A landlord, a coworking operator or a virtual office provider hands you a document headed Leave and Licence Agreement. It looks like a rent agreement. It calls the parties licensor and licensee instead of landlord and tenant. It runs for eleven months, or sixty. Somebody asks whether it is “as good as” a lease, and whether the GST officer will accept it.
The short answer is that a lease and a licence are two different instruments under two different Acts, and the difference is one line long: a lease transfers an interest in the property to you; a licence gives you permission to use it. Everything else — whether you can sublet, how it ends, what happens if the building is sold, whether it must be registered — comes out of that line.
This guide is for founders, operations and finance teams who have been handed such a document. It covers the definitions, a comparison with a lease, the Maharashtra rules that make registration compulsory, the eleven-month convention, the clauses that matter to a business, and how GST and MCA treat the document as address proof. Where a rule comes from an Act, the section is named. Positions are stated as of September 2026.
What a leave and licence agreement actually is
“Leave” here is the old sense of permission — as in “by your leave”. A leave and licence agreement is a written permission from the owner of premises (the licensor) allowing another person (the licensee) to use those premises for a stated purpose, period and fee, without giving the licensee any ownership right or interest in the property.
The source is Section 52 of the Indian Easements Act, 1882, which defines a licence as a right to do something in or upon the grantor’s immovable property that would otherwise be unlawful, where that right does not amount to an easement or an interest in the property. That last clause is the point: the licensee gets a right against the licensor personally, not a slice of the property.
A lease is the opposite. Section 105 of the Transfer of Property Act, 1882 defines a lease as a transfer of a right to enjoy immovable property for a term, for a price or rent. The word is transfer. A lessee holds an interest for the term, which is why a lease behaves more like ownership: it can normally be assigned, it survives a sale of the building, and it cannot be ended because the owner changed their mind.
Because a licence is personal permission, it is by nature not transferable by the licensee and is revocable as the agreement and the general law allow. That is why operators like it, and why you should read the exit clauses carefully.
Lease vs leave and licence: the differences that matter
| Point | Lease (Transfer of Property Act, s.105) | Leave and licence (Easements Act, s.52) |
|---|---|---|
| What is created | Transfer of the right to enjoy the property for a term | Personal permission to use it; nothing is transferred |
| Interest in the property | Yes — the lessee holds an interest | No — only a contractual right against the licensor |
| Parties are called | Lessor and lessee (landlord and tenant) | Licensor and licensee |
| Possession | Exclusive possession of the demised premises | Permission to use; legal possession stays with the owner |
| Transfer or sub-letting | Generally assignable and sub-lettable unless barred | Personal to the licensee; not transferable unless expressly allowed |
| Ending it | By efflux of time, forfeiture or notice under the lease and rent-control law; removing a tenant is a formal process | On expiry or revocation as the agreement provides; contractual, not a tenancy |
| If the building is sold | The interest generally binds the buyer for the rest of the term | Does not automatically bind a new owner unless carried forward |
| Typical term | 3, 5 or 9 years and longer, with escalation and renewal options | 11 months, or 33 to 60 months for serviced space |
| Registration | Compulsory if from year to year or exceeding one year (Registration Act, s.17(1)(d)) | Compulsory in Maharashtra in every case (MRCA s.55); elsewhere the same Registration Act test |
| Who uses it | Whole floors and buildings, warehouses, retail, factories | Coworking, serviced and managed offices, virtual offices, short-term commercial |
A licence is not second-class paper. It is an ordinary commercial instrument, and it is what almost every serviced-space arrangement in India uses. The difference is that your protection comes from the contract terms rather than from tenancy law — so read the lock-in, notice, deposit and renewal clauses with that in mind.
The label does not decide it — substance does
You cannot turn a lease into a licence by typing “Leave and Licence Agreement” at the top. Indian courts look past the heading to what was actually handed over. The indicators of a lease are exclusive possession of a defined space, the right to keep the owner out, and control over who enters. The indicators of a genuine licence are the reverse: the operator retains control and access, the space may be reallocated, services are bundled with the fee, and the permission is tied to your use rather than to a defined plot.
For most readers — a desk, a cabin, a serviced office, a registered address — the licence characterisation is uncontroversial. It becomes a live question only where someone takes a whole locked floor and calls the paper a licence.
Why landlords, coworking operators and virtual office providers prefer a licence
Four practical reasons, and they explain the drafting you will see.
- No tenancy is created. A licence keeps the occupier out of the state’s rent-control machinery, so the owner is not worried about a long-term occupancy right forming over the property.
- Flexibility on space. One floor can hold forty licensees, and an operator can move a member between cabins or resell a hot desk. A lease of a defined area cannot be shuffled like that.
- Services, not just space. What an operator sells is a bundle — address, reception, internet, meeting rooms, mail handling. A licence fee for that fits better than rent for a demised area.
- Shorter paperwork. Outside Maharashtra, an eleven-month licence usually avoids compulsory registration, keeping onboarding to a day rather than a fortnight.
None of this is against your interest, as long as you know what you are getting. Where it bites is at the exit: the lock-in and notice clauses are all that stands between you and a bill for the rest of the term.
Maharashtra: the state where registration is compulsory
Maharashtra is the exception every business needs to know about, because Mumbai, Pune, Thane and Navi Mumbai are where a large share of commercial licensing happens. Section 55 of the Maharashtra Rent Control Act, 1999 requires every agreement of leave and licence, or of letting, to be in writing and to be registered. There is no eleven-month escape route: the requirement is not tied to the length of the term. The section places the responsibility on the licensor — the landlord or operator, not you. Two consequences follow, and the second is the one people underestimate.
- Penalty on the licensor. Failure to register is punishable with imprisonment up to three months, or a fine up to ₹5,000, or both.
- The licensee’s version prevails. If the agreement is unregistered and there is a dispute about what was agreed, the licensee’s contentions about the terms are presumed true unless proved otherwise. The party who fails to register loses control of the record.
Registration is done online through the Maharashtra Department of Registration and Stamps (IGR) e-registration facility with Aadhaar-based biometric verification, so it does not usually require a trip to the sub-registrar. Agreements can be registered for up to 60 months, which is why five-year commercial licences are common in Maharashtra where other states use a chain of eleven-month renewals.
Stamp duty and registration fee in Maharashtra
| Item | Maharashtra position |
|---|---|
| Stamp duty | 0.25% of the total licence fee payable for the whole term, plus a notional amount computed on the refundable deposit (Article 36A, Maharashtra Stamp Act) |
| Registration fee | ₹1,000 in municipal corporation areas; ₹500 elsewhere |
| Maximum registrable term | 60 months |
Do not accept an unregistered agreement for Maharashtra premises. It is the licensor’s legal duty and a registered agreement is the cleanest address proof for a GST or MCA filing. If a provider says registration “is not needed for eleven months”, that is the habit of other states applied to one where the law is different. Ask for the registered copy before you pay — SimplySetup’s Mumbai addresses are documented on this basis.
Outside Maharashtra: your own stamp act, your own numbers
There is no all-India rule setting the stamp duty on a rent or licence agreement. Each state levies it under its own stamp act, and the rate, the base it is calculated on (annual fee, total term fee, deposit or a slab) and the ceiling all differ, as do registration fees. Anyone who quotes a single national figure is guessing.
What is common across states is the Registration Act, 1908. Section 17(1)(d) makes registration compulsory for a lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent. Section 23 requires a document to be presented for registration within four months of execution. A document that ought to have been registered and was not may be shut out as evidence of its own terms — a serious problem the day you need to prove what was agreed.
That gives three tiers of comfort: an unregistered agreement on stamp paper, a notarised one, a registered one. For an address that will carry your GSTIN or registered office, aim as high as the state and the provider allow.
Why almost every agreement runs for eleven months
The eleven-month convention is a direct product of Section 17(1)(d). A term of eleven months is not “from year to year” and does not exceed one year, so the document escapes compulsory registration under that clause — and with it, in most states, the trip to the sub-registrar. Renewal is handled by a fresh document or a renewal letter.
- It is a practice, not a rule. Nothing requires eleven months. You can sign for six, twenty-four or sixty.
- It does not work in Maharashtra, where Section 55 requires registration whatever the term.
- It has nothing to do with stamp duty itself. Duty is payable on the instrument regardless of length; the term affects how much, not whether.
For a business the eleven-month term has one real cost: it puts a renewal negotiation on your calendar every year, and renewal is when escalation clauses bite. Read the escalation percentage before you enjoy the low first-year figure.
The clauses a business should actually read
Most leave and licence disputes are not about the law. They are about a clause somebody skipped. Check these before signing, and add one question: who receives your post and a visiting officer, and how are you told?
| Clause | What to check | Why it matters |
|---|---|---|
| Licence fee | Amount, what it includes, whether GST at 18% is extra, billing frequency, late-payment interest | Bundled services vary widely; “all inclusive” rarely is |
| Security deposit | How many months, refund timeline after exit, what can be deducted | Deposit refunds are the most common dispute at exit |
| Lock-in period | How long, and what you owe if you leave early — the balance of the lock-in, or a capped amount | A lock-in is a payment obligation even if you vacate |
| Notice period | Notice to exit, notice to renew, notice the licensor must give you, whether email counts | Missing a renewal window can auto-renew you for another term |
| Permitted use | The stated business activity, and whether it covers what you actually do | A mismatch with your GST or MCA filing invites questions |
| Right to register at the address | Express permission to use it as PPOB for GST and/or registered office for MCA, plus an undertaking to give the NOC and utility bill | Without this in writing, the address is just a desk |
| Name board and signage | Whether your board goes up at the entrance, and who pays | Rule 18 of the CGST Rules requires the GSTIN on the name board |
| Access hours and visitors | 24×7 or business hours, guest policy, meeting-room credits | Decides whether the space works for your team |
| Escalation | Percentage and frequency on renewal, and whether it is capped | The renewal number is your real cost, not the first-year one |
| Exit condition | Restoration, removal of fit-outs, clearance of dues, handover | Restoration clauses can turn a deposit refund into a bill |
Ask for the document kit before you pay, not after. If the address is going onto a GST or MCA filing, the agreement is one of three papers you need. Ask in writing for a sample agreement, the owner’s NOC and a recent utility bill for the exact unit. A provider who cannot produce ownership proof for the specific premises cannot support your registration.
How GST treats a leave and licence agreement
Straightforwardly, and this surprises people. FORM GST REG-01 has no box for “leave and licence”. It asks for the nature of possession of the principal place of business — own, rented or leased, consent or shared — and then for the matching proof. A leave and licence agreement is uploaded as the rented/leased document.
For rented or leased premises the official list is the valid rent, lease or licence agreement plus any one ownership document of the owner — latest property-tax receipt, municipal khata copy, electricity bill or similar. Where the premises are shared or held on consent, the set is a consent letter (NOC) plus that ownership document instead.
CBIC Instruction No. 03/2025-GST dated 17 April 2025 tells officers to ask only for what REG-01 lists, and specifically not to demand extras such as the owner’s PAN or Aadhaar, photographs of the premises or original physical copies. If an officer asks for something outside the list, that instruction is what you cite.
Three rules matter once the GSTIN is granted. Rule 18 requires the certificate to be displayed at every place of business and the GSTIN on the name board, so your agreement should permit the board. Rule 19 requires an amendment in FORM GST REG-14 within 15 days of an address change — and a licence that expires without renewal is an address change waiting to happen. Rule 21 allows cancellation where business is not conducted from the declared place.
The full document set and upload limits are in the GST registration documents guide, and the agreement-plus-NOC combination in the NOC and rent agreement guide. If you are registering in a state where you have no premises at all, the VPOB and APOB guide shows how the address and the warehouse fit together.
How MCA treats it for a registered office
Company law asks for the same thing in different words. Section 12 of the Companies Act, 2013 requires every company to have a registered office capable of receiving and acknowledging communications, within 30 days of incorporation. Rule 25 of the Companies (Incorporation) Rules, 2014 sets the proof: the conveyance, lease or rent agreement with rent receipts, a no-objection certificate from the owner where the premises are not owned, and a utility bill — electricity, telephone, gas or water — not older than two months. A leave and licence agreement is accepted as the possession document. LLP address proof works on similar lines.
Two details cause most resubmissions. First, a stale bill: a utility bill dated more than two months before filing is the commonest reason an INC-22 or SPICe+ attachment comes back. Second, a name mismatch: the agreement must be in the name of the applying company or LLP, not a director’s, and the address must match the bill and the NOC to the last line.
Which address belongs on the certificate of incorporation and which on the GST certificate is a separate question; the registered office vs corporate office guide sets out which filing changes which record.
Coworking membership vs leave and licence
These overlap, and the distinction decides whether you can register a business at the address.
A coworking membership is usually a service contract: a monthly, quarterly or annual plan for a hot desk, dedicated desk or private cabin, priced per seat per month with 18% GST on top and a deposit of one to three months (managed offices run 12 to 36 months). On its own it is often not enough for a registration filing, because it does not name specific premises held on a documented possession, and the operator may not issue an NOC or share the owner’s ownership proof.
A leave and licence agreement is the property document underneath: it names the premises, parties, term and fee, and pairs with an NOC and a utility bill to form a filing kit. So the question to put to any operator before you pay the deposit is one sentence — will you give me the agreement, the owner’s NOC and a utility bill for the unit, in my company’s name? What each seating format includes is set out in the coworking explainer.
The virtual office leave and licence, and what the kit contains
A virtual office is a real commercial premises whose address you are licensed to use for registration and correspondence without occupying a desk there. The instrument that gives you that right is, almost always, a leave and licence agreement in your business name.
At SimplySetup the address is premises we own or hold with an exclusive partner, a name board goes up, and staff receive your post and any officer who visits. Packages are billed annually, with 18% GST charged separately:
- Business Address — ₹399 per month. Address, mail handling and name board. It does not include a rent agreement or owner NOC, so it is for correspondence and presence, not for a filing.
- GST Registration — ₹799 per month. Adds the kit — agreement, owner’s NOC and a utility bill for the unit — plus GST filing support. This is the plan that supports a GST registration at the address.
- Company Registration — ₹899 per month. The same kit prepared for a registered office under Rule 25, for a SPICe+ or INC-22 filing.
Be blunt about what a virtual office does: it gives you a compliant, staffed, documented address. It does not give you a desk, it does not make you resident in that state for any other purpose, and it is worthless if the provider does not control the premises.
Five problems we see, and how to avoid them
- Unregistered agreement for Maharashtra premises. The duty sits on the licensor under Section 55, but you carry the consequence when a filing or a dispute needs clean paper.
- The licence is in a person’s name, not the company’s. A founder signs personally, then applies for GST or incorporates; the applicant PAN and the agreement name do not match and the application is queried. Have it redrawn in the entity’s name before filing.
- The address differs across the three documents. One unit number on the agreement, another on the utility bill, an abbreviated one on the NOC. Officers read all three. Insist on identical wording — unit, floor, building, PIN code.
- A stale utility bill. Rule 25 wants a bill under two months old and a GST officer wants a current ownership document. Ask for a fresh copy dated close to the filing date.
- No written right to register. The agreement is silent on using the address as a principal place of business or registered office, and the operator declines the NOC afterwards. Get the permission written in, not promised on a call.
The one that ends badly. An address where nobody is present. Rule 21 of the CGST Rules allows cancellation where business is not conducted from the declared place, and a registered office that cannot receive and acknowledge communication puts the company at risk. A licence over premises that are locked, unstaffed or not actually controlled by the licensor is not a shortcut — it is an exposure.
What to do next
Read your draft against the clause table and mark three things: the lock-in, the notice period, and whether the document expressly lets you register at the address. If the premises are in Maharashtra, ask the licensor for the registered copy — it is their legal duty and your best evidence. If the address is going onto a filing, ask for the owner’s NOC and a utility bill for the exact unit dated within the last two months, and check the address text on all three papers is identical. If you would rather not assemble it yourself, SimplySetup will: tell us the city and whether the address is for GST, company registration or both, and we will send back the document set for that state and a fixed price.
Tell us the state, what you sell and where the stock sits. A registration specialist replies with the exact document list and timeline — free.
