TPA Section.105 Leases

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OF LEASES OF IMMOVABLE PROPERTY

105. “Lease” defined.—

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 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.

“Lessor”, “Lessee”, “premium” and “rent” defined.—

The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.

As is evident from the definition, lease is not a transfer of ownership in property, it is transfer of an interest in an immovable property. The interest is the right to use or enjoy the immovable property.

Since ‘interest’ in an immovable property is considered as property, lease is a transfer of property. However, lease is a transfer of only a partial interest. It is not a transfer of absolute interest.

Lease contemplates separation of right of possession from the ownership.

The transferor is called lessor and the transferee is called lessee. In common language the lessor is usually called landlord and the lessee is known as tenant. Price is called premium and the money, share, service or other things so given is called the rent.

Essential Elements of Lease.—

The essential elements of lease are as under: -

1. The parties i.e. transferor and the transferee.

2. The demise i.e. right to enjoy immovable property.

3. The term i.e. the duration.

4. The consideration i.e. premium or rent.

1. The Parties : Lessor and Lessee.—

In a lease two contracting parties are necessary. The parties are lessor and lessee.

Every lease is based on an agreement between two persons competent to contract. Since one cannot contract with himself therefore one cannot also grant any lease to himself.

Lessor.—

The lessor, who transfers the right of enjoyment of his property must be a person competent to contract and must also have right to transfer the possession of property.

The lessor must have attained the age of majority and must possess a sound mind at the time of granting the lease.

The lessor must not be only competent to contract but he must also have the authority to effect the lease.

Lessor has authority if he is either owner of the property or, has possession of the property.

In a lease there is not a transfer of ownership but transfer of only ‘possession’.

Therefore, not only the owner but also the lessee himself is entitled to grant lease.

Lease is right to transfer possession, therefore, a person having only possession of an immovable property (i.e. lessee) is also entitled to grant lease provided it does not extend beyond such person’s own possession. Lease by a lessee is called sub-lease, or derivative lease.

Minor cannot grant lease; lease executed by minor is void. Minor’s guardian of property is authorised to grant lease without Court’s permission for a term not exceeding five years or lasting for more than one year after minor’s attaining majority. (See. 29 (b) Guardian and Wards Act, 1890.)

Lessee.—

Lessee too must be competent to contract at the date of execution. Lessee must be of the age of majority and must be of sound mind.

Lease in favour of a minor is void because the transfer by way of lease contemplates agreement by minor to pay rent and other obligations.

Lessee may be a juristic e.g. a company or, a registered firm.

But, an unregistered firm is not a juristic person. Therefore, it cannot be a competent lessee.

2. The Demise : Right to Enjoy Immovable Property.—

Lease is a transfer of right of enjoyment in an immovable property. It is not a transfer of ownership; it is a transfer of partial or limited interest. This limited estate which is ‘right of enjoyment’ of property, is called demise. In a lease this right of enjoyment or demise is the subject matter of transfer.

The right of enjoyment of property is technically ‘leasehold’ estate and is transferred after being separated from ownership. This right is a right in rem.

In a lease, the property must be immovable. Immovable property here means not only land but everything included in this term as defined in Section 3 of this Act.

Thus, the property may be a house, minerals, benefits arising out of land such as fisheries, ferries or right to collect rent from a market etc. However, the property being leased out must be definite and ascertainable.

3. The Term: Duration of Lease.—

Term is a necessary element of every lease. The right of enjoyment must be given to the lessee for a certain period of time. The period for which the right to use the property is transferred is called ‘term’ of the lease.

The term may be any period of time, longer or shorter, even for perpetuity. But it must be specified in the deed.

The time from which the right of enjoyment begins and the time when it ends must be fixed and ascertainable.

The lease may commence immediately after execution of deed or, may commence with effect from a specified future date. The date of commencement may also depend on some future event.

It should not be uncertain or ambiguous.

The extent of the period during which a lease may remain effective may be perpetuity. Such leases are termed as leases in perpetuity or, prominent leases.

Leases in Perpetuity.— Leases in perpetuity are also called permanent leases. Such leases may be created either by express words or by necessary implication.

Where the deed expressly provides that right of enjoyment is for indefinite period or, for the life of grantee or that the grant has been made in perpetuity the permanent lease is deemed to have been made in favour of lessee.

But, where the deed does not provide for a permanent grant in express words, such a lease may be presumed from an inference drawn from the surrounding circumstances and subsequent conduct of the parties.

Continuing long possession may give presumption of permanent lease.

Where a tenancy has passed through several generations a permanent lease may be inferred.

Where a land is held in lease for purposes of building houses or residence, the lease may be presumed to be a permanent lease.

Permanent leases are not known in England. In India the leases in perpetuity are permissible and have been in practice since long.

4. Consideration.: Premium or Rent.—

The contract of lease must be supported with some consideration. Consideration in a lease may be premium or rent.

A lease must have consideration, which may be premium plus rent, as well as premium alone or rent alone.

Where the whole amount to be recovered as consideration from the lessee is paid by him in lump sum, (at one time) the consideration is called premium.

For example, where A executes a lease of his land to B for one year and takes Rs. 1200/- from B before transferring the right of enjoyment to B for the said period, Rs. 1200/- is the premium.

Consideration paid periodically is called rent of the lease. Rent need not be necessarily in the form of money.

Under this section, rent may be paid in the form of services rendered by lessee to the lessor. Rent may be paid also in the form of a share of crops. However, the rent fixed for the lease must be certain.

It may vary from time to time but it must be reasonably ascertainable. An option to renew the rate of rents to be paid according to market value of the property from time to time does not make the rent uncertain.

Agreement to Lease.— Agreement to lease is a contract under which a person promises to grant lease on a future date. There is no transfer of possession or right of enjoyment with immediate effect. An agreement to lease only binds the parties for the grant of lease to become effective in future.

Agreement to lease is an executory contract and if this contract is in writing the intending lessee is entitled to defend his possession under Section 53-A.

AGREEMENT TO LEASE — It may be noted that a contract to let and a lease are different things; a contract to let, just like a contract to sell, gives rise to no right In rem. It creates only a personal obligation, which may be enforced by a suit for specific performance under the Specific Relief Act, provided that the agreement to lease is in writing and is accompanied by delivery of possession. In this respect, it materially differs from an agreement to sell. The latter agreement may be specifically enforced, even if oral and unaccompanied by delivery of possession; but not so with respect to an agreement to let or lease. A lease does, but an agreement for lease does not, establish the legal relationship of landlord and tenant between the parties. This is so, because a lease is a transfer of a right to enjoy property, whereas an agreement to lease is not.

It is to be noted that lease is an agreement between two competent persons under which the lessor transfers the right of enjoyment of his immovable property to lessee either with immediate effect or from any future date.

Lease, therefore, transfers ‘actual demise’ in favour of lessee. This is an agreement of lease. On the other hand, It is a promise by one person to grant the lease an

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