Navigating Leave & License Agreements in Mumbai: Key Considerations

In Mumbai, property rentals are predominantly managed through Leave & License Agreements. This arrangement allows the Licensor (Owner) to grant the Licensee (Tenant) permission to use the property temporarily without transferring any legal interest or exclusive possession.

If you are a Property Owner, Broker, or prospective Tenant looking to rent a property, it is crucial to discuss the following aspects to ensure a smooth transaction:

1. Duration of the Agreement:   – Decide on the term of the Leave & License Agreement, whether it be 1 year, 2 years, or up to the maximum of 5 years (60 months). Beyond this period, a new agreement must be executed.

2. Clearance of Dues:   – Ensure all previous maintenance and utility bills are settled before renting out the property. Licensees can request copies of the last paid bills for verification.

3. Agreement Dates:   – Confirm the Start Date and End Date of the Agreement to avoid any confusion.

4. Lock-in Period:   – Agree on a lock-in period during which neither party can terminate the Agreement unless there is a breach of terms.

5. Security Deposit:   – Determine the Interest-Free Security Deposit (IFSD) amount. In Mumbai, owners typically demand a deposit equivalent to 6 months of license fees, though this can sometimes be negotiated up to 4 for residential and smaller commercial properties.

6. Rent Escalation:   – Agree on the percentage increase in the License Fee annually.

7. Notice Period:   – Establish a notice period for terminating the Agreement. This period generally applies after the lock-in period ends.

8. Condition of Premises:   – Specify whether the premises are furnished, semi-furnished, or unfurnished. Both parties should list all furniture and fixtures in the Agreement and document them with photos or videos for clarity.

9. Handover Condition:   – Outline how the premises should be returned to the Licensor. While normal wear and tear is typically acceptable, any damage must be repaired by the Licensee at their own cost.

10. Refund of Deposit:    – The Licensor should return the security deposit (without interest) upon termination or expiration of the Agreement. Any outstanding payments can be deducted from the deposit. Additionally, the Licensor may retain a portion of the deposit to cover pending bills, which should be returned to the Licensee once these are settled.

Compare listings