Lease under Transfer of Property Act, 1882
Section 105-117
Lease & Determination of Lease
The provision regarding Lease is covered under section 105 to section 117 of Transfer of Property Act, 1882
A lease is the transfer of a right to enjoy a certain property. It is either for a certain period or perpetuity. It is
an agreement by which the owner of the property or the lessor transfers his
right of possession to the lessee. It is not an absolute transfer of all rights
in the property. It is merely a partial transfer. A lease can be done
only on immovable property.
In a lease, the
transfer of immovable property is not an absolute transfer like a Sale. The
ownership and possession get separated from a certain period but after the
expiry of the specified period possession again gets merged into ownership.
Section
105 defines lease as:
“A transfer of right to enjoyment in immovable
property made for certain time either express or implied or in perpetuity in
consideration f price paid or promised in the form of money, services rendered,
share of the crop or other things of value to be rendered either periodically or on a specific occasion to the transferor by
the transferee on such terms
Section
105 also defines terms like Lessor, lessee, premium, and rent
One who transfers the property i.e. transferor
called Lessor,
One who accepts it i.e. the transferee called lessee,
The price is called the premium and services and other things which are rendered is called rent.
Essentials of Valid Lease
So
there are 4 essential for valid lease, they are:
1)
Parties to lease must be competent
The person who transfers the property under the lease
is called the lessor and to whom it is transferred is called the lessee.
“Lessor” must be competent according to the Indian Contract
act i.e., he should be major, of sound mind ad not disqualified by law.
“Lessor” must have the right to transfer the property and the property must be transferable according to section 6 of transfer of property
act.
Thus minor cannot transfer the property, but the guardian may transfer on behalf of
minor.
”Lessee”
must also be competent according to Indian
Contract Act i.e., he should be major and of sound mind and not disqualified by
law.
Under the lease, the lessee had also to be competent
because there is some liability on the lessee also.
2)
Subject Matter/ Demise
The subject matter of
lease must be immovable property. The word "immovable property" not
only means house or land but also
benefits to arise out of the land, right to collect the fruit of a garden, right to
extract coal or minerals, hats, rights of ferries, fisheries.
In case of a lease, it is
only the transfer of partial interest and not the absolute interest in
consideration. So in the lease, there are two rights:
· Right of lessor called as the reversion
· Right to lessee called as the right to lease Hold.
Girdhari
Singh vs. Meghlal Pandey (1918) 45 Cal 87, and
Shanti Bai vs. the State of Bombay
In these two cases, the court held that,
- In a lease one has the right to enjoy the property but he had no right to take away the property.
- Lease conveys an only limited estate.
- In this transfer right of the transferee is called leasehold and the remaining interest is called right to reversion
3)
Duration
The right to enjoyment in the property must be in a certain period which is called the term of the lease. So the term of lease may be
for any period shorter or longer as specified in the lease deed.
The term of the lease may be for a specific time or
for the permanent duration.
{Duration can be any, but it should be specified
in lease deed}
We can
categories the term of the lease into three categories:
- · Lease for a Certain time
- · Periodic Lease
- · Lease for Agriculture and Manufacturing purpose
Lease
for Certain time:
The time may begin either from the date if
execution or from the date of a specific time in the future or any specific event in
future,
Periodic
lease:
The lease may be from month to month or from year
to year.
According
to section 106 of
transfer of property act, for ascertaining the term of the lease the section categories
into 2 categories:
Lease for agricultural and manufacturing Purpose:
Then the duration will be a lease from year to year
and in
Any other case the duration of the lease will be from
month to month.
When no fixed time is specified as duration but
it may be terminated at any time at the will of the lessor and less than the lessee
is called as tenant –at-will.
In this situation, the lessee has no certain and sure
estate and the lessor may pout him out anytime he pleased/want. Thus in tenant
–at-will the lease is not for f=certain time where neither party is sure about the duration of
time.
Tenant-at-sufferance:
Where the tenant continues to hold the possession
even after the expiry of the notice to quit then the tenant is not in legal possession and
he may be treated ads a trespasser but the law does not penalize such tenant by treating him as
trespasser and called such tenant as tenant at-sufferance. such tenant maybe
evicted any time without giving notice.
4) Consideration
In case of lease consideration
is in the form of either premium or rent.
Premium is a single and nonrecurring payment prior to the creation of tenancy also
known as salami.
Rent is a consideration paid periodically it need not be in the form of money it may be in the form of crop, services or anything of value and it must be certain.
Section 107: Lease how made
For
this purpose we can categories the lease into:
a) Lease for more than 1 year or year to year or
permanent basis
It must be executed by a registered document
between lessor and lessee
b) Lease for 1 year or less than 1 year or month to
month basis
It may be executed by 2 ways either by a
registered instrument or by oral agreement accompanied by delivery of
possession.
Exception:
State government by issuing a notification can also, direct that lease of immovable property other than leases from year to a year or any term exceeding one year or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.
Section 111: determination of Lease
A lease of immovable property determines:
(a) By the efflux of the time-limited
The lease is transfer of demise for a certain period
.after the expiry of the period specified the lease is automatically
determined.
However, if there is a stipulation of renewal the lease may continue even after the expiry of the fixed period. In such a case, notice is required.
(b) By happening of specific event
The lease may be made subject to certain
condition such as happening of an event .if the term is limited conditionally
on the happing of certain event, the lease determines on happing of such event.
(c) Termination of lessor interest in property
Where lessor interest in the immovable property
is limited then the lease come to an end upon the termination of lessor
interest Thus where person is given authority to make lease the lease, made by
him is determined when that authority is
taken away.
Merger
means meeting of smaller interest with another interest, when the limited
interest becomes absolute, there is a merger because smaller interest merge with
larger interest.
It is based
on the principle that nobody can be the landlord and tenant at the same time
thus for the merger, it is necessary that there is a union of two unequal interest
at the same time and in the same person.
(e) By Express surrender
Surrender
is opposite to merger. In a merger, larger interest merges with the smaller
interest while in surrender smaller interest unite with larger interest
In merger
tenant acquires reversion while in surrender landlord acquires lease, It is base on the principle that the two sets can not co-exist being incompatible
and inconsistent.
(f) By implied surrender
Surrender
is implied if it takes place by operation of law.
By operation
of law, there is surrender:
·
By creation
of a new lease, or
·
By
relinquishment of possession
When the
lessee accepts from the lessor new lease of the same property which is already
in the lease to him i.e., called implied surrender of the earlier lease and former the lease is impliedly determined
The
delivery of possession may be either actual or constructive.
(g) By forfeiture
Lease may be forfeiture in 3 ways:
2) Denial of lessor’s title
3) Lessee adjudicated insolvent
1) Breach
of any express condition
For
forfeiture there must be two essential:
·
Their must
be express condition between the lessor and lessee.
· The lessor on such breach of condition shall take back the property.
2) Denial
of lessor’s title
When the lessee deny the title of the lessor r in case the lessee renounces his character y setting up the title of the lessor in the third person or in himself then the lease maybe determined.
3)
Lessee adjudicated insolvent
By insolvency of a lessee
there are two essential:
·
Lessee
adjudicated insolvent
· The term of the lease provided that lessor may re-enter to the premise on happening of such act.
Rights and Liabilities of Lessor and Lessee
Section 108 of Transfer of Property Act, 1882
does not provide for any specific right of the lessor. But since rights and
duties are correlative, the liabilities of lessee would identically mean rights
of the lessor.
1) Duty to disclose latent material defect:
Lessor must
disclose a latent material defect in the property to the lessee. A defect in the
property is latent if it is not apparently visible but the lessor has knowledge
of it. Such a defect is material if it is of substantial nature.
Lease is
transfer of the right to enjoy or use an immovable property. Without
possession, enjoyment of property is not possible. The lessor is, therefore, liable
to deliver the possession of the property to the lessee so that he may use it or enjoy
it.
Lease being
transfer of the right of enjoyment in immovable property, it is the implied duty
of the lessor to ensure the lessee a peaceful enjoyment of this right. Accordingly,
the lessor is deemed to have contracted that during the term of the lease if the lessee
continues to pay the rent, he is entitled to possess the property without any
interference. ‘Quiet Enjoyment’ means ‘no interference or objection’ in the
lessee’s possession of the immovable property during the period of the lease.
Rights and Liabilities of Lessee
The rights of a lessee under the transfer of
property act, 1882 are as follows:
1) Right to Accretions:
Accretions
can be defined as the additions made to the property either by a human being or
by the operation of natural forces. If during the continuance of lease some
accretion has been made to the property, it is then presumed to be the part of
the property.
Where the
property is rendered substantially and permanently unfit for use due to fire,
flood, violence, mob, or other uncontrollable reason, the lessee has the right
to get the lease terminated before the expiry of the term.
The lessor has no obligation to repair the property. But under an express agreement, the lessor may take the obligation of making necessary repairs in the tenanted property.
4) Right to deduct outgoings:
It is the
duty of the lessor to pay the outgoings. Where a lessee makes a payment of the
public charge in respect of tenanted property, he has the right to deduct the
amount from the rents.
After
termination of the lease, the lessee has the right to remove the fixtures made by
him during the continuance of the lease. The lessee can remove and take out
these fixtures even after the determination of the lease.
After the termination of the lease, the lessee is
entitled to remove the crops sown by him during the subsistence of the lease.
7) Right to assign his Interest:
A lessee
has the right to assign or transfer his right of enjoyment in the property. The right of enjoyment of immovable property is a property owned by the lessee. He can
transfer it to any other person provided there is no prohibition imposed by the
lessor.
1) Duty to disclose facts:
Just as the lessor has a duty to disclose a latent material defect to the lessee, the lessee to is bound to disclose to the lessor any fact known to him which increases the value of the property.
2) Duty to pay rent:
The lessee
is bound to pay the rent or premium as stipulated in the lease deed. But, the
tenant’s liability to pay rent begins from the date on which he takes the
possession and not from the date from which the landlord signs the deed.
The lessee
is bound to keep and maintain the property in the same condition in which it
was given to him. He has, therefore, to take reasonable care in keeping the
property in good condition.
If the
lessee comes to know that encroachment has been made on the property in his
possession, it is a duty to inform the lessor so that he may take proper action.
5) Duty
to use property reasonably:
The lessee has a duty to use and enjoy the tenanted property as a person of ordinary prudence would use his own property.
6) Duty not
to erect permanent structure:
The lessee cannot erect any permanent structure on the leased property without the consent of the lessor. If a lessee makes permanent constructions without the lessor’s consent, he is entitled to remove them without causing damage to the tenanted property. If the permanent structures on the leased property are not removed by the lessee, then on the expiry of the lease, they belong to the landlord.
7)
Duty to restore Possession:
Upon the
expiry of the term or determination of the lease before its expiry the lease
must re-transfer the possession to the lessor. It is the duty of the lessee to
vacate the possession and restore it to the lessor after the expiry of the term.
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