The essential clauses of leave and license agreement
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Essential clauses
The main essential clauses to the leave and license agreement are as follows:
1. Party clause:
A clause identifying the parties to the agreement is mandatory. Party name clause is an
important clause where the names of the licensor and licensee with their address &
identity proof are mentioned in the clause. There is a need to ensure that the business of
the licensee to be identified and mention the Company Identification Number (CIN), if any
in the commercial agreement.
2. The definitions clause:
This clause gives meaning to the specific and various terms/words mentioned /used in
the agreement for getting clarity about it in the agreement. This clause is a self-
explanatory clause. Like “Premise”, means wherever the word premise is mentioned it will
be understood the same throughout the agreement.
3. Premise/the place of use:
The place used/occupied for residence or commercial use shall be mentioned in detail
with full address describing all sides and borders of the place and also mention the
purpose like in commercial agreement which type of business is going to be carried out. It
should be clearly mentioned in the agreement about the space which should be used
accordingly.
4. Transfer of rights:
This clause is very important as it clearly expresses that the lessor is transferring the
rights of his property to the lessee for a period of time. This clause contains the main
purpose of this agreement and is also imperative to the agreement.
5. Rent and Security deposit:
This clause tells us about the security amount and rent amount clause. Rent is the
consideration which is mutually decided by both parties and sometimes in commercial
agreement along with the base rent the party has to share the profit percentage with the
other party.
The security deposit is to be paid in the context of any dispute/default arising out of the
agreement by the lessee to the lessor as security. This should be ideally paid after the
agreement is signed by both parties and returned at the end of the tenure.
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6. Tenure of the Agreement:
The tenure is mostly fixed for 11 months and it is to be mentioned clearly. However, in
commercial agreement, the term may be longer and mutually as decided.
7. Duties and obligations of both parties:
The duties and obligations of both parties related to this Agreement shall be mentioned
clearly in this clause. Both parties are legally bound to follow the terms. The duty of the
tenant is to take care of the property very well, maintain peace, law and order in the
place, pay the rent on time etc. The duty of the landlord is to provide proper facilities like
water and electricity to the tenant in the premises for the period of the tenure.
8. Termination:
The way of termination is mentioned in this clause and also about how the notices shall
be served and it can be either terminated by both or either of the parties. After or before
the termination both parties can mutually decide for the extension/renewal of the
agreement.
9. Dispute resolution:
This clause is the most important in the event of any dispute arising out of the agreement
or during the tenure. This clause provides the means of dispute resolutions. Arbitration,
Conciliation and way to court are the most common ways to dispute resolution.
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