Difference between lease and licence agreement: A cardinal distinction between a lease and a licence is that in a lease, there is a transfer of interest in the leased property whereas, in the case of a licence, there is no such transfer of any interest in the property, although the licensee may have a right to occupy the subject property, e.g.land.
The Supreme Court in Khalil v. Tufelhussain [AIR 1988 SC 184,190]: “If an interest in the immovable property is created so as to entitle the transferee to enjoyment, it is a lease. If permission to use the land, without exclusive permission, is, alone, gathered, a licence is the legal result.”
In Indian law, the expression “licence” is defined differently under different legislations. For example, “licence” is defined in a certain manner in the Easements Act, of 1882. It is also defined in a certain manner in the Maharashtra Rent Control Act, 1999. For the present, suffice it to say that, in case of a lease, there is a transfer of an interest in the property coupled with an exclusive right of occupation or use. In case of a licence, there is merely a right to the use of the property in a certain way and on certain terms, while the property remains in possession and control of the owner.
It was held by the Bombay High Court in Balvantsingji v. Bhagwantrao [AIR 1980 Bom. 333]: ” The test of exclusive possession is an extremely important test for deciding as to whether a particular transaction is a lease and/ or leave and licence. The right of entering or right to visit is something far different from possession in respect of the land.”