Concept of lease

Meaning
Lease basically means when one person through the means of a contract conveys or rents his
property to another person for a specified amount of time in return for a periodic or a lump-sum
payment.
e.g. A leases his house to B for 8 months for periodic payment of Rs. 10000 per month. This is
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the most basic example of a lease.
Definition
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The term “lease” is defined under Section 105of The Transfer of Property Act, 1882 and it states
that-
“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
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money, a share of crops, service or any other thing of value, to be rendered periodically or on
specific occasions to the transferor by the transferee, who accepts the transfer on such terms”.
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There are 4 terms that we will come across this article which are related to lease of immovable
property and they are as follows:
● Lessor- The transferor of the immovable property is called lessor.
● Lessee- The transferee of the immovable property is called lessee.
● Premium- The premium is the price paid for obtaining a lease of immovable property.
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● Rent- The money or service that is rendered is known as rent.
Elements of a valid lease
For a lease to be valid it has certain prerequisites that are needed to be fulfilled and they are as
follows:
. Competency of Lessor and Lessee- For a lease to be valid both the lessor and the lessee
must be competent enough to constitute a contract. For a lessor and lessee to be
competent they must be:
● The lessee must be a major.
● The lessor must hold the title and authority to make the lease.
● Both the lessor and lessee must be of sane mind.
. Subject matter- The subject matter of the lease must be immovable property like a flat,
house or loft.
. Consideration- There must be a form of consideration involved in the contract. Without a
consideration it would not be a valid lease rather it would be treated as a gift. The
consideration is usually in the form of premium plus rent but sometimes it can be premium
alone or rent alone.
. Duration- A lease for an immovable property shall be made for 11 months. In case the
duration exceeds a year i.e 12 months or more then a lease agreement can only be made
by a registered instrument as per Section 107 of the Transfer of Property Act, 1882.
. Delivery and Acceptance- The lessor must deliver the contract and the lessee must accept
the contract without any form of undue influence, coercion. Once the lessee accepts the
contract, the lease becomes valid.
Nature of lease
In case there is neither an oral confirmation or a registered document of a lease agreement
accompanied by delivery of possession then there is no formation of a lessor and lessee
relationship.
Absence of registration
If there is an absence of a registered deed when the duration of a lease agreement for
immovable property is above 1 year then in that case Section 106 of the Transfer of Property Act
applies and it states that:
. Immovable property for manufacturing or agricultural purpose- If there is an absence of a
registered deed for an immovable property that is used for manufacturing or agricultural
purpose then, in that case, it is considered to be under a year to year lease and the lease
can be terminable on part of lessor or lessee by six months’ notice.
. Immovable property used for other purposes- If there is an absence of a registered deed
for an immovable property that is used for some other purposes, in that case, it is
considered to be under a month to month lease and the lease can be terminable on part of
lessor or lessee by a fifteen day’s notice.
. Every notice that is delivered must be in writing and signed by the person delivering it. The
notice must be delivered to the lessee personally or through the mail.
Agreement to lease and lease deed or lease agreement
There are certain differences between an agreement to lease and a lease agreement but both of
these terms are often confusing for common people and it makes them vulnerable.
So basically an agreement to lease is the initial part of a lease agreement. Agreement to lease
does not create any legal obligation, agreement to lease just implies the possibility of any future
transfer. Agreement to lease just denotes the terms and conditions of a prospective lease
agreement. It is just a stepping stone in the process of the lease.
On the other hand, a lease deed or a lease agreement is a final contract. A lease deed along with
the delivery of possession creates a legal obligation upon a person. A lease deed transfers the
rights from a lessor to lessee for a specific duration.
Rights and Liabilities of a Lessor
We already know who is a lessor, so legally a lessor is granted certain rights and certain
liabilities. Section 108A talks about the rights and liabilities of a lessor, so let’s further analyse
the rights and liabilities of a lessor.
Rights of a lessor
. Right to accretions- If during the tenancy period or during the duration of the tenancy any
further accretion, accumulation or addition is made in the property then the lessor is
entitled to such property. Such addition can be natural or by the expense of the lessee but
after the termination of the tenancy period, the lessee must deliver the title to the lessor.
. Right to collect rent- The lessor has the right to collect rent or any form of consideration
as mentioned in the terms and conditions of the contract from the tenant without any form
of interruptions.
Liabilities of a lessor
. Duty of disclosure- The lessor is bound to disclose any form of a material defect in the
property. There are two kinds of defects:
 ● Latent defect- Latent defect cannot be discovered rationally or through inspection by the
lessor.
● Apparent defect- Apparent defect can be easily discovered through some inspection.
So basically a lessor shall disclose any apparent defect to the lessee and it is vital to disclose
such defects as they interfere with the enjoyment of the property by the lessee.
. To give possession- The lessor must give possession of the property to the lessee on
lessee’s request. However, this liability only arises when there is a request on behalf of the
lessee.
. Covenant for quiet enjoyment- The lessee has all the rights to enjoy the property. It is the
duty of the lessor to not cause any form of interruptions during the tenancy period. The
Madhya Pradesh HC stated that actions such as physical interference or direct
interference in the premises lead to a breach of enjoyment and interruptions.
Rights and liabilities of a lessee
Just like a lessor, a lessee has also some rights and liabilities which are granted to him by the
Transfer of Property Act. So now we will analyse the rights and liabilities of a lessee.
Rights of a lessee
. To charge for repair- If the lessor fails to make any repairs in the property which the lessor
is bound to do in that case the lessee can make such repairs by his personal expenses. If a
lessee makes such repairs by his personal expenses then, in that case, it is the right of the
lessee to deduct the cost of such repairs from the rent or the lessee may simply charge
the lessor for such repair.
. Right to remove fixtures- The lessee has the right to remove any fixture in the property
during the time period of the lease, however, after the termination of the lease deed the
lessee must leave the property in the condition in which he received it. In case the lessee
fails to do so, the lessor can sue the lessee.
. Right to assign his interest- The lessee can sub-lease the property or the lessee can
absolutely transfer his interests. However, if the lease deed restricts a lessee to assign his
interest then the lessee is prohibited to do so and even after the transfer of his rights, the
lessee is still subject to all the liabilities related to the lease deed.
. Right to have benefits of crops- When the lease is of uncertain duration then, in that case,
the lessee or his/her legal representative has been given the right to gain benefits from all
the crops grown by them.
Liabilities of a lessee
. Duty to disclose material facts- The lessee is bound to inform the lessor of any material
fact which the lessee is aware of and the lessor is not. In case the lessee does not disclose
such fact and the lessor suffers any loss then the lessee is bound to compensate the
lessor.
. Duty to pay rent- The lessee is bound to pay the rent or the premium to the lessor or his
agent in the proper time and proper place as decided by the lease deed. In case the lessee
fails to pay his/her rent then, in that case, the lessor can eject the lessee on the ground of
non-payment of rent or file a suit for arrears of rent.
. Duty to maintain the property- The lessee is bound to maintain the property in a good
condition as it was when he was given the possession of the property. The lessor or his
agent are allowed to inspect the property at the reasonable ground. Only the changes
caused by irresistible forces can act as an exception for this liability.
 caused by irresistible forces can act as an exception for this liability.
. Duty to give notice- If the lessee becomes aware that any person has tried or is trying to
damage the rights of the lessor or the title of the lessor is endangered then, in that case,
the lessee must give notice to the lessor.
. Duty to use the property in a reasonable manner- The lessee must use the property in a
manner as if it was his/her own property.
. Duty not to erect any permanent structure- A lessee cannot erect any permanent
structures except in the case of agriculture without the consent of the lessor.
. Duty to restore possession- After the determination of the lease, the lessee must restore
the possession of the property to the lessor. If the lessee does not vacate the premises
even after the expiry of the notice, the lessee is then bound to pay the damages.
Termination of a lease
A lease is terminated in eight different ways that are discussed below:
. A lease is terminated after the expiry of the specified time period.
. If the length of the lease is until the happening of some event and when that event
happens the lease is terminated.
. If the lessor’s interest in the property is to terminate the lease on the happening of some
event and when the event happens the lease is terminated.
. When the lessee surrenders by implying.
. When both the lessor and lessee mutually agree to end the contract.
. On the expiry of a notice which expressly conveys the intention to terminate the vacancy
and such notice must be unconditional.
. Through forfeiture which legally allows a lessor to re-enter and reclaim his property.
. If the interest of both the lessor and the lessee in the whole property becomes vested at
the same time in one person in the same right, then by the operation of law merger takes
place.