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Security Deposit

Querist : Anonymous (Querist) 16 December 2009 This query is : Resolved 
Dear All,

I am planning to take residential flat on leave and license agreement, i have following query
1) Can i enter into 36 months contract?
2) What is diff between Lease and leave & license
3) Flat owner gave me following 2 option for compensation
a) Rs. 7 lacs refundable deposit + no rent
b) Rs. 10,000 Rent + 1 lacs S. deposit,

If i opt for option no 1 then what precaution i have to take or which clause should i write in the agreement which will safeguard my money in case of owner solvency or bankruptcy.
Devajyoti Barman (Expert) 16 December 2009
1. The agreement should be of one year.
2.TO state precisely the leave and license agreement does not create any interest in favour of the licensee. It is a mere permissible occupation whereas by lease the lessee obtains interest in the property and his rights are protected under section 108 of the Transfer of Property Act.
3.In case of first option a mere agreement should suffice but going for the first option is not advisable at all.
Raj Kumar Makkad (Expert) 16 December 2009
In response to your quarry, I advise to opt first option as it is more safe for you but get clear writing from him that in case of any insolvency, you shall have first preference over all his debts and obtain bank guarantee from him.
Querist : Anonymous (Querist) 17 December 2009
Dear Divjyoti Sir,

Can u pls advice why 1st option is not advisable and what is the legal consequence if I enter into 36 months agreement


Dear Rajkumar Sir,

To give bank guarantee, owner has to keep FD and as he is business man he don’t want to block his money as lower rate of interest can u please advice me if he is not able to give BG what else I have to ask for
N RAMESH. (Expert) 17 December 2009
If you enter into 36 months agreement, it is required to be registered by paying stamp duty assessed on the basis of annual rental value or premium amount.
Mukul Aggarwal (Expert) 17 December 2009
Mr. anonymous,

i think second option is good and you can go for 36 months license agreement. Law does not bar the 3 year license agreement..

Second Thing kindly mention the state in which property exist
Mukul Aggarwal (Expert) 17 December 2009
As he is a businessman if he suffer loss in business after sometime than your money will get blocked..
Querist : Anonymous (Querist) 17 December 2009
Dear Mukul,

Ya he is business man, mine living at mumbai, what precaution should i take to safe my deposit
Vineet (Expert) 20 December 2009
You can enter into 36 moths Leave and License Agreement, the corresponding stamp duty needs to be paid and the agreementis registered.

In financial terms, the first option is better, but there is always risk regarding money being blocked. Normally in all such deposit matters a clause is made in the agreement regarding posession of flat be continued with the Lessee till the deposit is refunded. So that is the best safety but again if the property is motgaged, your rights are fraught with risk.

You have to take a call considering the present status of person. A simple clue is that person is foregoing Rs 10000 pm rent for a refundable deposit of Rs 6 Lakhs, so in effect he is borrowing @20% PA. It shows how desperately he is in need of money otherwise he can always take loan against property from any bank which is available @14-15% PA.


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