LEASE UNDER PROPERTY LAW

 LEASE UNDER PROPERTY LAW

One of the modes of transferring property for a particular period of time is Lease. Lease is a transfer of an interest in the property for a stipulated period of time without transferring the ownership of that property. In a lease, right of possession is transferred instead of the right of ownership. Transferor here is called the lessor and the transferee i.e. the one enjoying the property for a period is called lessee. Lease is governed by the Transfer of Property Act, 1882 and it is given from Sections 105 to 117.

 

Section 105 states the definition of a lease which states that it is a transfer of immovable property for a particular time period for a consideration of which the transferee has accepted the terms surrounding the agreement.

ESSENTIAL ELEMENTS OF LEASE:

• 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.

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

• Rent: Consideration for a lease can be taken in the form of a rent or premium.

• 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.

• 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.

Under section 106 of the Transfer of Property Act, when a lease for Agricultural or manufacturing purpose is deemed to be of year to year, then it will attract a 6month notice that the lease will end on the expiry of 1 year from the date of the commencement of the lease and 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 1 month from the commencement of the lease.

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

When there is a lease of Immovable property for a term of 1 year or more – This can only be made by a registered deed.

All other leases of Immovable property – Can be either made by a registered deed or an oral agreement or settlement along with the transfer 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.

In the case of Punjab National Bank v. Ganga Narain Kapur (1.), Court held that if the lease is done through an oral agreement, then the provisions of Section 106 will apply.

Notice to quit is a formal written statement that is issued to the lessee if the lessor desires to end the lease agreement, whether on the expiry of the duration as stated under Section 106 or on grounds specified in Section 111.

Any lease can be forfeited as mentioned in the sub-clause (g) of Section 111, by acceptance of the notice to quit.

Section 111 states about the determination of the lease, which lays down the ways in which lease is terminated:

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

• Specified event – When there is a condition on time of lease depending upon a happening of an event.

• Interest – Lessor’s interest to lease the property may cease, hence resulting in the termination of the lease.

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

• Express Surrender – This happens when the lessee ceases to have an interest in the property and comes into a mutual agreement with the lessor.

• Implied Surrender – When the lessee enters into a contract with another for the lease of property, this is an implied surrender of the existing lease.

• Forfeiture – There are three ways by which a lease can be terminated:

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

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

When the lessee is termed as insolvent by the banks, and if the conditions provide for it, the lease will stand terminated.

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

But Section 112, states that if the lessor after initiating the process of termination of the lease on the grounds of forfeiture accepts any rent from the lessee, it will be understood that the lease will still exist and the termination and notice to quit has been waived.

Lease is a very important aspect of real life. Every person has witnessed a lease deal involving renting of a house, car or etc. Therefore it is important for the general public to know about the rights of every individual in a lease, and to know about the provisions that govern lease. The lease is mentioned from Sections 105 to Section 117, out of which Sections which may help the general public, law students and the legal fraternity have been discussed in this article to give clarification and a basic idea about the lease.