Leave & License vs Rent Agreement — Which to Use

A leave and license agreement gives the occupant a personal permission to use the premises without creating any interest in the property, while a rent agreement (lease) transfers a legal interest in the property to the tenant. The practical consequence: a licensee is far easier to evict, gains no tenancy protections, and in Maharashtra the leave and license format is compulsorily registrable — which is why Mumbai landlords use it almost exclusively.

If you are drafting an agreement in India in 2026, the choice between lease and license changes your eviction position, stamp duty, registration duty and even how rent-control law applies. This guide explains the legal difference in plain language, compares the two formats clause by clause, shows which states push you toward which format, and tells you when each one is the right tool. You can generate either format online with state-correct clauses in about ten minutes.

Leave and license agreement vs lease: the legal core

The two documents come from two different statutes. A lease is defined by Section 105 of the Transfer of Property Act, 1882: a transfer of the right to enjoy immovable property for a term, in exchange for rent. A license comes from Section 52 of the Indian Easements Act, 1882: a right to do something on another's property that would otherwise be unlawful — with no transfer of interest at all. Courts look past the title of the document to its substance: the touchstone is exclusive possession and intention. If the occupant has exclusive possession, pays rent, and the owner cannot enter at will, a judge may treat a "license" as a lease regardless of its heading.

Stamp duty and registration: the state-by-state reality

Cost and compliance often decide the format in practice. Three patterns dominate:

Note the asymmetry: in Maharashtra even a 3-month license needs registration, while in Delhi an 11-month lease typically does not. Duty and fee amounts change with state budgets — verify current rates on your state's registration portal before executing; the legal text of the Registration Act itself is available on India Code, the government's statute repository.

Which format protects whom

For landlords, license format is the defensive choice: no interest passes, revocation is cleaner, rent-control statutes that protect "tenants" are less likely to attach, and in Maharashtra the registered license record itself deters overstay. The main landlord mistake is behaving like a lessor while holding a license document — granting exclusive possession, never inspecting, auto-renewing for years. Substance beats label, and a court can re-characterise the arrangement.

For tenants/licensees, a lease is stronger: it survives a sale of the property, supports longer notice periods, and grounds statutory protections. If you accept a license — which is simply the market norm in Mumbai — protect yourself contractually instead: a fixed license term with a lock-in for the owner, a clearly capped and refundable deposit (pair this with the rules in our security deposit guide), notice period symmetry, and a registered document so the terms cannot be disputed later. Whichever format you use, the clause set matters more than the label — our checklist of must-have rent agreement clauses applies to both.

Choosing in practice: five scenarios

• Residential flat in Mumbai or Pune: leave and license, e-registered — this is both the legal requirement and the market standard.
• Residential flat in Delhi/Bengaluru/most cities, up to 11 months: conventional rent agreement on stamp paper; register it voluntarily if the deposit is large or the relationship is high-stakes.
• PG, co-living or serviced room: license fits the reality — shared access, house rules, no exclusive possession.
• Commercial premises, multi-year: registered lease with lock-in and escalation clauses; a license here would leave the business's occupancy too fragile.
• Family/friend informal stay with payments: put a license in writing anyway — informal "he's just staying" arrangements generate the messiest possession disputes of all.

Execution checklist for either document

Get the parties' full names and IDs, exact premises description, term, rent, deposit, notice period, maintenance split, and permitted use into the document; execute on correct stamp value; register where required or prudent; and complete tenant police verification where your state or city mandates it (our police verification guide covers the process city by city). Keep one signed original per party. And when the term ends, renew formally rather than letting the occupant hold over — a lapsed license followed by years of accepted rent is exactly how licenses mutate into contested tenancies. Both formats, drafted with your state's requirements built in, are available in our agreement generator.

Stamp duty on license agreements: the calculation logic

Where license agreements are stamped, the duty base usually differs from a lease. Maharashtra's formula for leave and license charges 0.25% on the total rent for the term plus a notional interest component on the refundable deposit plus any non-refundable premium — meaning a high deposit raises duty even though the money returns to the tenant. For a typical Mumbai flat at Rs 40,000 rent with a Rs 2,00,000 deposit on a 24-month term, the combined stamp duty and registration fee generally lands in the low thousands of rupees, and the online e-registration process completes with Aadhaar-based biometric verification without either party visiting an office. Split the cost contractually — the market convention is 50:50 or landlord-pays, but the law only cares that it is paid. Under-stamping is the trap to avoid on both formats: an insufficiently stamped agreement attracts penalty multiples when produced in court, exactly when you need the document most.

This article is general information, not financial, tax or legal advice. Figures are approximate and change over time — always verify with a qualified professional or the official source before making a decision.

Written and reviewed by the Rent Agreement Generator editorial team. Facts checked against primary sources; see the reference above.

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