Concept of Lease under Transfer of Property Act, 1882

CONCEPT OF LEASE UNDER TRANSFER OF PROPERTY ACT , 1882

Chapter V of this act deals with leases of immovable property consisting of 14 section from section 105 to section 117.

According to section 105 a lease of immovable property is a transfer of right of possession to enjoy such property from transfer to transferee for a stipulated period of time in return of a price paid by the transferee.

In the case of B Arvind Kumar v. Govt. Of India (2007) The Honorable Supreme Court held that lease of of immovable property is a transfer of right to enjoy the property for which the price is paid.

Essential elements of a transaction of lease are:

(i) Parties to lease:

To constitute a valid lease there must be two parties involved i.e lesser(the transferor) and the lessee the( transferee ). A lease takes place in an agreement between the owner of a property and the person who offers to take that property for a span of time on payment of consideration the person transferring the right of enjoyment of property is called lesser and to whom the right is is transferred is called lessee.

(ii) Subject matter of lease:

This clause states that sub matter of of lease must be
particularly immovable property. Section 3 of the Transfer of Property Act defines immovable property which constitutes that immovable property not only includes land ,buildings and Minerals but also the benefits to arise out of land.

In the case of T Lakshmipathi v. P Nithyananda Reddy Court held that there may be different elements in a lease. A lease of house or of a shop is a a lease not only of the superstructure but also of its site just like leaves of a factory along with its machinery.

(iii) There must be transfer of right:

For a lease to be valid there must be a transfer of right of enjoyment of the property. And right of enjoyment can only be done when there is transfer of possession.

(iv) Duration of lease:

The lease deed must always show the prescribed time for which the lessee is going to have the right of possession.

(v) Consideration:

In a lease lessor transfers the right of possession and in return the lessee pays rent or premium as a consideration for a lease.

In the case of CIT, Assam,Tripura and Manipur v. Panbari tea Co Ltd The honorable
supreme court made a distinction between premium and rent. When the whole amount paid is lump sum then it is known as premium. The consideration paid periodically is called rent.

Section 106 : Duration of lease

Section 106 provides for the duration of lease in case there is no lease agreement. Moreover it states that lease can be ended by both the parties to the lease by issuing a notice.

This section states two circumstances:

● Firstly, when a lease for agricultural or manufacturing purpose is deemed to be of year to year then it will attract a six month notice that the lease will end on the expiry of 1 year from date of the commencement of lease.

● Secondly, when a lease for any other purpose is deemed to be of the month to month , then it will attract a 15 day notice that the lease will end on the expiry of one month from the commencement of lease.

There is a clause in this section which constitutes that notice to quit should be written and conveyed to the other party who is supposed to abide by it.

In the case of Oasis Bar And Restaurant v PUmabala, AIR 2002 AP 465 Court held that where raw products were taken and eatables were sold it would amount to manufacturing process within the meaning of section 106.

In the case of Sachidananda v. Chettissery Khader AIR 2004 Court stated that where period of lease I was only for six months it could not be deemed to be Tenancy from year to year under section 106.

Execution of lease :

Section 107 contains mode of creation of lease

● When there is a lease of immovable property for a year or more more than this can be made simply by registered deed.
● All other leases of immovable property can be made by registered deed or and oral agreement accompanied by possession of that property.
● In the case of leases of multiple properties lease will be made by both lessor and lessee

In the case of food Corp of india v. Babulal Agrawal , AIR 2004 SCC 712 Court held that in the absence of of registration of lease deed its nature would only be that of monthly lease.

In the case of Gurdial Singh v. Raj Kumar Aneja AIR 2002 SC 1003 Court held that though registered and described as lease deed the court said that oral evidence was not allowable for the purpose of throwing light upon the real nature of the document.

In the case of Pradeep Bahal v. Kanwaljit Kaur The tenant was inducted into premised on a monthly rent note of Rs. 5000/- and subsequently the landlord claimed increased rent of Rs. 9000/- on the basis of rent note. That note was not signed neither registered nor signed. The court held that such document could not be termed as a rent note or a lease deed. Claim on the basis of rent note was not proper. The tenant was allowed to recover back the amount of rent which he had to pay to avoid eviction.

RIGHTS AND LIABILITIES OF LESSOR AND LESSEE

Section 108 states right and liabilities of both lessor and lesse

RIGHTS OF THE LESSOR:

1. Lessor has an absolute right to recover the rent from the lessee which was stated in the lease agreement.
2. Lessor has a right to take back the possession of his property from lessee if he breaks any condition which was stated in the lease.
3. Lessor has a right to recover the compesation amount from the lessee if there is any damage done to the property by lessee.
4. Lessor has a right to take back the possession of his property from the lessee on the expiry of the time period of the lease prescribed in the agreement.

LIABILITIES OF LESSOR:

(a) Duty of disclosure: Clause(a) states that t he lessor is suppose to disclose to lessee any material defect in the property which the lessee does not know and could not discover with ordinary circumstances.
(b)Duty to give possession: Clause (b) states that lessor is suppose to give right of possession over his property to the lease upon his request.
(c) Covenant for quiet enjoyment: Clause (c ) states that lessor has a right to enter into a contract with the lessee if he is ready to perform the contracts stated in the agreement the the lessee can enjoy the property for the rest of the time period without any interference with an obligation to pay the rent later on.

RIGHTS OF LESSEE:

1. Right to repair property: this clause state that is the lessor neglects to make any repairs which he is is obliged to make to the property after notice within a reasonable time the lessee may make the repairs himself and deduct the expense of such repairs with interest from the rent or otherwise recovered from the lessor .
2. Right to make payments: This clause provide that if lessor does not make any payment which he is obliged to make and which it is not made by him is recoverable from the lessee for against the property then the lessee can make such payment by himself and deduct it from the interest from rent aur recover it from the lessor.
3. Right to remove fixtures: This clause provide that lessee may even after the termination of the lease remove all the things which he has attached to the property provided that hi he gives back the property in the state which he received it.
4. Right to have benefit of crops: This Clause provides that When a lease is not of fixed duration in the lease agreement, lessee or his have a right to collect all the profits or benefits from the crops which were sown by the lessee at that property.

LIABILITIES OF LESSEE:

1. Duty to disclose facts: clause k of section 108 states that lessee is obliged to disclose all the material facts which might increase the value of the property which lessor is not aware of.
2. Duty to pay rent: clause L of section 108 state that lessee is bound to pay rent to lessor or his agent in the prescribed time period.
3. Duty to maintain property: clause m of section 108 states that lesee is bound to keep the property in the same condition that he initially got and also return the property in the same condition. Moreover lessee is bound to allow lessor or his agent at any point of time to inspect the property and give notice if there is any defect in it.
4. Duty to give notice of any encroachment: clause n constitutes that if lessee get to know about any e proceedings relating to the recovery of property then lessee is bound to give notice to lessor.

DETERMINATION OF LEASE

Section 111 of the transfer Property Act lays down the condition in which leaves is terminated.
Following are some of the conditions which determines lease :-
(i) Expiry of time : When a lease agreement is made then the time period of lease is fixed by both the parties. After the expiry of the term lease is terminated automatically on the last day of the fixed time period.
In maheshwar singh v. Radhamadhab Jew Thakur AIR 2007 Court held that if time period of lease is fixed then the notice to quit is not necessary.
(ii) By happening of specific event : This clause provides that lease will terminate in case where time of lease is limited depending upon the condition on happening of any event.
(iii) Lessor’s interest in the property: This clause states that lease of an immovable property is terminated if the lessor’s interest
to lease the property may cease.
In the case of Raghubir Singh v. Jeethu Mahton court held that lessor has a limited interest to grant lease then lease is determined with the loss of that interest.
(iv) By merger: This clause states that lease of immovable property determines if the interest of both lessor and lessee is vested in the same person at the same time in the same right.
(v) By implied surrender: When lessee creates new relationship (lease) with another lessor for the lease of property.
(vi) Breach of express condition: The lease terminate and lessor gets back the possession of the leased property if any express condition is breached by the lessee which was stated in the lease.

Author: sarthak udaipuria,
ICFAI LAW SCHOOL HYDERABAD, 3RD YEAR