Leave and License or Lease? What Changes When You Buy a Pre-Leased Property

October 25, 2026

A property is sold as "pre-leased". The tenant is a known brand. The rent comes in every month. But the document behind that rent may not be a lease at all. It may be a leave and license agreement. For a buyer, that one difference changes what you actually get when you buy.

The short answer

A lease transfers a right to enjoy the property to the tenant. A leave and license only gives a permission to use it, with no interest in the property. Under Indian law, when an owner sells a leased property, the buyer steps into the seller's rights under the lease, unless the contract says otherwise. When an owner sells a licensed property, the buyer is not, as such, bound by the license. So before you pay for "pre-leased" income, find out which document the occupant signed, and what it actually says.

What the law says

Lease: Transfer of Property Act, 1882

Fact: Section 105 defines a lease as "a transfer of a right to enjoy" immovable property, for a certain time or in perpetuity, in return for rent or another thing of value.
Fact: Section 109 says that if the lessor transfers the leased property, the transferee, "in the absence of a contract to the contrary", gets all the rights of the lessor. The buyer is not entitled to rent arrears that fell due before the transfer.
Fact: Section 107 says a lease for any term exceeding one year can be made only by a registered instrument.

License: Indian Easements Act, 1882

Fact: Section 52 defines a license as a right to do something on the grantor's property that "does not amount to an easement or an interest in the property".
Fact: Section 59 says that when the grantor of a license transfers the property, "the transferee is not as such bound by the license".

The label is not the final word

Fact: The Supreme Court, in Capt. B.V. D'Souza v. Antonio Fausto Fernandes (1989), restated the test from Associated Hotels of India v. R.N. Kapoor: "the substance of the document must be preferred to the form", and "the real test is the intention of the parties". If the occupant gets exclusive possession, they are prima facie a tenant, though that factor alone is not decisive.

So a document titled "Leave and License" is not automatically a license, and a document titled "Lease" is not automatically a lease. A lawyer reads the clauses, not the heading.

This is general information, not legal advice. Verify with a qualified property lawyer before you act.

Why it matters to your money

When you buy pre-leased property, you are buying a cash flow. The price is built on that rent continuing after you take over. If the occupant holds a lease, the law gives you a path to step into the seller's shoes. If the occupant holds a license, the law says you are not, as such, bound by it, so the arrangement does not simply carry over. Your lawyer has to plan how it continues, for example through a fresh or tripartite agreement signed as part of the sale.

That affects two things:

Continuity of rent. Will the same rent, escalation and lock-in carry over to you?
Your exit. The next buyer's lawyer will ask the same question you are asking now.

Want a second pair of eyes on a pre-leased deal you are looking at? Talk to VRX Capital. Call / WhatsApp: +91 9315368515.

How to check it: the VRX lens

At VRX Capital, yield is not the investment thesis. We look at the tenant, the lease, the cash flow, the asset, the location, the price and the exit, together. The agreement type sits right at the start of "the lease".

VRX practice: We do not treat a property as pre-leased until we have seen the signed agreement itself. A listing that says "pre-leased" is a description, not a document.

Get the full signed agreement. Not a summary, not a rent receipt.
Read the title, then ignore it. Check what the clauses actually give the occupant: exclusive possession, a fixed term, a right to transfer, a lock-in.
Check registration. A lease for more than one year must be registered. Read our guide on why an unregistered lease weakens a pre-leased property.
Look for a transfer clause. Does the agreement say what happens if the owner sells?
Plan the handover in writing. For a lease, read our guide on the attornment letter. For a license, ask your lawyer what fresh or tripartite document is needed, and make it part of the sale.
Confirm who signed. See who actually signed the lease.

Illustrative example

Illustrative example. Not a real property or tenant.

An investor is offered a shop at ₹3 crore with a monthly rent of ₹1,50,000. That is ₹18 lakh a year, a gross yield of 6.0% on price. The listing says "pre-leased to a national retail brand, 9 years".

When the agreement arrives, it is titled "Leave and License Agreement". The investor's lawyer now has two jobs. First, read the clauses to see whether, in substance, it is a lease or a license. Second, if it is a license, make sure the occupant signs a fresh or tripartite document with the buyer before the money moves. Without that, the 6.0% on the brochure is not yet the investor's 6.0%.

Common mistakes

Pricing the asset on rent before reading the agreement.
Assuming "Leave and License" and "Lease" mean the same thing because the rent is the same.
Assuming the heading decides the question. Courts look at substance.
Leaving the occupant's consent to "after registration". Get it in writing as part of the deal.
Forgetting that, under a lease, the buyer is not entitled to rent arrears due before the sale, and agreeing nothing about them.

Quick checklist

Full signed agreement received
Agreement type checked in substance, not just by title
Registration status confirmed
Transfer-on-sale clause read
Handover document (attornment or fresh/tripartite agreement) planned
Lawyer's written opinion on file before payment

FAQ

Is a leave and license agreement the same as a lease?

No. Under Section 105 of the Transfer of Property Act, a lease transfers a right to enjoy the property. Under Section 52 of the Indian Easements Act, a license gives no interest in the property. Courts decide which one a document is by its substance, not its title.

If I buy a property with a licensee in it, does the license continue?

Section 59 of the Indian Easements Act says the buyer is "not as such bound by the license". So the license does not, by itself, carry over to you. Ask your lawyer what fresh or tripartite document your deal needs.

If I buy a leased property, do I get the rent?

Under Section 109 of the Transfer of Property Act, the buyer gets all the rights of the lessor, unless a contract says otherwise. The buyer is not entitled to rent arrears that fell due before the transfer.

Does the title of the document decide whether it is a lease or a license?

No. The Supreme Court has said the substance of the document is preferred to its form, and the real test is the intention of the parties.