LEASE AS PER TRANSFER OF PROPERTY ACT: ALL YOU NEED TO KNOW

LEASE AS PER TRANSFER OF PROPERTY ACT: ALL YOU NEED TO KNOW  

LEASE DEFINITION

As per Section 105 of the Transfer of  Property act Lease is defined as:-

A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. Lessor, lessee, premium and rent defined.—The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other things to be so rendered is called the rent.

Therefore, A lease of immovable property is a transfer of a right to enjoy such property made for a certain time (express or implied), or in perpetuity, in consideration of a:

• The price paid or promised, or
• Money
• A share of crops
• Service, or
• Any other thing of value

LESSOR, LESSE, PREMIUM, AND RENT

• The Transferor is called the lessor
• The Transferee is called the lessee
• The price is called the premium
• The money, share, service, or other things to be so rendered is called the rent

   ESSENTIALS FOR LEASE

• Immovable property,
• transfer of interest( (right to enjoy)
• For a specific period
• Consideration (rent) is paid periodically or on specified occasions.

Duration Of Certain Leases In Absence Of Written Contract Or Local Usage

As per section 106. Duration of certain leases in absence of written contract or local usage.—

(1) In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months’ notice; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days’ notice.

(2) Notwithstanding anything contained in any other law for the time being in force, the period mentioned in sub-section (1) shall commence from the date of receipt of the notice.

(3) A notice under sub-section (1) shall not be deemed to be invalid merely because the period mentioned therein falls short of the period specified under that sub-section, wear a suit or proceeding is filed after the expiry of the period mentioned in that sub-section.

(4) Every notice under sub-section (1) must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.

Leases How Made

As per section 107. Leases how made.— A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument.

All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.

Where a lease of immovable property is made by a registered instrument, such

instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee:

Provided that the State Government may, from time to time, by notification in the Official Gazette, direct that leases of immoveable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.

• VARIOUS KINDS OF LEASE
  1. Perpetual Lease: A perpetual lease is an ongoing tenure over state land in accordance with the Urban Land (Ceiling & Regulation) Act, 1976. A landholder of a perpetual lease is responsible for complying with the term of the perpetual lease deed failing which the property/land may be revoked. Perpetual leases are issued for a specific purpose (e.g. agricultural or commercial). The lease must only be used for the purpose for which it was originally issued.

2. Tenancy At Will: Tenancy at will, also known as the estate at will, is a property tenure without a lease or written agreement that can be terminated at any time by either the tenant or the owner (landlord). It exists without a contract or lease and usually does not specify the length of a tenant’s duration or the exchange of payment.
3. Tenancy At Sufferance: A tenant at sufferance is the situation when a tenant of real estate continues to occupy the premises without the landlord’s consent after the original lease or rental agreement between the landlord and the tenant has expired. A tenant in this situation is also referred to a holdover tenant. The tenant is responsible for payment of the monthly rental at the existing rate and terms, which the landlord may accept without admitting the legality of the occupancy. If a tenant at sufferance does not leave after a notice to quit (move out), he/she is subject to a lawsuit for unlawful detainer.
4. Tenancy By Holding Over: A holdover tenant is a renter who remains in a property after the expiration of the lease. If the landlord continues to accept rent payments, the holdover tenant can continue to legally occupy the property, and state laws and court rulings determine the length of the holdover tenant’s new rental term.
   • Periodic lease: A lease from year to year or month to month
   • Lease for a fixed period: Here the period is fixed
   • Lease for life: Lease for the lifetime of the lessee.

RIGHTS AND LIABILITIES OF LESSOR AND LESSEE

Section 108 of the Transfer of Property Act lays down the right and liabilities of Lessor and Lessee. These rights and liabilities are applicable in absence of an agreement or a local custom to its contrary Rights and Liabilities of Lessor and Lessee are laid down from sub-section (a) to subsection (q) of Section 108.

Rights And Liabilities Of Lessor And Lessee

As per section 108. Rights and liabilities of lessor and lessee.— In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next

following, or such of them as are applicable to the property leased:—

(A) Rights and liabilities of the lessor

(a) the lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the former is and the latter is not aware, and which the latter could not with ordinary care discover:

(b) the lessor is bound on the lessee’s request to put him in possession of the property:

(c) the lessor shall be deemed to contract with the lessee that, if the latter pays the rent

reserved by the lease and performs the contracts binding on the lessee, he may hold the property during the time-limited by the lease without interruption.

The benefit of such contract shall be annexed to and go with the lessee’s interest as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested;

(B) Rights and liabilities of the lessee

(d) if during the continuance of the lease any accession is made to the property, such accession (subject to the law relating to alluvion for the time being in force) shall be deemed to be comprised in the lease:

(e) if by fire, tempest or flood, or violence of an army or of a mob, or other irresistible

force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void:

Provided that, if the injury be occasioned by the wrongful act or default of the lessee,

he shall not be entitled to avail himself of the benefit of this provision:

(f) if the lessor neglects to make, within a reasonable time after notice, any repairs which he is bound to make to the property, the lessee may make the same himself, and deduct the expense of such repairs with interest from the rent, or otherwise recover it from the lessor:

(g) if the lessor neglects to make any payment which he is bound to make, and which if not made by him, is recoverable from the lessee or against the property, the lessee may make such payment himself, and deduct it with interest from the rent, or otherwise recover it from the lessor:

(h) the lessee may

1[even after the determination of the lease] remove, at any time

2[whilst he is in possession of the property leased but not afterward,] all things which he has attached to the earth:

provided he leaves the property in the state in which he received it:

(i) when a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or sown by the lessee and growing upon the property when the lease determines, and to free ingress and egress to gather and carry them:

(j) the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease:

nothing in this clause shall be deemed to authorize a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee:

(k) the lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take, of which the lessee is, and the lessor is not, aware, and which materially increases the value of such interest:

(l) the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf:

(m) the lessee is bound to keep, and on the termination of the lease to restore, the property in as good condition as it was in at the time when he was put in possession, subject only to the changes caused by reasonable wear and tear or irresistible force, and to allow the lessor and his agents, at all reasonable times during the term, to enter upon the property and inspect the condition thereof and give or leave notice of any defect in such condition; and, when such defect has been caused by any act or default on the part of the lessee, his servants or agents, he is bound to make it good within three months after such notice has been given or left:

(n) if the lessee becomes aware of any proceeding to recover the property or any part

thereof, or of any encroachment made upon, or any interference with, the lessor’s rights concerning such property, he is bound to give, with reasonable diligence, notice thereof to the lessor:

(o) the lessee may use the property and its products (if any) as a person of ordinary prudence would use them if they were his own; but he must not use, or permit another to use, the property for a purpose other than that for which it was leased, or fell

[or sell] timber, pull-down or damage buildings 1[belonging to the lessor or] work mines or quarries not open when the lease was granted, or commit any other act which is destructive or permanently injurious thereto:

(p) he must not, without the lessor’s consent, correct on the property any permanent structure, except for agricultural purposes:

(q) on the determination of the lease, the lessee is bound to put the lessor into possession of the property.

LIABILITIES OF LESSOR

The liabilities of the lessor are –

• Duty of disclosure [ Clause(a) ]
• Duty to give possession [ Clause (b) ]
• Covenant for quiet enjoyment [ Clause (c)]

   Duty to Disclosure [Section 108(m)]

• Clause (a) provides that the lessor is bound to disclose to the lessee any material defect in the property with reference to its intended use of which the lessor is aware but the lessee is not
• Defects are of two types apparent and latent. The lessor is bound to disclose latent defects because such defects cannot be discovered with ordinary
• Duty of disclosure is especially important where defects affect right of enjoyment or use of the property

   to Give Possession [Section 108(m)]

• The lessor is under a duty, on the lessee’s request, to put him in possession of the
• If he fails to deliver possession to the lessee, he cannot recover rent or enforce the obligations of the lessee under the
• However, the duty of the lessor to deliver possession only arises when there is a request by the lessee in this request

   Covenant for Quiet Enjoyment [Section 108(m)]

• The clause provides that if the lessee pays rent reserved by the lease and performs the contract binding on him, he may hold the property during the time-limited by the lease without
• What constitutes a breach of a covenant for quiet enjoyment is not always easy to Some guidelines have been provided by the Madhya Pradesh High Court in Daryao Singh v. Pramilabai (AIR 1959 M.P 191 )
• It was held in this case that “no act of a lessor can be regarded as an actionable breach of a covenant for quiet enjoyment unless it involves some physical or direct interference with the enjoyment of the given premises and that in determining whether the enjoyment of the premises has been disturbed or interfered, one must look to the purpose for which the premises were ”

   RIGHTS OF LESSEE

• Right to Accretions [Sec. 108 (d)]
• If during the continuance of a lease any accretion, accession, or addition is made to property given by way of the lease such accretion, accession or addition shall be deemed to be comprised in the original lease
• The addition may be natural, e.g. by flood or alluvial activity or at the expense of the lessee or maybe a tree planted by the
• However, the lessee cannot have title to such accretion and the lessee should surrender the accretion after the period of

   To Avoid Lease [Section 108(e)]

• In the case of the destruction of the subject matter of lease, the lessee, if he is not to be blamed for such destruction, could avoid the lease at his option
• In cases where the whole rent has been paid in advance, and the property is destroyed before the period of the lease expires the lessee has a right to recover the proportionate part of the rent already
• The application of this Section has been clearly stated by the Supreme Court in the case Shaha Ratansi Khimji & Sons VS Kumbhar Sons Hotel (P) Ltd [ (2014) 14 SCC 1 ]
• It has to be ascertained whether the lease was created in the structure or both in the structure as well as the underlying land. If it was a lease of the structure alone, the mere destruction of the structure would not avoid it, unless it was due to some fault on the part of the lessee. Lease of building or structure, namely, house, shop, godown, etc. normally cannot be treated as a mere lease of structure. It would also include the lease of site or land on which such structure is built unless the underlying land was specifically excluded

To Charge for Repair [Section 108 (f)]

• This clause provides that If the lessor neglects to make any repairs which he is bound to make to the property after notice within a reasonable time, the lessee

may make the repair himself and deduct the expense of such repairs with interest from the rent or otherwise recover it from the lessor

• The lessor is not bound to make repairs but if he has agreed at the time of the lease with the lessee that he will make the necessary repairs then he becomes bound to make the

Right to Make Payments [Section 108(g)]

This clause provides that if lessor neglects to make any payment which he is bound to make and which if not made by him, is recoverable from the lessee or against the property, the lessee may make such payment himself and deduct it with interest from rent or otherwise recover it from the lessor.

Right to remove fixtures Section [108(h)]

• The lessee may, even after the determination of the lease, remove, at any time while he is in possession of the property leased, but not afterward, all things which he has attached to the earth. But he must leave the property in the state in which he received
• This clause provides an exception to the general rule that things attached to earth become part of it

   Right to have the benefit of Crops [Section 108(i)]

• When a lease is of uncertain duration and the interest of the lessee is determined otherwise than his fault, the lessee is entitled to the benefit of all crops growing, planted or sown by
• Lessee or his legal representative has been given the right to ingress and egress to visit the leased property to gather and carry the grown crops

   Right to Assign his Interest [Section 108(j)]

• In absence of any contract to the contrary, this section empowers the lessee to transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the His transferee or assignee may likewise, transfer his interest
• However, The lessee shall not by reason only of such transfer, cease to be subject to any of the liabilities attached to lease

      LIABILITIES OF LESSEE

• Duty to disclose material facts materially increasing the value of the property [Section 108(k)]
  • Under this clause, the lessee is bound to disclose to the lessor any defect of which he is aware but lessor is not aware and which materially increases the value of such
  • Where the lessee fails to disclose the fact and the lessor suffers thereby, he can sue for
  • He would have no right to avoid lease unless there is an express agreement to that

   Duty to pay rent[Section 108(l)]

• A lessee is under a duty or obligation to pay or tender the premium or rent to the lessor or his agent at the proper time or
• The obligation to pay rent arises as soon as the lessee has been put into possession
• Where the lessee fails to pay the rent and it has fallen into arrears, the lessor has two remedies against him. Firstly, he is entitled to file a suit for arrears of rent; or he can start ejectment proceeding on the ground of non-payment.

   Duty to maintain the property [Section 108(m)]

• The lessee is bound to keep on the termination of the lease to restore the property in as good condition as it was when he was put into possession
• He is bound to allow the lessor and his agents at all reasonable to enter upon the property and inspect its conditions
• Only the changes caused by reasonable wear and tear or irresistible force are allowed under this clause

   Duty to Give Notice [Section 108(n)]

• If the lessee becomes aware that any person has initiated any proceeding to recover whole or any part of the property, or has encroached upon it or has interfered with the right of the lessor, he must bring such a fact to the knowledge of the lessor
• Where the title of the lessor is endangered, he may sue for a declaration of his rights and for a decree giving him a formal possession as against the

(Raj Kumar v. Ali Mia, AIR 1923 Cal. 192.)

   Duty to use Property in a Reasonable way [Section 108(o)]

• This Clause provides that the lessee may use the property and its products as a person of ordinary prudence would use them if they were his own.
• He must not cut down the trees or sell the timber, or pull-down or damage the buildings belonging to the lessor
• Lessor must not use or allow others to use the property for a purpose other than that for which it is leased

   Duty not to erect permanent Structure [Section 108(p)]

• for agricultural purposes or without the consent of the lessor.

• A lessee is under a duty not to erect any permanent structure on the property except
• The restriction under this clause is only against a permanent structure
• What is a permanent structure is a question of fact depending on the nature of the structure and intention with which it is erected(Surya Properties Ltd. v. Bimelendu Nath,(1963) 67 Cal. W.N. 977)

Duty to restore possession [Section 108(q)]

• This clause provides that on the determination of lease the lessee is bound to put the lessor into the possession of the property
• When the tenant does not vacate the tenanted premises even after the expiry of notice he becomes liable to pay damages as well as mesne profits to the This rule is known as the rule in Henderson v. Square

Rights Of Lessor’s Transferee

As per section 109. Rights of lessor’s transferee.— If the lessor transfers the property leased, or any part thereof, or any part of his interest therein, the transferee, in the absence of a contract to the contrary, shall possess all the rights and, if the lessee so elects, be subject to all the liabilities of the lessor as to the property or part transferred so long as he is the owner of it; but the lessor shall not, by reason only of such transfer, cease to be subject to any of the liabilities imposed upon him by the lease, unless the lessee elects to treat the transferee as the person liable to him:

Provided that the transferee is not entitled to arrears of rent due before the transfer, and that, if the lessee, not having reason to believe that such transfer has been made, pays rent to the lessor, the lessee shall not be liable to pay such rent over again to the transferee. The lessor, the transferee and the lessee may determine what proportion of the premium or rent reserved by the lease is payable in respect of the part so transferred, and, in case they disagree, such determination may be made by any court having jurisdiction to entertain a suit for the possession of the property leased.

Exclusion Of Day On Which Term Commences.

As per section 110. Exclusion of day on which term commences.—Where the time limited by a lease of immovable property is expressed as commencing from a particular day, in computing that time such day shall be excluded. Where no day of commencement is named, the time so limited begins from the making of the lease.

Duration of a lease for a year.—Where the time so limited is a year or a number of years, in the absence of an express agreement to the contrary, the lease shall last during the whole anniversary of the day from which such time commences.

Option to determine the lease.—Where the time so limited is expressed to be terminable before its expiration, and the lease omits to mention at whose option it is so terminable, the lessee, and not the lessor, shall have such option.

Determination Of Lease

As per section 111. Determination of lease.—A lease of immovable property determines—

(a) by efflux of the time-limited thereby:

(b) where such time is limited conditionally on the happening of some event—by the happening of such event:

(c) where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to, the happening of any event—by the happening of such event:

(d) in case the interests of the lessee and the lessor in the whole of the property become vested at the same time in one person in the same right:

(e) by express surrender; that is to say, in case the lessee yields up his interest under the lease to the lessor, by mutual agreement between them:

(f) by implied surrender:

(g) by forfeiture; that is to say, (1)in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter  or in case the lessee renounces his character

as such by setting up a title in a third person or by claiming the title in himself;

[or  the lessee is adjudicated an insolvent and the lease provides that the lessor may re-enter on the happening of such event and in

1[any of these cases] the lessor or his transferee

2[gives notice in writing to the lessee of] his intention to determine the lease:

(h) on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other.

Illustration to clause (f)

A lessee accepts from his lessor a new lease of the property leased, to take effect during the continuance of the existing lease. This is an implied surrender of the former lease, and such lease determines thereupon.

Waiver Of Forfeiture

As per section 112. Waiver of forfeiture.—A forfeiture under section 111, clause (g) is waived by acceptance of rent which has become due since the forfeiture, or by distress for such rent, or by any other act on the part of the lessor showing an intention to treat the lease as subsisting:

Provided that the lessor is aware that the forfeiture has been incurred:

Provided also that, where rent is accepted after the institution of a suit to eject the lessee on the ground of forfeiture; such acceptance is not a waiver.

Waiver Of Notice To Quit

As per section 113. Waiver of notice to quit.—A notice given under section 111, clause (h), is waived, with the express or implied consent of the person to whom it is given, by any act on the part of the person giving it showing an intention to treat the lease as subsisting.

Illustrations

(a) A, the lessor, gives B, the lessee, notice to quit the property leased. The notice expires, B tenders and A accepts, rent which has become due in respect of the property since the expiration of the notice. The notice is waived.

(b) A, the lessor, gives B, the lessee, notice to quit the property leased. The notice expires, and B remains in possession. A gives to B as lessee a second notice to quit. The first notice is waived.

Relief Against Forfeiture For Non-Payment Of Rent

As per section 114. Relief against forfeiture for non-payment of rent.—Where a lease of immovable property has determined by forfeiture for non-payment of rent, and the lessor sues to eject the lessee, if, at the hearing of the suit, the lessee pays or tenders to the lessor the rent in arrear, together with interest thereon and his full costs of the suit, or gives such security as the Court thinks sufficient for making such payment within fifteen days, the Court may, in lieu of making a decree for ejectment, pass an order relieving the lessee against the forfeiture; and thereupon the lessee shall hold the property leased as if the forfeiture had not occurred.

Relief Against Forfeiture In Certain Other Cases

As per section 114A. Relief against forfeiture in certain other cases.—Where a lease of immovable property has determined by forfeiture for a breach of an express condition which provides that on breach thereof the lessor may re-enter, no suit for ejectment shall lie unless and until the lessor has served on the lessee a notice in writing—

(a) specifying the particular breach complained of; and

(b) if the breach is capable of remedy, requiring the lessee to remedy the breach;

and the lessee fails, within a reasonable time from the date of the service of the notice, to remedy the breach, if it is capable of remedy.

Nothing in this section shall apply to an express condition against the assigning, underletting, parting with the possession, or disposing, of the property leased, or to an express condition relating to forfeiture in case of non-payment of rent.

Effect Of Surrender And Forfeiture On Under-Leases

As per section 115. Effect of surrender and forfeiture on under-leases.— The surrender, express or implied, of a lease of immovable property does not prejudice an under-lease of the property or any part thereof previously granted by the lessee, on terms and conditions substantially the same (except as regards the amount of rent) as those of the original lease; but, unless the surrender is made for the purpose of obtaining a new lease, the rent payable by, and the contracts binding on, the under-lessee shall be respectively payable to and enforceable by the lessor.

The forfeiture of such a lease annuls all such under-leases, except where such forfeiture has been procured by the lessor in fraud of the under-lessees, or relief against the forfeiture is granted under section 114.

Effect Of Holding Over

As per section 116. Effect of holding over.—If a lessee or under-lessee of the property remains in possession thereof after the determination of the lease granted to the lessee, and the lessor or his legal representative accepts rent from the lessee or under-lessee or otherwise assents to his continuing in possession, the lease is, in the absence of an agreement to the contrary, renewed from year to year, or from month to month, according to the purpose for which the property is leased, as specified in section 106.

Illustrations

(a) A lets a house to B for five years. B underlets the house to C at a monthly rent of Rs. 100. The five years expire, but C continues in possession of the house and pays the rent to A. C’s lease is renewed from month to month.

(b) A lets a farm to B for the life of C. C dies, but B continues in possession with A’s assent. B’s lease is renewed from year to year.

Exemption Of Leases For Agricultural Purposes

117. Exemption of leases for agricultural purposes.—None of the provisions of this

Chapter apply to leases for agricultural purposes, except in so far as the State Government may by notification published in the Official Gazette, declare all or any of such provisions to be so applicable [in the case of all or any such leases], together with, or subject to, those of the local law, if any, for the time being in force. Such notification shall not take effect until the expiry of six months from the date of its publication.