Lease meaning in law
According to Section 105 of the Transfer of Property Act, a lease of immovable property is the transfer of a right to enjoy the property in consideration of a price.
The person who transfers property in this manner is referred to as the lessor, whereas, the person who receives it is called the lessee.
The consideration/price paid for the acquisition of a lease is referred to as the premium, and the money (or something of value) paid to the transferor in exchange for the occupation and use of the property is referred to as the rent.
Duration
The duration of a lease is governed by the terms of the contract executed by the lessor and the lessee. However, in case a written contract does not exist, courts rely on local customs and usage to determine the duration of the lease. In the absence of both, a written contract and local customs pertaining to this issue, the duration of a lease is governed by the provisions of section 106 of the Transfer of Property Act.
A lease of immovable property transferred for either agricultural or manufacturing purposes is deemed to be valid for one whole year. Such lease contracts may be terminated at six months’ notice.
All other types of leases are renewed from month to month and are terminable by a fifteen days notice.
A notice for the termination of a lease must be in writing and signed by or on behalf of the person serving it. It may be sent either through the post or served in person to the party concerned, one of his family members, or a household servant. In case none of this is feasible or convenient, the notice may be affixed to a conspicuous part of the property.
Mandatory registered instruments: Section 107 of the Transfer of Property Act states that in case the duration of a lease of immovable property is at least one year, or more, drawing up a registered instrument is compulsory. Such a registered instrument must be executed by both the lessor and the lessee. For all other kinds of leases, an oral agreement, followed by delivery of possession is considered sufficient.
Rights and liabilities of the lessor and lessee
A lessor’s liabilities-
a) The lessor is bound by law to reveal to the lessee any major defect in the property that is likely to interfere with or hinder the purpose for which it is being leased. Though, it might be added that the lessor is not held liable for minor defects, or defects of such nature that an observer could easily discover. However, if the defect is of the kind that an unknowing observer is not expected to discover on his own, the lessor is held accountable for withholding information.
b) When the contract is executed, the lessor is bound to transfer the possession of the property to him.
c) Upon executing the lease instrument, the lessee is deemed to have contracted to allow the lessor continuous and uninterrupted possession and use of the property. Though, it is implied that the lease contract holds on the condition that the lessee pays the rent in time, and adheres to the conditions stipulated by the terms of the contract.
Rights and liabilities of the lessee
d) In case any accession occurs to the property, while the lease subsists, the lessee in entitled to enjoy it as being part of the lease holding.
e) If the property or a substantial part of it is destroyed due to fire, flood, or some natural calamity, or due to the violent acts of an invading army or rioting mob, then the lessee may choose to declare the lease contract void. However, if the lessee is responsible for bringing about such destruction upon himself through his own wrongful act or default, he loses the right to declare the lease document void.
f) The lessor is bound to make such necessary repairs as are necessary for the upkeep of the property. If he neglects to do, the lessor, after serving him a notice and waiting for a reasonable amount of time, may carry out such repairs himself and deduct the cost (with interest) from the rent due to the lessor.
g) In case the lessor neglects to make some payment necessary for maintaining the property, the lessee may, after giving him a reasonable notice, make such payment and recover the amount (with interest) from him.
h) When the lease determines, the lessee may remove from the property all things he may have attached to it. Though, he must do so while he is still in possession of the property, and not after it.
i) If the lease determines suddenly and it is not the lessee's fault, he is entitled to cut and carry away all crops planted by him and growing on the property. And, the lessor is bound to allow him, or his legal representative free access to the property for the purpose.
j) The lessee is free to transfer absolutely, mortgage, or sub-lease the leased property. And, the law permits such transferee to further sub-lease or mortgage it.
k) If the lessee is aware of some fact that substantially increases the value of the property, such as the discovery of oil or some valuable material underneath it, he is legally bound to disclose it to the lessor.
l) The lessor must pay the premium and rent for the leased property timely.
m) It is the duty of the lessee to maintain the property like his own and restore it to its original condition before transferring possession to the lessor upon the determination of the lease. He is not liable though for inevitable wear and tears caused due to the passage of time. The lessor or his legal representatives reserve the time to inspect the condition of the property at any reasonable time and demand its repair in case they notice any damages caused due to the acts of the lessee.
n) If the lessee comes to know of any legal suit on the property, or a bid to encroach it (or a part of it), he is duty bound to inform the lessor about it.
o) The lessee must not undertake any activity on the leased property that is permanently destructive, such as felling timber, opening up mines, or pulling down buildings without the express approval of the lessor.
p) The lessee is not allowed to erect any permanent structures on the leased property without the assent of the lessor.
q) When the lease determines, the lessee is bound to put the property back in the possession of the lessor.
Determination of the Lease
A lease terminates upon the completion of the duration of the lease mentioned in the lease instrument.
If the lease was given on the condition that it would terminate upon the occurrence of some event, it terminates when that event occurs.
If the lessor loses his interest in the property, or his power to lease it, the lease terminates.
If the interests of the lessor and the lessee become vested in the same person, the lease terminates.
If the lessee surrenders his interest to the lessor voluntarily, the lease terminates; and such determination is referred to as determination by express surrender.
If the lessee commits some act that entails an implied surrender of the lease, then the lease determines.
A lease is said to determine by forfeiture (section 111) if one of the following happens-
If the lessee is found to have broken some express condition which provides that in the case of its breach the lease determines.
If the lessee claims the property as his own or recognizes a third party as its owner.
If the lessee is declared insolvent, and the lease document provides that the lease would determine upon the happening of such an event.
Finally, a lease terminates upon the expiration of a notice to determine the lease, served by either of the parties to the other.
Waiver of forfeiture
A forfeiture, incurred in the manner we saw above gets waived if the lessor accepts rent, or something by way of distress (accepting something of value in lieu of money), or does something else that reflects his intention to let the lease subsist. It is necessary to remember though that forfeiture is not waived if the lessor accepts rent after he has initiated a suit to eject the lessee in a competent court (section 112).
The surrender of a lease does not affect any under-leases who might be in possession of the property, except as regards the amount of rent. However, if the determination occurs due to forfeiture, all under-lessees lose their lease-holdings as well. (Section 115).
Holding Over
Holder over is a kind of a tacit agreement between the lessor and the lessee. It applies if the lessee remains in possession of the property after the determination of the lease, and the lessor accepts rent from him. By doing so, the lessee conveys to the lessor that the lease subsists and it may be renewed annually (if the lease is for the purpose of manufacturing or agriculture), or monthly (if the lease is for some purpose other than manufacturing or agriculture)
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