All About Leave And Licence Agreement In Pune
In a city like Pune, purchasing a place to set up a new business can cost a considerable amount. This in turn can dramatically impact the budget set aside for the business and put a financial strain on the entrepreneur before even starting the new business. But this ‘burden’ can be easily avoided by renting out a premise from where the business can be carried out.
In fact, renting an office space or commercial property is beneficial for the business in several ways as it provides more flexibility to the entrepreneur, as compared to when purchasing a business premise, because the business owner is not attached to the property for a long term. And renting or leasing an office space even saves a considerable amount, not just for purchasing the property but also taking care of the repairs, maintenance, taxes, insurance and other expenses for its upkeep. These saved resources can be used productively for setting up the business.
Renting and leasing a business space rather than purchasing it, is a wise business move, especially for new businesses and entrepreneurs who are just starting off. While there is a list of things to consider while starting a new business, one of the main documents required while renting a place for the business is the Leave and License Agreement.
What Is Leave And Licence Agreement?
A Leave and License Agreement is an agreement wherein the licensor temporarily allows the licensee to use and occupy licensor’s immovable property, either full or a portion of it, for the purpose of carrying out business activity or for residential use. A Leave and Licence Agreement is also known as a Rent Agreement.
The Rent Agreement can also be described as a legal document that binds both the parties to their obligations and also provides rights to them. It gives the right of “occupying the property” to the tenant/lessee and the right to receive a mutually agreed “Rent” to the owner/lessor. It is of utmost importance that the rental agreement clauses be mentioned explicitly and make the deal crystal clear.
What Is The Need For A Leave And Licence Agreement?
When starting a new business in the city, it is advisable to draft and register for a Leave and Licence Agreement in Pune. The procedure to register is the same throughout the State of Maharashtra.
The drafting and registration of the Rent Agreement is needed because it gives the landlord and the tenant legal rights. Also, the Rent Agreement helps set conditions on the occupant with respect to the use of the property, the term, the rent amount and other such conditions. In addition, mentioning different clauses or terms and conditions, after mutual agreement,
eliminates any chance of dispute or disagreement at any point in time. Both the parties are at ease and are aware of their rights and limitations.
And lastly, a registered Leave and Licence Agreement acts as an address proof which is accepted by various organisations.
Leave and License Agreement in Pune
Businesses need to draw a Leave and Licence Agreement in Pune when leasing an office space. But before drawing the Agreement, entrepreneurs need to be aware of the clauses that need to be entered in the Rent Agreement and what each Clause implies.
However, one important pointer to consider before entering into a Lease or Rent Agreement is that it is vital to decide the name of the business, finalise and form the business entity, such as a Sole Proprietorship or a Partnership Firm or a Company or LLP. This is because the Rent Agreement will be entered in the name of the business and details of the entity such as the type of entity, the address of the entity etc. also need to be mentioned in the Rent Agreement.
- Clauses of the Rent Agreement
- Security Deposit
- Tenants in majority of the cities in India, including Pune, follow the practice of keeping some amount as a ‘Security Deposit’ with the lessor or owner of the property. This amount is generally ‘X’ number of times the monthly rent. However, the amount can be discussed between the parties.
- It is advisable to mention in the Agreement that in case the tenant/licensee defaults in payment of rent and/or damages the property, the owner/lessor has the right to recover such amount from the security deposit.
- Use Of Rented Property
- The purpose for which the property has been rented/leased should be specified in the Rent Agreement.
- Also, the clauses relating to quiet possession, surrender of property, etc should be included in the Agreement. Additionally, clauses relating to sublet and/or assign the property, as well as alterations in the property should also be included in the Agreement.
- Payment Of Rent
- The exact amount and the due date of payment of the rent should be mentioned in the Agreement. Which means whether the rent will be paid at the start of the month, that is, in advance, or paid after the month is over must be specified in the Agreement.
- Agreement Period
- The Agreement period is generally kept as 11 months and is mentioned in the Rent Agreement. In case there is any lock-in period, that should also be mentioned. The lock-in period is the date until which both the parties cannot terminate the Agreement unless otherwise specified in the Agreement.
- There can also be a provision that either party may terminate the Agreement upon prior written notice to the other party which must be mentioned in the Agreement.
- Maintenance Or Society Charges, Government Taxes Or Any Other Charges
- The Agreement should mention who will pay the monthly charges such as maintenance or society charges, parking charges, electricity charges, gas pipeline bill etc.
- Also, who will be liable to pay Property Tax or Municipal Tax must be mentioned in the Agreement.
- The responsibility of who will bear the cost of damage to the property should be mentioned in the Agreement.
- Renewal Of Agreement
- The provision for renewal should be made in the Leave and Licence Agreement.
- Dispute Resolution
- The place, governing law and mode of dispute resolution should be specified in the Leave and Licence Agreement.
- Security Deposit
- Clauses of the Rent Agreement
How To Draft The Leave And Licence Agreement?
- Drafting And Registering The Agreement
- The Leave and Licence Agreement in Pune can be drafted online by first viewing a sample copy. The legal experts at deAsra can help with the online drafting of the Rent Agreement.
- The next step is the registration of the Leave and Licence Agreement draft. The draft can be self registered online by visiting the site- https://efilingigr.maharashtra.gov.in/ereg/
- Apart from online application and registration, applicants can also visit the Registrar’s office in Pune to file for Registration of Leave and Licence Agreement.
- Alternatively, team experts such as those at deAsra can also help with the registration of the Agreement for any business or Agreement drafted for premises within the State of Maharashtra.
- Post the draft, the next step for the registration is to undergo a biometric and verification process. Since the form requires first for the applicant to login, create an id and fill in several forms,the preferred procedure is to register the Rent Agreement online via or with the help of third party experts such as deAsra.
- Documents Required
The documents required while drafting and registering for Lease and Licence Agreement in Pune are listed here. The drafting of the Rent Agreement is the same throughout the country.
- The address proof and identity proof of all the parties (PAN and Aadhar are mandatory)
- The address proof and ownership proof (e.g. Index II, electricity bill etc.) of the premises to be rented or given on lease.
- The passport size photograph of all the parties (only in the case of individuals).
- Based on the constitution of the business of the parties following additional documents are required:
- Partnership firm – Registered Partnership Deed
- Limited Liability Partnership (LLP) – LLP Agreement
- Private Limited Company, Public Company and OPC – Certificate of Incorporation, MOA and AOA, Board Resolution permitting the renting of premises
- Trust – Trust Deed
- Co-operative Society – Copy of by-laws
- The Agreement should be executed on a stamp paper of appropriate value.
- Information required
- The detailed address of the premises
- The details of the owner (s) of the premises (Address, name etc.)
- The details of the occupant, that is, the business occupying the premises on rent/lease (Name, address, etc).
- The duration of lease/rent
- The lease/rent amount
- The security deposit amount
- The identity proof and address proof of the owner(s)
- The PAN of the business (however in case of Proprietorship concern PAN of the Proprietor is sufficient)
- The identity proof and address proof of the representative(s) of the business (representative can be the proprietor, partner, or director)
- The address proof of the premises (Sale Deed or Index II)
- The passport size photos of the owner and representatives of the business
What If The Rent Agreement Is Not Registered?
The Rent Agreement is necessary as well as vital documents that need to be registered. In fact. it is mandatory to register such an Agreement if the tenure of the Leave and Licence Agreement exceeds a period of 12 months or a year. Therefore, agreements wherein the tenure are less than 12 months or a year are not mandatorily required to register. However, registration gives all the parties legal rights, hence, it is advisable to register the Leave and Licence Agreement. Usually, the landlord is responsible for registering the document while tenants typically bear the monetary charges.
If, however, both the parties do not register a Rent Agreement with the authorities, they are liable to pay a penalty which can be as high as ten times the original amount of registration.
These are the crucial pointers to be known while drafting and registering a Leave and Licence Agreement in Pune.