LEASES OF IMMOVABLE PROPERTY

LEASE (SECTION 105)

A lease of an immoveable property is a transfer or handing over of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a value paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered intermittently or on specified or stated occasions to the transferor by the transferee, by whom transfer on such terms is accepted.

The person who transfers the property (transferor) is known as the lessor. The person to whom the transfer is made(transferee) is known as the lessee. The price here is acknowledged as the premium and the money, share, service, or any other thing so rendered in acknowledged as the rent.

A lease is the enjoyment of immovable property for a certain period of time or in perpetuity. But, in lease transfer of immovable property is not absolute like there it is in sale. The right of possession is separated from the right of ownership. In a sale, all the rights of ownership, which the transferor has, passes on to the transferee. In a lease, there is a partial transfer, that is a transfer of a right of enjoyment for a certain time.

A lease is transfer of an interest in an immovable property which is the subject matter of the lease and interest is the right to occupy and utilize the property for which the lease is given for period on terms and conditions as settled between the parties to lease agreement.

ESSENTIALS OF A LEASE AGREEMENT

2 Parties:

There should be two parties to a lease. The lessor and the lessee. Parties must be competent. The parties in a lease agreement should be competent to enter into a contract. Lesser should be authorised to a property and have absolute rights over that property.

Right of possession:

Ownership rights are not transferred in a lease, only the possession of the property is transferred or the right to use and enjoy the property.

Rent:

Consideration for a lease agreement can be reserved in the form of a rent or a premium.

Acceptance:

Lessee, who get the interest in the property after lease, has to agree to the lease agreement along with the time period and terms & conditions levied on the transfer.

Time Period:

Lease can continue for a certain time period which has to be specified in the lease agreement.

DURATION OF CERTAIN LEASES IN ABSENCE OF WRITTEN CONTRACT OR LOCAL USAGES (SECTION 106)

Section 106 provides for the duration of the lease in the absence of the lease agreement. It lays down that in the non-existence of a contract, lease can be terminated by both parties to the lease agreement by issuance of a notice to quit. The specified time period always initiates from the date notice to quit is received.

According to section 106 of TPA, 1882, if there is an absence of a written contract or a local usage to the contrary then in the case, a lease of immovable property for manufacturing and agriculture purpose will be from year to year and will be valid till the time until it was terminated by either of the party, by six months’ notice and if there is a lease any other purpose except agriculture or manufacturing will run from month to month then it will be terminated by 15 days’ notice.

LEASE HOW MADE (SECTION 107)

Section 107 states about lease how made. This section covers three aspects:

A lease of Immovable property for the term of 1 year or exceeding a year– This can only be prepared by a registered deed.

Another leases of Immovable property for the period less than one year can be either prepared by a registered deed or a verbal agreement or settlement, accompanied by delivery of possession of that property.

When the lease is of multiple properties that require multiple deeds, it will be made by both the parties of the lease.

DETERMINATION OF LEASE (SECTION 111)

Section 111 states concerning the determination of the lease, which sets down the methods to terminate lease:

Lapse of time – When the prescribed time of the lease expires, the lease is terminated.

Specified event – When there is a condition on termination of time of lease i.e. lease will terminate on happening of an event.

Interest – Lessor’s interest to lease the property may cease, hence the lease is terminated.

Same owner – When the interest and rights of both lessor and lessee are relocated or vested in the same person.

Express Submission– Happens when the lessee ceases to own an interest in the property and gets into a mutual agreement with the lessor.

Implied Submission – When the lessee goes into a contract with some other lessor for the lease of property, it is an implied surrender of the current lease.

Forfeiture – There are three ways in which a termination of lease can be done:

When there is a breach of an express condition by the lessee. The lessor may get the possession of his property back.

When lessee renounces his character or gives the title of the property to a third person.

When the lessee is called as insolvent by the banks, and the conditions provided for it, the lease will be held terminated.

Expiry of Notice to Quit – When the notice to quit by the lessor to the lessee expires, the lease will also expire.

RIGHTS OF LESSOR

Right to accretions- If during the tenancy period any further accession, accumulation or addition is made in the property whether naturally or artificially by the expense of the lessee. On the termination of the lease period, the lessee must surrender the accession to the lessor.

Right to collect rent- The lessor has the right to collect rent or any form of consideration as mentioned in the terms and conditions of the contract from the tenant without any form of interruptions.

LIABILITIES OF A LESSOR

Duty of disclose material defects- The lessor is bound to disclose to the buyer any material defect in the property. There are two kinds of defects:

So basically, a lessor is bound to disclose those apparent defects to the lessee, which are material with reference to the intended use of property or interfere with the enjoyment of the property by the lessee.

To give possession- The lessor must deliver possession of the leased property to the lessee on being requested by lessee. The lessor is not entitled rent unless he has fulfilled his obligations to put lessee in possession of the leased premises.

Covenant for quiet enjoyment- the lessor is deemed to contract with the lessee that if the lessee pays the rent and performs his own obligation, he may hold property during the time limited by the lease without any interruption. The Madhya Pradesh HC stated that actions such as physical interference or direct interference in the premises lead to a breach of enjoyment and interruptions.

RIGHTS OF A LESSEE

To deduct the cost for repair- If the lessor commits a breach of the covenants which the lessor is bound to do in that case the lessee can make such repairs by his personal expenses. The lessee after giving reasonable notice to the lessor, may do such repairs by his personal expenses, and recover the amount expended by him by him together with interest by deducting it from the rent.

Right to remove fixtures- Lessee has right to remove the fixtures or trees planted by him in the property during the time continuance of lease. However, after the termination of the lease deed the lessee is allowed to remove his possession in the property. It is considered optimal that property is left in the condition in which it was received by lessee.

Right to assign his interest- The lessee may transfer absolutely or by way of sub-lease or mortgage the whole or any part of his interest in the property.  However, if the lease deed restricts a lessee to dispense his interest then the lessee is barred to do so and even after the transfer of his rights, the lessee is still subordinate to all the liabilities related to the lease deed.

Right to have benefits of crops- a lessee who holds the lease of uncertain duration then, in that case, the lessee or his/her legal representative has been given the right to take benefits from all the crops cultivated by them.

LIABILITIES OF A LESSEE

Duty to disclose material facts- The lessee is bound to disclose facts concerning the lessors title which increase the value of lease and of which the lessor is ignorant.  In case if the lessee does not disclose material fact and the lessor undergoes any loss then the lessee is bound to compensate the lessor.

Duty to pay rent- The lessee’s liability for rent is regulated by term of the lease. He is bound to pay the rent or the premium to the lessor or his agent in the appropriate time and suitable place. In case the lessee fails to pay his/her rent then, in that case, the lessor can expel the lessee on the ground of non-payment of rent or file a suit for arrears of rent.

Duty to maintain the property- The lessee is bound to maintain and restore the property in the condition he was given the possession of the property. Only the changes caused by uncontrollable forces can act as an exception for this liability.

Duty to give notice of encroachment- duty of lessee to inform lessor when he becomes aware that any person has tried or is trying to damage the rights of the lessor or the title of the lessor is endangered then, in that case, the lessee must give notice to the lessor.

Duty to use the property in a reasonable manner- The lessee is under an obligation to use the property as a person of ordinary prudence would.

Duty not to erect any permanent structure- prohibits lessee from erecting any permanent structures except the agricultural cultivation without the consent of the lessor.

Duty to restore possession- On determination of the lease, the lessee is bound to the possession of the property to the lessor. If the lessee does not vacate the premises even after the expiry of the notice, then lessee remains liable for the rent.

CONCLUSION

The fundamental conception of a lease is that it is the separation of possession from ownership. For a lease of immovable property, there must be lessor and lessee. An agreement of lease must be executed lawfully by the parties to lease agreement.

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