Understanding the Purpose of Property Investment
Investing in property serves two primary objectives:
- Purchasing the property for personal use.
- Buying a property with the intention of selling it later for a profit.
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Additionally, real estate investments can generate a steady monthly income through rent, making it a preferred option for financial growth.
The Growing Popularity of Rental Income
A significant number of individuals own multiple residential and commercial properties, renting them out to earn a substantial monthly income. However, landlords often face issues such as delayed rent payments and tenants refusing to vacate the property.
To safeguard property owners, rental and lease agreements have been established. But even these agreements don’t fully protect landlords. This is where the Leave and License agreement comes into play.
What is a Leave and License Agreement?
A Leave and License agreement is a legal contract that grants the tenant permission to use a property for a specified period. It offers more protection to landlords compared to traditional rent or lease agreements.
According to Pradeep Mishra, CMD of ORAM Developments,
“The Leave and License agreement includes specific clauses that ensure the landlord retains complete ownership of the property, minimizing the risk of tenants trying to take control.”
How Does a Leave and License Agreement Benefit Landlords?
- Eliminates Ownership Disputes: Clearly states that the tenant cannot claim ownership of the property.
- Flexible Rental Duration: Can be created for 10-15 days to 10 years, unlike traditional agreements.
- Stronger Legal Protection: If the agreement is not renewed, the tenant must vacate the property immediately.
- Automatic Termination: Becomes null and void if either party dies, unlike lease or rent agreements that continue with successors.
Key Differences Between Rental, Lease, and Leave and License Agreements
| Agreement Type | Duration | Property Type | Ownership Claim Protection | Successor Transfer |
|---|---|---|---|---|
| Rent Agreement | 11 months | Residential | Moderate | Can be transferred |
| Lease Agreement | 12 months or more | Commercial | Moderate | Can be transferred |
| Leave and License Agreement | 10 days to 10 years | Residential & Commercial | Strong | Becomes void if a party dies |
Legal Requirements for Rental Agreements
- All agreements can be made on stamp paper and notarized.
- If the rental period exceeds 12 months, the agreement must be registered with the court.
- Since real estate laws vary by state, registration fees range from 1-2% of the total rental amount.
Which Agreement is Best?
Compared to rent and lease agreements, the Leave and License agreement is the better option for landlords.
As Mishra suggests,
“A Leave and License agreement ensures that ownership rights remain intact and prevents legal disputes over property control. Landlords should always opt for this agreement to secure their investments.”