Partnership Firm – Partnership Deed, Authority Letter, PAN Card Number of Partnership Firm, Aadhaar of all Partners or Aadhaar of Authorized Partner.

Note: Aadhaar Card is Mandatory for the Online Registration Process, for Offline Process any ID Proof of the party is acceptable.

Who keeps the original copy of the agreement?

This question arises when parties choose to register an agreement offline and it depends upon mutual understanding. In the online registration process, the soft copy gets generated and there is no such thing as an original or photocopy.

The difference in Lease and Leave & Lease Agreement

The basic difference is, in the Lease Agreement certain rights get transferred to the tenant (except property selling rights) for certain duration, eg. right to sub-let, right to take a loan, etc. In the Leave and License Agreement licensee gets the right to use the premises for his residential or commercial use only, the licensee can not transfer the license to another person or he can not sub-let the premises.

For the Lease deed, the Stamp Duty is calculated on the basis of property government valuation, rent, and the duration of the agreement. For the Leave and License Agreement, the Stamp Duty is calculated on the basis of total license fees and deposit. How do I evict a licensee in India?