Leases - understanding the concepts

Last updated: December 2020 | 6 min read

The concepts for Net Lawman users:

Transfer of Property Act, 1882

In India the party who takes the property for his use and occupation for prescribed time executes a lease deed. Property can be defined as something tangible or intangible to which its owner has legal title. Lease therefore can be of a movable or an immovable property. Lease is specie of transfer of immovable property under the Transfer of Property Act 1882. In the instant article on Lease, we intend to deal with the immoveable property.

A lease is transfer of an interest in an immovable property which is the subject of the lease and that interest is the right to occupy and use the property for which the lease is given for period and on such terms and conditions as agreed between the parties. The transferor of property is called the lessor and the person to whom it is transferred is referred as a lessee, and the consideration so rendered is called rent.

The essentials ingredients of a lease agreement are:

  1. Parties to the agreement;
  2. The identification of the property subject matter of the arrangement;
  3. Term of lease,
  4. Rent,
  5. Date of commencement and expiry.

Procedure of forming a lease agreement:

Lease of immovable property for one year, or term exceeding one year, can only be made by registered instrument. All other leases may be made by unregistered instruments or oral agreements.

Where there is no contract or local law governing the execution of a lease deed then lease of immovable property for agricultural or manufacturing purpose shall be deemed to be on yearly basis and terminable on the part of either lessor to lessee by giving 6 months notice. On the other hand a lease of immovable property for any other purpose shall be for monthly basis, terminable by either lessor or lessee by giving 15 days notice.

In the absence of a lease agreement in writing or the existing agreement is silent on the rights and liabilities of lessor or lessee then section 108 of the Transfer of Property Act sets down the guidelines to be followed for a working relationship in a lease arrangement. Once the lessor transfers the property leased to the lessee, the lessee in the absence of contract to the contrary shall possess all the rights and will also be subject to all the liabilities of the lessor as he is the owner of it. For computing the time for a lease of immovable property, if time is expressly mentioned then the lease of immovable property will commence from that particular day and where no time is mentioned the lease begin from the day when it was entered into.

Where the time is limited and the lease can be terminated before the expiration, but the lease deed omits to mention at whose option it is terminable. In such a case the lessee will have the option to determine the lease.

The Right of Possession:

A lease of an immovable property can be determined through 8 modes and it is only by one of these methods that the lease stands determined and the lessor gets back  right of possession of the property;

  • By efflux of time limited thereby;
  • where the interest of the lessor terminates on happening of an event;
  • the interest of the lessor terminates on, or his power to dispose of the same extends to the happening of any event;
  • in case the interest of lessor and lessee becomes vested;
  • express surrender before the term is over;
  • implied surrender;
  • forfeiture;
  • When the lessee renounces his character

The prerequisites of the agreement:

Holding over comes into play when even after the determination of lease the lessee remains in possession of the property and the lessor or his legal representatives accept the rent and assent to the continuing possession by the lessee. In such a case the lease stands renewed year after year or month after month according to the purpose for which the property is leased. Where lease of immovable property has been determined by forfeiture for non-payment of rent and the lessor files a suit to evict the lessee. If the lessee at the hearing of the suit pays to the lessor rent in arrear with interest, full cost of suit or provides sufficient security within 15 days, the court may pass an order to relieve the lessee from forfeiture and allow him to hold on to the property.

Lease and License:

Lease and license are two different aspects of transferring property and to ascertain whether the transaction is a lease or license it has to be ascertained whether parties had intended to create a lease or a license; if the document creates an interest in the property, it can be referred as lease and if it permits a person to use a property and the legal possession remains with the owner or the original lessee it is called a license.

The Stamp Duty Act 1899:

The Stamp Duty Act 1899 enumerates the value of stamp duty payable on different lease documents. A lease agreement can be stamped as an ordinary agreement under article 5 of the Indian stamp act and corresponding provision of the state stamp duty act. If an agreement of lease amounts to a demise it is required to be stamped under article 35 of the Indian stamp act which also includes a sub lease or an agreement to let and sublet. Under article 35, duty charged is on the average annual rent which is multiplied by the number of years according to the length of the lease period.

Therefore, while entering into a lease, lessor and lessee have to act according to the provisions mentioned under Transfer of Property Act, registration, amount payable on account of stamp duty and other terms and conditions so mentioned in the lease deed.

Net Lawman:

Net Lawman documents comply with the legal requirements when dealing with the concept of Lease.Some examples of all time best legal documents pertaining to Lease are as follows:

One of these may definitely suit your requirements. In the event that your requirements and expectations are different, we also offer a service to draft legal documents to specific requirements of the users, where we guarantee client satisfaction so that you can return to us for your future needs. We therefore invite you to kindly visit Contract drafting service to find the necessary help and assistance.

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