Difference Between Lease and License
Difference Between Lease and License
1. Meaning
Lease
A lease is a transfer of interest in immovable property from the owner (lessor) to another (lessee) for a certain period, at a certain rent, giving the lessee the right to exclusive possession.
Governing law: Transfer of Property Act, 1882 (Sec. 105–117).
Key element: Transfer of interest in property.
License
A license is a permission granted by the owner (licensor) to another person (licensee) to do something on the property which would otherwise be unlawful, without transferring any interest in the property.
Governing law: Contract Act, 1872 (Sec. 52) for permission; not governed by Transfer of Property Act.
Key element: No transfer of interest, only a personal right.
2. Essentials / Characteristics
| Feature | Lease | License |
|---|---|---|
| Nature of Right | Transfer of interest in property | Mere personal permission |
| Exclusive Possession | Yes – Lessee can exclude everyone including the lessor (except agreed conditions) | No – Licensee has no exclusive possession, owner can enter anytime |
| Transferability | Usually transferable unless restricted by agreement | Not transferable; personal to licensee |
| Duration | Usually for fixed period | Usually for short duration; can be revoked anytime |
| Consideration | Rent or money consideration | Usually fees or rent, but sometimes gratuitous |
| Governing Law | Transfer of Property Act, 1882 | Contract Law (Indian Contract Act) |
| Right to Sublet | Yes, if permitted by lease agreement | No right to sublet; only personal permission |
| Interest in Property | Creates legal interest in property | No legal interest; only personal right to use |
| Eviction / Termination | Requires legal process under Rent Control / civil law | Can be revoked at any time as per agreement or reasonable notice |
3. Key Differences Explained
Exclusive possession – In lease, lessee gets exclusive possession; in license, licensee can be asked to vacate anytime.
Transfer of property interest – Lease transfers a proprietary interest, license does not.
Right to sue for possession – Lessee can sue for possession in case of wrongful eviction; licensee cannot.
Duration – Lease is generally longer, license is short-term.
Legal protection – Lessee has statutory protection (Rent Control Acts, TPA), licensee has only contractual protection.
Revocability – Lease is not revocable during term except breach; license can be revoked anytime with reasonable notice.
4. Case Laws
**(i) Harbans Lal vs. Union of India (1968, SC)
The Supreme Court held that exclusive possession is the hallmark of a lease, and mere permission to use property does not create tenancy.
**(ii) T.P. Muthuswami vs. Union of India (1970, SC)
Court clarified that a license cannot be assigned, whereas a lease (unless restricted) can be assigned or sublet.
**(iii) K.K. Verma v. State of Delhi (1995, Delhi HC)
Delhi HC emphasized that license is revocable at any time, even if consideration is paid; whereas a lease creates legal estate which cannot be terminated arbitrarily.
**(iv) C.P. Sarathi vs. State of Kerala (2004, SC)
SC held that exclusive possession and transfer of interest distinguishes lease from license, irrespective of what the parties call the agreement. Courts look at substance over form.
**(v) B.K. Verma v. Union of India (2002)
Court reiterated that licensor can enter property at any time, but lessee cannot be disturbed in possession during lease term.
5. Illustrations
Lease Example: A rents out his flat to B for 11 months at ₹20,000/month. B has exclusive possession and can exclude A. B is a tenant.
License Example: A allows B to run a canteen on his property and collect fees. B cannot prevent A from entering. B has a license.
6. Key Legal Principles
Exclusive possession is decisive – If the occupant has exclusive possession, it’s a lease; otherwise, a license (Harbans Lal case).
Substance over form – Courts look at rights and obligations, not the label “lease” or “license” (C.P. Sarathi case).
Revocability – License can generally be revoked anytime; lease cannot be terminated arbitrarily during term.
Transferability – Lease interest is transferable/sublettable; license rights are personal and non-transferable.
7. Conclusion
Lease = Transfer of interest in immovable property + exclusive possession + fixed term + statutory protection.
License = Mere permission to use property + no interest transferred + revocable + personal right.
Courts always look at the substance: possession, control, duration, and legal interest to decide whether it’s a lease or license.
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