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Lease of Property in India: Meaning, Essentials, Rights- Transfer of Property Act

A lease of an immovable property can be defined as the transfer of right to enjoy property made of a certain time, express or implied, or which is made in perpetuity, or in consideration of a price paid or promised to be paid, to the transferor by the transferee, who accepts the transfer on such particular terms.[1]

The transferor is called as the lessor, the transferee is called as the lesee, the price is called as the premium and the money, share, service or other thing to be rendered is called as the rent.

Section 105 of transfer of property act, 1882; it defines Lease.

Essentials elements of Lease

1) The parties (the lessor and the lessee): In a lease there is always a requirement of two parties; the parties are respectively called as the lessor and the lessee. Lease is based on an agreement made by two persons who are competent to contract. A lessee can be a juristic person that is, a company or a registered firm etc. If a lease deed is executed by one of the partners of behalf of the firm, the lessee is the firm not the partner. In the case of, Raunak Ram V. Pishori Singh[2], the Supreme Court held that, after the retirement of that particular partner the lease continues to be exists and there is no subletting by partner in favour of the firm. The firm continues to be the lessee.

2) The Demise: The Right to enjoy Immovable property: Lease is the transfer of limited estate. This limited estate which is ‘right of enjoyment’ of property, is called the demise. So, in lease, the demise is the subject matter of transfer. So, in the case of Girdhari Singh.V. Megh Lal Pandey[3], it was held that; the essential characteristic of lease is that the property is occupied and the corpus of which does not, by reason of the user, disappear.

3) The Term: The Duration of Lease: The period for which the right to use the property is transferred is called the term of the lease. The term may be any period of time, longer or shorter, or even for perpetuity, but it has to be mentioned in the deed. In the case of, Chapsibhai.V. Puroshottam[4], the Supreme Court held that, a lease is permanent lease because the rights of the lessee or tenant are heritable; such leases are not intended to be only for the life time of the lesee.

4) Consideration: Premium or Rent: Consideration in lease may be premium or rent. The consideration paid at one time is called as the premium. But the consideration paid periodically is called as the rent.

Determination of Lease

Section 111 of transfer of property act, 1882 defines determination of lease.

Determination of lease means the termination or the end of the lease. It means that the legal relation between the lessor and the lessee comes to the end.

1) By lapse of time: Lease is transfer of demise for a certain period. After expiry of the period specified in the lease, the lease is automatically determined. In the case of, Renuka Seal .V. Sabitri Dey[5], in this case, it was held that, the lessee could not be treated as a tenant by way of holding over after expiry of the original lease period nor it was a monthly tenancy.

2) By happening of specified event: The term of the lease may be made subject to certain condition happening of some specified event. If the term is limited conditionally on the happening of the future event, the lease determines upon the happening of that event.[6]

3) Termination of lessor’s interest: Where the lessor’s own interest in the immovable property is limited, the lease comes to an end upon the termination of lessor’s interest.

4) By Merger: It means meeting of one interest with another interest. During the tenancy period, a tenant has only a limited interest namely, ‘right to enjoy the property’, Section 111 (d) incorporates the principle of the maxim; Nemo potest esse tenens et deminus, which means “nobody can be both landlord and tenant of the same property”. If the two interests are equal and co exists simultaneously, there is no merger.

5) By express surrender: In surrender the smaller interest unites with the larger one. When a lessee vacates the premises before expiry of the term, lessee’s right to enjoy the property (smaller interest) reverts back to the lessor’s reversion (larger interest). Surrender may be express or implied.

6) By Implied Interest: Surrender is regarded as implied surrender if it takes place by operation of law. So, according to the operation of law, there is surrender, when there is creation of a new lease or by a relinquishment of possession.

7) By Forfeiture: It means loss of lessee’s right to use the property by some fault on his part. A lessee is determined by forfeiture on following grounds:

I) Breach of express condition by lessee: When the lessor imposes on the lessee any express condition and lessee fails to perform that condition, there is breach of condition by lessee.

II) Denial of landlord’s title: Lessee has only limited right in respect of tenanted property; he is not the owner. When the lessee claims to be the owner of the tenanted property, he denies the status of the landlord. But by doing so he also denies his own status of tenant.

III) Insolvency of the lessee: Insolvency of the lessee by itself does not forfeit the lease. There must be a stipulation between the parties the lessee’s right shall be lost in case of his solvency and lessor would be entitled to resume possession.

Rights and Liabilities of Lessor and Lessee

Section 108 of The Transfer of Property Act, 1882 defines rights and liabilities of lessor and lessee respectively.

The rights and liabilities of lessor and lessee in the section 108 of transfer of property act, 1882 are in the absence of any contract to the contrary.

Rights of Lessor:

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.

Liabilities of Lessor:

1) Duty to disclose latent material defect: Lessor must disclose latent material defect in the property to the lessee. Defect in the property is latent if it is not apparently visible but the lessor has knowledge of it. Such defect is material if it is of substantial nature.

2) Duty to give possession: Lease is transfer of the right to enjoy or use an immovable property. Without possession, enjoyment of property is not possible. Lessor is therefore, liable to deliver the possession of property to lessee so that he may use it or enjoy it.

3) Covenant for quiet enjoyment: Lease being transfer of the right of enjoyment in an immovable property, it is implied duty of lessor to ensure the lessee a peaceful enjoyment of this right. Accordingly, the lessor is deemed to have contracted that during the term of lease if 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 immovable property during the period of lease.[7]

Rights and Liabilities of Lessee:

The rights of 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 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.

2) Right to avoid lease on destruction of 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.

3) Right to deduct cost of repairs: 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.

5) Right to remove fixtures: After termination of 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.

6) Right to remove crops: After the termination of 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 right to assign or transfer his right of enjoyment in the property. Right of enjoyment of an 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.

The liabilities of lessee under the transfer of property act, 1882 are as follows:

1) Duty to disclose facts: Just as the lessor has duty to disclose a latent material defect to lessee, the lessee too 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.

3) Duty to maintain property: 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.

4) Duty to give notice of encroachment: If the lessee comes to know that an encroachment has been made on the property in his possession, it is 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 lessee, then on the expiry of 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 expiry of the term.

[1] Dr RK Sinha, The Transfer of Property Act (12 edn, Central Law Agency 2011) 408

[2] AIR 1990 SC 1892

[3] (1918) 45 Cal 87

[4] AIR 1971 SC 1878

[5] AIR 2008 Cal 75 (DB)

[6] Dr RK Sinha, The Transfer of Property Act (12 edn, Central Law Agency 2011) 408

[7] Dr RK Sinha, The Transfer of Property Act (12 edn, Central Law Agency 2011) 432

For more articles on Transfer of Property Act, Click Here.

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Author Details: Rakshandha Darak (2nd year student of B.A. LL.B. (Hons.) at Alliance University, Chandapura)

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