Lease of immovable property
Property Law · Unit IV · Topic 15 of 21 · 8 min read
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1. Definition: section 105
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 those terms. The transferor is the lessor, the transferee the lessee, the price the premium and the periodical payment the rent.
- Transfer of a right to enjoy: a partial transfer; ownership stays with the lessor, who keeps the reversion.
- For a certain time, express or implied, or in perpetuity.
- Consideration: premium, rent, or both.
- Acceptance by the lessee.
2. Duration and notice: section 106 (as amended in 2002)
In the absence of a contract or local law or usage to the contrary:
- a lease for agricultural or manufacturing purposes is deemed a lease from year to year, terminable by either party by six months' notice;
- a lease for any other purpose is deemed a lease from month to month, terminable by either party by fifteen days' notice.
The Transfer of Property (Amendment) Act, 2002 removed the old technicality that the notice had to expire with the end of a month or year of the tenancy. Now the period runs from the date the notice is received; a notice is not invalid merely because the period stated falls short of the required period, if a suit or proceeding is filed after the required period expires. Every notice must be in writing, signed by or on behalf of the person giving it, and either sent by post or delivered personally to the other party or a member of his family or servant at his residence, or, if that is not practicable, affixed to a conspicuous part of the property.
3. How a lease is made: section 107
- A lease from year to year, or for any term exceeding one year, or reserving a yearly rent: only by a registered instrument.
- All other leases: by registered instrument or by oral agreement accompanied by delivery of possession.
An unregistered deed for a term above one year does not create the lease it describes, but if the tenant has been let into possession and pays rent, a tenancy from month to month (or year to year) arises by implication under s.106.
4. Rights and liabilities: section 108
Liabilities of the lessor.
- (a) to disclose any material latent defect in the property of which he is aware and the lessee is not and could not with ordinary care discover;
- (b) on the lessee's request, to put him in possession;
- (c) the implied covenant for quiet enjoyment: if the lessee pays the rent and performs the contract, he may hold without interruption during the term.
Rights of the lessee.
- (d) the benefit of any accession to the property during the lease;
- (e) if the property is wholly or substantially and permanently destroyed or rendered unfit by fire, tempest, flood, violence of an army or mob, or other irresistible force, the lease is, at the lessee's option, void, unless the injury results from his own wrongful act;
- (f) if the lessor fails, after notice, to make repairs he is bound to make, the lessee may make them and deduct the expense from the rent;
- (g) if the lessor neglects to make a payment he is bound to make (such as revenue), the lessee may pay it and deduct it, with interest, from the rent;
- (h) to remove fixtures he has attached, while in possession and at any time up to the end of the lease, leaving the property in the state in which he received it;
- (i) where a lease of uncertain duration ends without his fault, to the crops he sowed and growing at the end, with free access to gather them;
- (j) to transfer his interest by sub-lease, mortgage or assignment, the lessee remaining liable under the lease. (A term in the lease, or a Rent Act, may forbid subletting.)
Liabilities of the lessee.
- (k) to disclose any fact which he knows and the lessor does not, and which materially increases the value of the interest;
- (l) to pay the rent or premium at the proper time and place;
- (m) to keep the property in as good condition as it was in when he was put in possession, subject to reasonable wear and tear and irresistible force, to allow the lessor to enter and inspect, and to make good defects within three months of notice;
- (n) to give the lessor notice of any encroachment or interference with his rights;
- (o) to use the property as a person of ordinary prudence would use it if it were his own, not to use it for a purpose other than that for which it was leased, not to commit waste;
- (p) not to erect any permanent structure without the lessor's consent, except for agricultural purposes;
- (q) at the end of the lease, to put the lessor into possession.
5. Determination: section 111
- (a) efflux of the time limited;
- (b) the happening of a specified event;
- (c) the termination of the lessor's interest, or his power to dispose of the property;
- (d) merger: the interests of lessee and lessor vest in one person in the same right;
- (e) express surrender, and (f) implied surrender, as where the lessee accepts a new lease taking effect during the old one;
- (g) forfeiture: where the lessee breaks an express condition providing for re-entry, or renounces his character as lessee by setting up title in a third person or himself, or is adjudicated insolvent and the lease provides for re-entry; and in each case the lessor gives written notice of his intention to determine the lease;
- (h) expiry of a notice to quit.
For forfeiture for non-payment of rent, the court may grant relief against forfeiture if the lessee pays the arrears, interest and costs (s.114); for other breaches s.114A requires a notice specifying the breach before a suit.
6. Holding over: section 116
If a lessee or under-lessee remains in possession after the lease has determined, and the lessor or his legal representative accepts rent from him or otherwise assents to his continuing in possession, the lease is, in the absence of agreement to the contrary, renewed from year to year or month to month according to the purpose, as in s.106. Mere continuance without assent makes him a tenant at sufferance. Acceptance of rent after a suit for eviction is filed is not by itself assent.
7. Lease and licence
A licence (s.52, Indian Easements Act, 1882) is a permission to do something on another's land which would otherwise be unlawful; it creates no interest in the property. A lease transfers an interest. In Associated Hotels of India Ltd. v. R.N. Kapoor, 1959 INSC 89, AIR 1959 SC 1262, the respondent occupied two rooms in the Imperial Hotel, Delhi, under a document described as a licence. The Court held it was a lease, and stated the tests:
- the substance of the document, not its form or label, is decisive;
- the real test is the intention of the parties: whether they meant to create an interest in the property or only a personal permission;
- exclusive possession is an important indication of a lease but is not conclusive;
- if the document creates an interest, it is a lease; if it only permits another to use the property while legal possession stays with the owner, it is a licence.
Differences: a licence is personal and not transferable, a lease is transferable; a licence is generally revocable, a lease is not before its term; a licensee cannot sue in his own name for trespass, a lessee can.
8. Problem
L lets a shop to T for a stationery business by an oral agreement, with possession. Two years later T starts selling firecrackers from it and builds a permanent mezzanine without asking L. L wants to evict T.
Issue. Nature of the tenancy, T's breaches, and how L can end the lease.
Law. Sections 106, 107, 108(o) and (p), 111(g) and (h).
Application. An oral lease with possession is valid only for a term not exceeding one year; continuing occupation on monthly rent makes this a month-to-month tenancy under s.106. Using a stationery shop to store explosives is use for a different purpose and not as a prudent owner would (s.108(o)); the mezzanine breaches s.108(p). There is no written re-entry clause, so forfeiture under s.111(g) is not available for these breaches.
Conclusion. L should serve a written fifteen days' notice to quit under s.106 and sue for possession after it expires, claiming damages for the breaches. Local rent control law, where it applies, may add its own grounds and procedure.
How this is examined
Ten marks: s.108 rights and liabilities of the lessee (or lessor), introduced by the s.105 definition. Short notes: holding over; determination of lease; lease and licence with Associated Hotels; notice under s.106 after the 2002 amendment.
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