LEASE

Secs. 105-117

Meaning of lease:

1. Acontract by which one party conveys land, property, services, etc. to another for a
specified time, usually in return for a periodic payment.

2. A lease is a transfer of a right to enjoy the property. The consideration may be a price or
a rent. The rent may be either money or share of crops, service or anything of value, to
be rendered periodically by the transferee to the transferor.

3. A lease of immoveable 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 such terms. Lessor, lessee, premium and rent defined.—The
transferor is called the lessor, the transferee is called the lessee, the price is called the
premium, and the money, share, service or other thing to be so rendered is called the rent.
(Sec. 105 of transfer of property Act)

Essentials of Lease.

1. Parties must be competent: The parties in a lease agreement should be competent to enter
into a contract. Lesser should be entitled to a property and have absolute rights over that
property.
(a)Transferor is called as Lessor
(b)Transferee is called as Lessee

2. Right of possession: Ownership rights are not transferred in a lease, only the possession
of the property is transferred.

3. Consideration: Consideration for a lease can be taken in the form of a rent or premium.
(a)The price is called as premium
(a)Money share service is called as rent

4. Acceptance: Lessee, who is to get the interest in the property after lease, has to accept the
lease agreement along with the time period and terms & conditions imposed on the
transfer.

5. Time Period: Lease always takes place for a particular time period which is to be
specified in the lease agreement. It can be relaxed at the option of the lessor.
 6. Transfer of right in the property – An interest in the subject property is to be created in
favour of the ‘lessee’ by the ‘lessor’

Difference between agreement to lease and lease:-

An agreement to lease does not give rise to right in rem. It creates only a personal obligation,
which may be enforced by a suit for specific performance under specific relief Act, provided that
agreement to lease is in writing and is accompanied by delivery of possession. In this respect, it
materially differs from an agreement to sell. The latter agreement may be specifically enforced
even if oral and unaccompanied by delivery of possession, but not in respect of agreement to
lease. A lease does but an agreement for lease does not establish the legal relationship of
landlord and tenant between the parties. This is so, because a lease is a transfer of a right to enjoy
property, whereas an agreement to lease is not.

Registration of the instrument of Lease

1. A Lease of immovable property from year to year or for any term exceeding one year or
receiving a yearly rent can be made only by a registered instrument.
2. All the other leases of immovable property may be made either by a registered instrument
or by oral agreement accompanied by delivery of possession.
3. Any lease of immovable property made by a registered instrument should by executed by
both lessor and the lessee
Madya Pradesh High Court has held that rent note not being covered by Section 17(1)(d) of the
Registration Act, its registration is not compulsory and the document does not come within the
mischief of Section 107 T.P Act
A lease executed included a sub-lease as per section 107 of the transfer of property act and such
a document required compulsory registration

Effect of non-registration

1. If the instrument is in writing but not registered, the doctrine of part performance may be
invoked to protect possession taken to the lease.
2. A specific relief act for specific performance be maintained.
3. The unregistered instrument may be admitted in evidence to show the nature of the
possession.
4. But the unregistered instrument cannot be received in evidence for proving the duration
of the lease or the rate of rent.
5. It cannot also be used to sustain a suit for damages for breach of any of its terms.
Unregistered Lease Deed is admissible for the purpose of establishing what damages the landlord
suing for arrears of rent is entitled to by way of rent(Lahore court, 1931).

Rights and liabilities of the lessor

 1. The lessor is bound to disclose all material defects in the property to the lease. He must
also disclose all the known latent defects in the property to the lessee. However he need
not disclose the defects which are discoverable, with ordinary care. This is based on the
principle of ‘Caveat Emptor’.
2. The lessor is bound to put the lessee in possession of the leased property. The lessee
however must first request the lessor to put him in possession. If the lessee does not do
so and fails to take possession, then he must pay the rent for lease.
3. The lessor must indemnify the lessee for all losses incurred by the latter due to the
interruption in the enjoyment of the property. In other words, it is an implied covenant
that lessee will have free and quiet enjoyment of the property. The covenant for title runs
with the land.

Rights and liabilities of lessor [S 108(a) to (c)]

1) the lessor is bound to disclose to the lessee, any material defect in the property with
reference to its intended use which the former is and latter is not aware, and which the
latter could not with ordinary care discover.S 108(a).
A defect in the lesser's title can not be said to be material defect in the property within the
meaning of this clause.

2) the lessor is bound on the lessee's request, to put him in possession of the property.S
108(b)

3) The lessor is also deemed to contract with the lessee that if the latter pays the rent
reserved by the lease and performs the contract binding on the lessee, he may hold the
property(during the time limited by the lease) without interruption: S 108(c).
This covenant is called a covenant for quiet enjoyment, and is absolute and
unconditional. It protects the lessee against the disturbance of his possession by lessor or
by person claiming under the lessor, but not against any disturbance by a trespasser.

Rights of lessee
1) If during the continuance of the lease, any accession is made to property, such
accession is deemed to be comprised in lease.

2) If by fire, tempest or flood, or violence of an army or of mob or other irresistible

force, any material part of the property is wholly destroyed or rendered substantially
and permanently unfit for the purpose for which it was let, at the option of the lessee,
the lease becomes void.(However, if injury is occasioned by the wrongful act or
default of lessee, he is not entitled to avail himself of this benefit).

3) If the lessor neglects to make within a reasonable time after notice, any repairs which
he is bound to make to the property, the lessee may make the same himself, and
deduct the expense of such repairs with interest from rent or otherwise recover it from
the lessor.
 4) If the lessor neglects to make any payment which he is bound to make, and which, if
not made by him, is recoverable from the lessee or against the property, the lessee
may make such payment himself and deduct it with interest from rent or otherwise
recover it from the lessor.

5) the lessee may even after the termination of the lease, remove at any time whilst he is
in possession of the property leased, all things which he has attached to the earth,
provided he leaves the property in the state in which he received it.

6) When a lease of an uncertain duration determines by any means except due to fault of
lessee,he or his legal representative is entitled to all the crops planted or sown by the
lessee and growing upon the property when the lease determines, and to free ingress
and egress to gather and carry them.

7) The lessee may transfer absolutely or by way of mortgage or sub-lease,the whole or

any part of his interest in the property and any transferee of such interest or part may
again transfer it. In such a case the lessee does not by reason only of such transfer
cease to be subject to any of the liabilities attaching to the lease.

Liabilities of lessee
1) the lessee must disclose to lessor any fact which materially increases the value of
such interest.

2) lessee must pay the premium and rent to lessor at proper time and place.

3) The lessee must keep the property in good condition. (reasonable wear and tear
excepted).

4) If lessee becomes aware of any encroachment on the property or any proceeding to

recover the property, he must inform the lessor about the same with reasonable
diligence.

5) The lessee must use the property as a man of ordinary prudence would use his own,
but he cannot use it for any other purpose or commit any act which may destroy or
permanently injure the property.

6) Without the lessor's consent, the lessee can not erect any permanent structure on the
property.

7) When the lease is over, the lessee must put the lessor in possession of the property.

Difference between lease and licence:-

Ordinarily a lease is a grant of property, for a time by one who has a greater interest in the
property, the consideration being usually the payment of rent. A licence, on the other hand is
governed by Indian easement Act, and is a permission to do some act which without such
permission, would be unlawful. Both have certain elements in common, but the following are the
points of difference between the two:

1) In a lease there is a transfer of an interest in the immovable property. In the case of a license,
there is no transfer of interest, although the licensee acquires a right to occupy the property.
For determining whether an interest in land is transferred or not, the main test is the delivery of
exclusive possession. If the exclusive possession is not with the grantee, and the subject matter is
in control and possession of grantor, then it is a license and not a lease. It is always open to a
licensor to have access to property, possession being with him, and not transferred to the
licensee.

2) If during the continuance of the lease, any accretion is made to the property, such accretion is
deemed to be comprised in the lease. A licensee has no property in the land, and therefore he
acquires no right by accretion.

3) A lease is transferable and heritable. A licence being purely a personal privilege is non-
transferable and non- heritable.
An exception is made in the case of a licence to attend a place of public entertainment, which can
be transferred by licensee, unless a different intention is expressed or necessarily implied(S 56 of
Indian easement Act).

4) A lease can be terminated by forfeiture. There is no corresponding provision in the case of

licence in the Indian easement Act.

5) A lease can be terminated only in eight different ways as mentioned S 111 of transfer of
property Act. A licence can be revoked at pleasure, unless (a) it is coupled with transfer of
property and such transfer is in force; or (b) licensee acting upon the licence has executed a work
of permanent character and incurred expenses in the execution. Therefore, unlike a lessee, a
licensee is not entitled to a notice to quit before eviction.

6) Lessee's interest is not liable to be defeated by subsequent transfer of leased property as per S
109 of Transfer of property Act. A licence is determined when the grantor makes an assignment
of subject matter of licence as per S 59 of Indian easement Act.

7) A lessee is entitled to maintain a suit in his own name against trespassers and strangers. A
licence does not create an interest in property in favour of licensee and therefore, he is not
entitled to maintain suits in his own name.

8) Death of either party does not affect a lease, where as a licence is terminated in such
circumstances

1. In Sohan Lal Naraindas v. Laxmidas Raghunath Gadir, (1971) it was stated in the
agreement that the loft "was given on lease and licence basis for use and occupation".
The Supreme Court dwelling upon the impugned instrument, observed: "An attempt was
deliberately made to camouflage the true nature of the agreement, by reciting in several
clauses that the agreement was for lease and licence and it emphasise the pretence, it was
 also recited that the defendant was not to have any right as tenant or subtenant In respect
of the loft.
2. Errington vs. Errington, Lord Denning observed that test of exclusive possession should
not be done but the test of intention in must to determine the lease.
3. Booker v. Palmer, the court held that there is an intention there to create a relationship of
landlord and tenant appears to be quite impossible. There is one golden rule which is of
very general application, namely, that the law does not impute intention to enter into legal
relationship where the circumstances and the conduct of the parties negative any intention
of the kind.
4. Delta International Ltd vs Shyam Sunder Ganeriwalla And Anr , the supreme court held,
In tenancy the tenant is granted right to enjoyment of the property and there is grant of
consideration under section 105 of transfer of property of act on other hand licence under
section 52 of Indian easements act excludes from its pale any transaction.

Determination of lease Sec. 111 of Transfer of Property Act

A lease terminates in eight ways:
1) by efflux of time.

2) If the duration of the lease is until the happening of some event-when that event happens.
Thus for instance, if a lease is for twenty years and at the same time made conditional upon
life of lessee, the lease terminates on the death lessee, even if death of lessee takes place
within stipulated period of twenty years; if the lessee does not die within this period lease
terminates at the end of the period.

3)If the lessor's interest in the property is to terminate on the happening of some event- when
that event happens. This clause operates in cases where the lessor has only limited interest or
limited power to grant a lease. Thus it has been held that a lease by hindu widow who is
entitled only to a life-estate terminates on her death.

4) Merger that is when the interest of the lessee and the lessor in the whole of the property
becomes vested at the same time in one person in same right. Merger may take place either
by act of parties or by operation of law.

5) By express surrender by lessee.

6) By implied surrender by lessee.

Thus if a lessee accepts from his lessor a new lease of leased property to take effect during
the continuance of existing lease, this is an implied surrender of former lease, and such lease
terminates thereupon.

Doctrine of merger

The doctrine of merger is attracted when a leasehold and revision coincide.  If the lessee
purchases the lessor’s interest, the lease is relinquished as the same person cannot at the same
time be both landlord and tenant.  The doctrine of merger is based on the principle of union of
two conflicting interests which cannot be held by one person at the same time.  Ramesh Kumar
Jhambh  v.  Official Assignee, High Court Bombay 1993

Implied surrender

There can be implied surrender, if the lessor grants a new lease to a third person with the assent
of the lessee under the existing lease who delivers the possession to such person or where the
lessee directs his sub-tenant to pay the rent directly to the lessor.  P.M.C. Kunhiraman Nair  v. 
C.R. Nagaratha Iyer, 1993

7) By forfeiture

7) on the expiry of a notice to terminate the lease, or to quit (or of intention to quit) the
property leased duly given by one party to the other.

Tenancy by holding over Sec. 116:

1. If a lessee or under-lessee of property remains in possession thereof after the
determination of the lease granted to the lessee, and the lessor or his legal
representative accepts rent from the lessee or under-lessee, or otherwise assents to
his continuing in possession, the lease is, in the absence of an agreement to the
contrary, renewed from year to year, or from month to month, according to the
purpose for which the property is leased, as specified in section 106. For example, A
lets a house to B for five years. B underlets the house to C at a monthly rent of Rs. 100. The five
years expire, but C continues in possession of the house and pays the rent to A. C's lease is
renewed from month to month
2. This section enunciates the effect when the lessee or an under-lessee of a property stays in
the possession after the determination of lease and the lessor or his legal representative
assent to the continuation in possession or accept rent, then the lease will be renewed as
per section 106 of the Transfer of Property Act, if the lessor and lessee do not create any
agreement.
3. Tenancy by holding over determined, where the possession must be continued with
the assent of the lessor or his legal representatives, the consent must be definite in
pursuance to the continuation of tenancy. There is a requirement of consensus ad
idem, ie., both lessor and lessee must have the same idea, there should not be any
room for any loop holes and inadequate inferences. And finally acceptance of rent
must always be in the clear recognition of the acceptance of tenancy.

Tenancy-at-will:
Tenancy at will is a property tenure that can be terminated at any time by either the tenant or the
owner or landlord. It exists without a contract or lease and usually does not specify the length of
a tenant's duration or the exchange of payment
Tenancy at will where the tenant occupies the property with the consent of the owner but without
necessarily a written contract or lease.
Tenancy at will is terminable /determined in the following manner:
 Terminable by either of the parties (Landlord or Tenant / lessee)
2. Death or the landlord or the tenant/lessee.
3. When a tenant puts the possession on sub lease /under lease.
4. When the Tenant/ Lessee acts inconsistent with the will to continue.
5. Alienation of tenancy

Tenancy at sufferance:
Tenancy at sufferance is an agreement in which a property renter is legally permitted to live on a
property after a lease term has expired but before the landlord demands the tenant vacate the
property. If a tenancy at sufferance occurs, the original lease conditions must be met including
the payment of any rents. Otherwise, the tenant can be evicted at any time without notice

Difference between tenancy by Holding over and tenancy-at-sufferance:

Retention of possession:
Tenancy by holding over: With the consent of landlord or his legal representative
Tenancy- at-sufferance: No consent

Interest in the leasehold

Tenancy by holding over – Has some interest
Tenancy -at-sufferance – No interest

Power to alienate tenancy

Tenancy by holding over – Transferable and heritable
Tenancy-at-sufferance – Neither transferable nor heritable

Notice  for ejectment

Tenancy by holding over – Notice as with respect to provision U/S 106 of the act
Tenancy –at- sufferance – No notice required

Tenancy in common:
Tenancy in common is an arrangement where two or more people share ownership rights in a
property or parcel of land. The property may be commercial or residential. When a tenant in
common dies, the property passes to that tenant's estate. Each independent owner may control an
equal or different percentage of the total property. Also, the tenancy in common partner has the
right to leave their share of the property to any beneficiary as a portion of their estate. Contract
terms for tenants in common are detailed in the deed, title, or other legally binding property
ownership documents.
A valid notice must satisfy the following three requisites viz-
1. It must expressly convey the intention to terminate the tenancy.
2. It must specify the date on which the tenancy is to expire.
3. It must be unconditional. Thus a notice given by a tenant that he will quit when he gets
another suitable accommodation is not valid.
In case of a sale, the language used in the sale deed has always been subject to judicial scrutiny
in order to infer whether the transaction is sale or otherwise. In khiria Devi v. Tameshwar Rao,
the sale deed provided that all rights and privileges in and concerning the suit property either in
praesenti or accruing in future as vesting in the vendor, were the subject matter of sale and that
the vendor, retained no right of any kind whatsoever. The court held that the right of
reconveyance under contract for sale was transferred by impugned sale deed. Further, in the
matter of termination of tenancy, the requirement of notice is most relevant for its determination.
In Kulkari Patterns Pvt. Ltd. v. Vasant Baburao Ashtekar the Supreme court held that in case of a
company, notice as required by section 106 of the Act, could be sent by registered post in the
name of the company.