A STUDY ON LEASE AND IT'S KINDS UNDER THE TRANSFER OF
PROPERTY ACT, 1882
PROPERTY LAW 5th SEMESTER PROJECT
Submitted to Rajiv Gandhi National University of Law, Patiala
PROJECT SUPERVISOR -
DR. JASWINDER KAUR
ASSISTANT PROFESSOR OF LAW,
RGNUL
SUBMITTED BY -
BHAVANDEEP SINGH
ROLL NO. - 20047
2022
ACKNOWLEDGEMENT CERTIFICATE
This project required a lot of guidance and feedback which was duly provided by my project
supervisor Dr Jaswinder Kaur. Therefore, I would like to utilize this opportunity to express my
gratitude and reverence towards her.
BHAVANDEEP SINGH
1. INTRODUCTION
In this modern world, the life of a human beings are closely related with the Properties. Humans
and Properties have become interrelated and inseparable. Humans acquires, enjoys and
disposes the property their pleasure or for their needs and wants. Whatever it may be , either
acquiring a property or disposing a property, a valid transfer is needed. Thus, the law that
governs the property and it’s transfer is called the ‘Law of Property’.
‘Property exists by grace of the law. It is not a fact, but a legal fiction’
-Max Stimer
In Olden days, the transfer of the immovable properties were governed by the principles of the
British Law. In 1882, The Transfer Of Property Act came into force. This deals with the rules
and regulations which must be followed during a transfer of property between the living
persons. This act deals with both transfer of movable and immovable properties, but majority
of this act deals with the immovable properties only.
The Transfer Of Property Act, 1882 discusses about different legal terms regarding transfer of
property which include Sale, Mortgage, Lease, Exchange, Gift, Actionable claims and etc.
Thus in this paper we are going to look about a detailed study on the Lease and its kinds, which
plays a vital role in the process of the transfer of property.
2. LEASE AND IT’S DEFINITIONS
Normally point this world will always prefer to own their own properties in of paying rent to
someone’s property. However, lease of an immovable properties can provide some benefits
like low initial payments, tax reduction, low risk etc.. In a simple term, we can understand
that, Lease is simply the relationship between the landlord or landlady and his or her tenants.
Lease is a form of a contract between these parties for a fixed period of time. This relationship
between the owner and their tenants arises when the owner of the immovable property gives
his property to another person for a fixed period of time and a contract was made between
them. Thus, this contract includes the terms like amount of the rent, rate at which it is collected
duration of the lease , purpose of the lease, etc.
When we look into the term ‘Lease’ legally , we can understand the term lease and it related
concepts are explained in the provisions sections 105 to 117 which comes under the Chapter
V of the Transfer of Property Act, 1882.
According to Stickney and Weil, ‘ A lease is a contractual arrangement calling for the
user(lessee) to pay the owner (lessor) for use of an asset.1
According to Mulla, ‘ a lease is a contract between the lessor and the lessee for the possession
and profits of land, etc., om one side and the recompense by rent or other considerations on the
others.2
Merriam- webster defines lease as a contract by which one conveys real estate, equipment, or
facilities for a specified term and for a specified rent.3
From the definitions mentioned above, we can easily understand that a lease is nothing but a
contract between a lessor and a lessee for a specific period of time prescribed in the contract.
1
Stickney and Weil 2007 p. 791 (Glossary of Financial Accounting: An Intro. To Concepts, Methods, and Use
12e)
2
[Link] Retrieved 13/09/2021
3
[Link] Retrieved 13/09/2021
Section 105 of the Transfer of Property Act, 1882 gives the definitions for lease, lessor, lessee,
premium and rent.
It defines that, ‘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.4
For entering into a lease agreement, there must be a two person namely lessor and lessee.
LESSOR ‐ lessor is a person who leases or lets a property to another person. Transferor is
a lessor. i.e. landlord.
LESSEE ‐ lessee is a person who holds a lease of a property. Transferee is a lessee. i.e.
tenant
PREMIUM ‐ premium is an amount to be paid
RENT ‐ rent refers to a tenant’s regular payment to his landlord for using his property or land
Lease is a relationship between the lessor and lessee arising out of an agreement to pay rent
and to enjoy the exclusive possession of an immovable property for a specified period and then
there is an element for creating interest on the immovable property. It is a transfer of right by
the owner to other person , of enjoy immovable properties.
The person who does not have a right or interest or lost the right on the property cannot create
any lease in favor of others , if there is any such lease is made then it is said to be void.
Sections 105 to 116 of the Transfer Of Property Act, 1882 deals with the leases but it does not
apply to the agricultural leases. Section 117 of the act is the exception of the leases for an
agricultural purposes.
Most of the agricultural leases are subject to the local state laws and this is one of the main
reasons why this chapter of the act is not applicable to the agricultural leases. Since this chapter
of the act does not apply then section 107 of this act also does not apply, that is agricultural
4
Sec. 105 of the Transfer of Property Act, 1882
leases can be made orally. Here an agricultural purposes refers to tilling and cultivation cot the
purpose of raising crops.
In the case of Byramjee Jeejeebhoy (P) Ltd. V. State of Maharashtra 5, the Supreme Court
explained that , a lease is a transfer of a right to enjoy land for a term or in a perpetuity in
consideration with the price paid or promised or service or other things with value to be
rendered in a periodically manner or in a specified occasions the transferor of the property.
The main subject matter of the lease is that it must be a immovable property. Union of India
V. Shivdayak Soin Sons6 ,in this case, the court held that, the act of letting out the property for
a non-residential use would not be said to be infringe the restriction in the transfer deed on the
ground that ‘house’ implies only residential uses.
In a lease, there can be both premium and rent , though the definition of both may be clashing.
In Fazl Ali, J V. Visweshwar Singh7 , it was observed the difference between the single
payment at the time of settlement of property and a recurring payment during the period of the
enjoyment of property by the lessee.
A lease agreement can be terminated by giving a reasonable and an acceptable proof that the
landlord had otherwise assented to the tenants for continuing in the possession after the
termination.
A notice to terminate the lease agreement, which is otherwise valid and does not become invalid
merely because of adding something else but it should be conditional. If in a notice with
terminate tenancy , there will be a threatening enhanced rent, and there a different opinion arise
that whether it is conditional notice or not.
5
AIR 1965 SC 590 7
6
AIR 2003 SC 1877
7
(1939) 7 ITR 536
III. RIGHTS AND LIABILITIES OF LESSOR AND LESSEE
Section 108 of the Transfer of Property Act, 1882 expresses the rights and liabilities of both
lessor and lessee.
(A) Rights of the Lessor
• Lessor has a right to recover the rent from the lessee as per expressed in the lease
agreement.
• Lessor has the right to take back the possession of his property when the lessee breaks the
terms and conditions expressed in he lease agreement.
• Lessor can also has a right to claim compensation from the lessee when there is any
damage for his property due to lessee.
• Lessor can take back the possession of his property when the period for lease expires.
(B) Liabilities of the Lessor
• Duty to disclose defects
The Lessor has a duty to disclose the defects on the property to the Lessee before making
the lease agreement.
• Duty to deliver possession
After making the lease agreement, the Lessor should give the right to possession of his
property to the Lessee.
• Covenant for a quiet enjoyment The Lessor should not interrupt after the lease agreement
was made, when the Lessee follows the terms and conditions and pays the rent correctly as
prescribed in the lease agreement.
(C) Rights of the Lessee
• Right to repair property
Lessee can himself repair the property, if the Lessor neglects to do or unable to do repair.
Later that amount can be deducted from the rent or can be recovered from the Lessor.
• Right to remove fixtures
Lessee can himself repair the property, if the Lessor neglects to do or unable to do repair.
Later that amount can be deducted from the rent or can be recovered from the Lessor.
• Right to have benefits of crops
Lessor also has a right to enjoy the benefits from the property during the period of lease
agreement and can collect the benefits from the crops in the property as prescribed in the
lease agreement.
(D) Liabilities of the Lessee
• Duty to disclose facts
Lessee should disclose all the true facts about the property to the Lessor.
• Duty to pay rent
It’s a duty to the Lessee to pay the rent to the Lessor as expressed in the lease agreement
• Duty to maintain property
Lessee is bound to maintain the property and return to the Lessor in the same condition
that the Lessor handover the property during the agreement, and the lessee should also
allow the Lessor or his agent to inspect the property.
IV. ESSENTIAL CONDITIONS FOR A LEASE
Some of the essential conditions to fulfil the lease are
1) There should be a availability of two parties since a single party cannot execute a
lease agreement.
2) Both parties entering into the lease agreement must be competent to contract by
fulfilling the essential conditions for a valid contract which are expressed in section
10 of the Indian Contract Act, 1872 .
3) Duration of the lease must be expressed clearly in a lease agreement.
4) There must be a consideration from both parties that is lessor and lessee.
5) There must be a acceptance of transfer of property by a lessor and lessee.
6) There must be a certainty
In the case of Jaswant Singh Mathura Singh V. Ahmedabad Municipal Corporation 8 , the court
held that , the lease creates rights and interests on enjoying the property and the tenant was
entitled to remain the possession of the property until the lease is fully terminated.
In the case of Makali Engg. Works Pvt. Ltd. V. Dalhousie Properties Ltd. 9 , the court held that
, for creating a legally binding lease agreement, one of the most essential elements required is
that there must be a definite period unless it is a lease of perpetuity.
In the case of B Arvind V. Government of India 10, the Supreme Court had clearly explained
some of the other essential ingredients for a valid lease like
• There must be a transfer of right to enjoy an immovable property
• Such transfer must be for a specific term or in perpetuity
• The transfer should be in the consideration of a premium or a rent
• The transfer should be in a bilateral transaction and there must be a acceptance of the terms
of the transfer.
8
AIR 1991 SC 2130
9
2006(1) California HN 419
10
AIR 2007 SC 1306
V. KINDS OF LEASE
There are many kinds of leases are followed in India. Section – 105 of the Transfer of Property
Act, 1882 recognizes only three main kinds of leases namely
• Leases for a certain time
• Periodic leases
• Leases in perpetuity
(A) Leases for a certain time
The word ‘certain’ in the section means that it is fixed or capable of being made certain in the
future [Link] duration must have a certainty. Time period, terms and conditions of the
leasemust be fixed or must be certain. In this lease, fixing of date is not mandatory but there
should be a certainty which is necessary for a lease agreement. A lease without certainty is
said to be void.
In the case of Lord Kenyon in Goodright D Hall V. Richardson 11 , the court stated that the
certainty need not ascertained at the time. If in the fluxion of time a day will arrive which will
make it certain, that is sufficient for such a lease.
(B) Periodic Leases
Periodic leases are a kind of lease usually held for a particular period of time. This type of lease
includes the lease for a particular period like lease from month to month or from year to year.
Monthly lease does not mean that a lease which begins on first day of every month and expires
on the last day of the month and a fresh lease is created for a next month automatically. It
means a lease of uncertain duration which can be put an end by either party by giving one
month's notice. Registration of lease is not necessary for this kind of lease since it is a lease
for a short period.
11
1789 2 Term Rep462
In the case of [Link] Singh V. Punching Associates12, Periodic leases has been defined as t
is a lease with duration to the term is continuous from period to period. A lease for an indefinite
period has generally been considered as a lease for a life, but if the rent has been paid yearly
then it would be taken as a lease from year to year. Similarly, in Venkatachellam V. Audian
case13, it was held that the lease for the year with the precondition then it would be in force
until another lease is granted is a lease from year to year.
(C) Leases in perpetuity
Lease in perpetuity is a kind of lease which is held for a longer duration .It is also called as
permanent lease or long term lease. Here, the lease is carried from generation to generation.
In this kind of lease , the lessee can renew the lease after the completion of period of lease
agreement. In the case of Commissioner of income tax , Assam V. Panbari Tea Co Ltd14, it was
held that , when the interest of the Lessor was parted for a price, then the paid price is the
premium, but the periodical payment for the enjoyment of benefits is a rent, here the premium
is a capital income and rent is a revenue receipt. For this lease of perpetuity, registration is
mandatory.
12
AIR 2008 Del 56
13
1881 ILR 3 Mad 358
14
AIR 1965 SC 1871
VI. OTHER KINDS OF LEASE
In Addition to these three main kinds of lease expressed in section 105 of the Transfer of
Property Act, 1882, lease can further be classified into many kinds , namely
• Absolute Lease
• Derivative Lease
• Sales Aid Lease
• Domestic Lease
• International Lease
(A) Absolute Lease
Absolute lease can otherwise called as primary lease. Absolute lease can be granted by a person
who has an Absolute right over the property. This lease can be granted for any number of years
or for any time.
(B) Derivative Lease
Derivative lease can otherwise called as sub-lease . This kind of lease are granted by a person
who himself has a limited interest on the property. In this kind of lease, it can never be extended
beyond the time period in which the Absolute lease has executed.
In the case of Roop Kumar V. Mahan Thedani15, it was held that , a tenant who himself does
not have a complete right over the property can never grant a valid sub-lease in favor of another.
In the case of Lov Raj Kumar V. Daya Shankar 16, the court examined that a person who himself
has no right over the property cannot create a lease on his own.
(C) Sales Aid Lease
In this kind of lease, the lessor will agree with the lessee to market the products in his property
and in return the lessee will be paid for his commission
15
2003 (1) RCR (Rent) 615 SC
16
AIR 1986 Del 364 (368)
(D) Domestic Lease
When all the parties in the lease agreement belongs to a same country, then it is called
Domestic Lease
(E) International Lease
When one or more parties of the lease agreement reside in a different countries, then it is
called International Lease.
VII. CONCLUSION AND SUGGESTION
Chapter V, section 105-117 deals about the lease in the Transfer of Property Act, 1882.
Lease plays an important role in the Law of Property. In this world maximum number of
the peoples will own property, either their own property or enjoying someone’s property
by paying rent or premium. Thus, it is vital not only for the people in the law field but also
each and every citizens to have a good knowledge about lease, because at one point of time
every person will own a property. If a person enter into a lease agreement without knowing
or without have a decent knowledge about lease, he/she may fail to have a proper lease
agreement and they can easily be misguided. Lease is nothing but a contract between a
lessor and a lessee for a specific period of time prescribed in the contract. There must be a
clarity on the during of lease, term of lease, amount to be paid, when and how to be paid,
etc. Violation of the rules, regulations, provisions, and terms prescribed in the lease
agreement is punishable under law . Lease is a good think until both the lessor and lessee
does their duty well. Thus from this paper, we can have a basic idea about what is lease,
who is lessor, who is lessee, and their rights and liabilities and its kinds.
BIBLIOGRAPHY
- Vepa P Sarathi Law of Transfer of Property, fifth edition rep
- N. Krishnamoorthy & Prasanth Kumar Singh 2008rinted, 2013 Transfer
of property Act, 1882, Edition
- Dr. Poznan Pradhan Sazena International Journal ofProperty Law, Second
edition