SIDDHARTH COLLEGE OF LAW

MUMBAI 400023
AY 2021-22
Assignment Topic:

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Sr No Particulars Pg No
1 Cover Page and Topic 1-2
2 Table of Contents 3
3 Introduction 4
4 Defination of Lease 5
5 Essential Element/Features of Lease 5
6 Types of Leases 6
7 Lessor vs Lessee 8
8 Rights of Lessor 9
9 Liabilties of Lessor 9
10 Rights of Lessee 10
11 Liabilties of Lessee 10
12 Duration of Lease 11
13 Termination of Lease 11
14 Few Judgements on Lease 12
15 Concusion 14

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Introduction
widely used in various economic transactions related to the transfer of property.
It is a contractual agreement made for transfer of an asset from one person to another. It is used for
the transfer of the asset in both commercial and non-commercial or personal fields.
In India, transfer of property is not possible for every individual because of financial issues. The
permanent or absolute transfer is a luxury for some people, but a temporary transfer is something
that has given every citizen the right of enjoying any property. One of the modes of transferring
property for a particular period of time is Lease.
Lease is a transfer of an interest in the property for a stipulated period of time without transferring
the ownership of that property. In a lease, right of possession is transferred instead of the right of
ownership. Transferor here is called the lessor and the transferee i.e., the one enjoying the property
for a period is called lessee.
Lease is governed by the Transfer of Property Act, 1882 under the ambit of Sections
105 to 117.
A lease can be done only of immovable property. A lease is the enjoyment of immovable property
for a certain period of time or in perpetuity. But, in lease transfer of immovable property is not
absolute like there it is in sale. The right of possession is separated from the right of ownership.

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Definition of Lease
Section 105 states the definition of a lease which states that it is a transfer of immovable property
for a particular time period for a consideration of which the transferee has accepted the terms
surrounding the agreement.
According to the definition mentioned above, a Lease is a contractual agreement made for the
transfer of the right of immovable property from one person to another for a specified duration of
time in exchange for money, share of crops or any other services. The rights transferred in the form
of a lease can be expressly or impliedly given to the other person who seeks those rights. A person
can get a lease by paying the total sum of money as a premium or in instalments as rent for the
immovable property.

Essential Elements/Features of Lease

Immovable Property A contract of Lease can be made only for immovable property
or assets. It cannot be done for a moveable property. The lease made will be for the
working and use of the immovable property and the Lessor and Lessee exchange the
rights of the property through the contract of lease.
Parties For a Lease agreement, the existence of two or more parties is necessary for
the proper transfer of rights of the immovable property. It is a bi-partied system and it
cannot be complete in the absence of the parties, therefore, making the contract of lease
void.
Subject matter of the Lease The subject matter or the purpose of the lease agreement
is compulsory and necessary to be mentioned in the agreement. The purpose of transfer
of the right of the immovable property, the services and profit decided, the details of the
immovable property, and other important data is required to be written in the contract of
lease.
Duration The duration of a lease agreement is an essential element which specifies the
commencement of the contract and how long the services and rights will be transferred
through a valid legal contract. Section 106 of the Transfer of Property Act, 1882 is
referred if it is not mentioned in the contract of lease. The duration must be for a certain
period of time, express or implied or in perpetuity.
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 Consideration Like every other contract, consideration is necessary for the fulfilment
of a contract of lease. The transfer of the rights of the immovable property is made by
giving consideration which may be premium plus rent, as well as premium alone or rent
alone. Premium is the price paid or promised in consideration of a transfer by way of
lease. Any payment by the lessee that is the part of the consideration of the lease is called
rent.
Competency The parties entering into a contract of lease should be competent
according to the Indian Contract Act, 1872. Both the Lessor and the Lessee must be of
sound mind, of majority age, and not subject to any law which restricts them to be a part
of a valid contract. If the transfer of the right of property is done to a minor, then a legal
guardian is necessary to work on behalf of the minor till he or she attains a majority age.
Valid contract essentials Lease is a contractual agreement made between two parties
and therefore, it must follow the essential elements of a valid contract given under Indian
Contract Act, 1872. Essential elements like Offer, Acceptance, Consideration, Lawful
Object, Intention of the Parties, Competency, Capacity to Contract, Subject Matter,
Writing and Registration etc, are important to be followed in the Contract of Lease.
Express and implied transfer The transfer of right of the immovable property between
the Lessor and the Lessee should be made expressly or impliedly, in a written contract.
And the notice of the termination of the lease should be given according to the clause
mentioned in the contract of lease and should be duly signed and delivered among the
parties.
Possession of Property In the contractual agreement of lease, transfer of the right of
property is made and the parties exchange the right of possession of the property for a
certain period of time and do not exchange the ownership of the immovable property.
The lessee must accept the transfer.
It must be in the mode prescribed under Section 107 of the Transfer of Property Act,
1882.
The above are the essential features a lease without which a lease cannot exist.
In an interesting decision delivered by the House of Lords, it was held that a man could not grant
a lease to himself (Rye v Rye 1962). It is submitted that if an identical case would arise in India,
the Indian courts would have taken an identical view.

Types of Leases

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There are different types of lease agreement for the transfer of the right of the immovable
property, these are:
Financial Lease
This type of lease is permanent and irrevocable. The Lessor transfers the rights of the
immovable property for a long period of time and works on the property. The Lessee takes
charge of all the burdens and liabilities of the property.
For instance, if a person assigned another person to look after his agricultural land and grow
crops and maintain it without specifying the termination of the lease, then it is said to be a
financial lease.
Operating Lease
In this type of lease, the Lessee does not hold the burden of the property and the lessor takes
care of the property. This type of lease is for a short period of time.
For instance, if a person transfers the property rights to another person in the form of a lease to
provide services on the immovable property for a short period of time, then it is considered an
operating lease.

Sale and lease back leasing

In this type of lease, the lessee sells the asset to the lessor with an advance agreement between
the two of leasing the asset back to the lessee for a fixed lease rental period. Such a lease is
also known as Bipartite lease.
Direct Lease
This is a tri-partied lease which includes:
equipment supplier,
lessor,
lessee.

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 Single investor Lease
In this type of lease, the lessor has to arrange for money in order to finance his asset by way of
debt or equity. The lender cannot recover anything from the lessee, in case the lessor defaults
in payment.
Leveraged Lease
There are three parties in this type of lease:
the lessor,
the lessee and
the financier/lender.
The lessor arranges for the equity and the financier has the responsibility to finance the debt.
Domestic Lease
When the lease contract is made within the country it is known as domestic lease.
International lease
There are two types of International lease:
Cross border lease
Import lease
An import lease occurs when the lessor and the lessee reside in the same country and the
equipment supplier resides in a different country. On the contrary, when the lessor and the
ease is known as a Cross border

Lessor vs Lessee

Lessor- The transferor of the immovable property is called lessor, ie lessor is the legal
owner of the property.
Lessee- The transferee of the immovable property is called lessee, ie lessee is the
person who is going to have possession and enjoy the property for a determined period
of time as agreed upon.
The rights and liabilities of lessor as well as lessee are discussed in Chapter 5 of the Transfer
of Property Act 1882.

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Rights and Liabilities of a Lessor
Legally a lessor is granted certain rights and certain liabilities.

Section 108A of the Transfer of Property Act of 1882 talks about the rights and liabilities of a
lessor which are mentioned hereunder: -

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

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. The rights and liabilities of a lessee are mentioned hereunder.

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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.
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.

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Duration of Lease
Lease being a contractual agreement specifies the date and time of the contract and the duration
in which the contract is valid. But there are certain circumstances that do not describe the
duration of the lease and are neither mentioned in any of the local customs and usages. In such
circumstances Section 106 of the Transfer of Property Act, 1882 is applicable which explains
certain situations and prescribes the duration of the lease.
Section 106 describes the duration of lease of two conditions including Agriculture or
Manufacturing purpose or other purposes:
Agriculture Or Manufacturing purpose
According to Section 106, if a lease agreement is made for agriculture and manufacturing
purposes without specifying the duration of the contract then it is prescribed to be for a year
and notice for termination of the lease is given in 6 months. The notice made should be written
and sent by post or personally delivered to another party and duly signed by them. The notice
made should be affixed without hiding it from the other party.
Other Purpose
If the lease agreement is made for any other transactions, then the time duration of the lease is
specified to be 1 month and renewed every month if it is not mentioned in the contract. The
notice for such a lease can be given within 15 days of the lease contract and delivered to the
other party in the same way mentioned for the agriculture or manufacturing lease purpose.

Termination of Lease
A lease is terminated in eight different ways that are discussed below:

i. A lease is terminated after the expiry of the specified time period as agreed upon at the
inception of the lease.
ii. If the length of the lease is until the happening of some event and when that event happens
the lease is terminated.
iii.
event and when the event happens the lease is terminated.
iv. When the lessee surrenders by implying.
v. When both the lessor and lessee mutually agree to end the contract.
vi. On the expiry of a notice which expressly conveys the intention to terminate the vacancy
and such notice must be unconditional.
vii. Through forfeiture which legally allows a lessor to re-enter and reclaim his property.
viii. 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.

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Notice to quit and its effects
A formal statement that is issued to the lessee if the lessor desires to end the lease agreement
whether on the grounds as specified under Section 106 or 111 of the Act, is known as a Notice
to quit. The lease can be forfeited as mentioned in the sub-clause (g) of Section 111, by
accepting the notice to quit.

Section 112 of the Act states that if the lessor accepts any rent from the lessee after initiating
the process of termination of the lease on the grounds of forfeiture, it will be assumed that the
notice to quit has been waived and the lease still exists.

Section 113 of the Act, provides the ways, i.e., expressly or impliedly in which a notice can be
waived.

1. Impliedly Waiver of notice to quit: When lessor issues notice to quit to the lessee
and on the expiry of that notice, another notice is issued to quit to the lessee by the
lessor. The first notice to quit is impliedly waived.
2. Express Waiver of notice to quit: The acceptance of rent by the lessor from the
lessee after the notice to quit has been served is called expressly waived.

Effect of holding over

Section 116 of the Transfer of Property Act, 1882, provides for the effect of Holding Over. It
states that if a lessor allows the lessee to have the possession of the property, the lease will be
renewed. But, if he does not agree to the holding over of the property by the lessee, a suit can
be initiated against the lessee on the grounds of trespass.
Two conditions are important for the application of Section 116 of the Act:
After the determination of the lease, the tenant or the lessee must be in possession of the
property.
The lessor or his legal representative, must either accept the rent from the lessee or
agrees to the holding over of the property by the lessee.
This section is applicable only when the original lease was fixed for year to year or month to
month and not when the lease was for life.

Few Important Judgements/Case Laws pertaining to Lease

Molla Sirajul Haque v Gorachand Mullick (Calcutta High Court)
The Calcutta High Court was faced with the question as to whether a lease of 999 years is
legal, especially in the view of the fact that substantial stamp duty can be saved by executing
such a kind of lease.
The Court held that there was nothing illegal in executing a lease for 999 years, and just
because the stamp duty is saved thereby, the aforesaid transaction does not become unlawful.

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The solution may be to amend the law relating to stamp duty or prohibiting parties from
entering into long leases. But until that is done such kind of leases remain valid and lawful.
This was pronounced by the Calcutta High Court.
Yashpal Lala Shiv Narain v Allatala Tala Malik Waqf Ajakhan Mus

the lessor and the lessee

mentioned in Section 108 of the Transfer of Property Act become conditions of contract
between the lessor and the lessee and have to be read as a part of the contract itself, unless
there is a contract or local usage to the contra
Pandit Kishan Lal v Ganpat Ram Khosla and Anr.

from a particular date he will cease to be in occupation under the landlord and that someone
else whom the landlord is not willing to accept as tenant. It is one of the obligations of contract
of tenancy that the tenant will on determination of a tenant, put the landlord in possession of
the property demised. Unless possession is given to the landlord, he continues to hold the

M/S Raptakos Brett & Co v Ganesh Property

ourt observed as

between the parties. Reason is obvious. The plaintiff in clearest terms has based its cause of
action also on the law of the land as found in paragraph 2 of the plaint. So far as this part of the
cause of action is concerned, it is a distinct cause of action apart from the cause of action
emanating from the alleged breach of the covenant on the part of the defendant. So far as the
law of the land, is concerned, it is obviously the common law under which the erstwhile tenant
on expiry of the lease has to hand over vacant possession to the erstwhile landlord. But that
apart, the said obligation on the part of the erstwhile tenant is status only recognized by

Allahabad Bank v Sourendra Nath Shaw and Anr

eave notice' as used in clause

(m) of Section 108 is also additionally indicative of the legal position that such notice as
referred to in clause (m) may be given orally also. The being so even oral notice as stated by
P.W. 1 to have been given in the case was sufficient to attract the fourth part of the liabilities

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Conclusion

The term lease is widely used in our day-to-day life for the matters relating to transfer of
immovable property. It is defined under Section 106 to Section 117, Chapter V of the Transfer
of Property Act, 1888. The Lease agreement is made similar to a valid contract mentioned under
the Indian Contract Act, 1872. It is a bi-partied agreement where the parties transfer the property
rights for certain share of profit or service made on the immovable property. It has various types
and essentials mentioned under the Act.

After reviewing the provisions laid down in the Act, along with the various judicial
pronouncements on the subject, it may be concluded upon that, lease is a very important aspect
of life and therefore, it becomes necessary for every individual to know about the concepts and
the essentials of the lease and also about the rights and the liabilities of the lessor and the lessee
and also to know about how the contract of lease may be terminated.

The provision of lease begins from section 105 of the Transfer of Property Act, 1882 and
continues till Section 117 of the Act. One can see that the duration is considered as an important
element of every lease. The lease provides for the duration during which the lessor can enjoy
the property. When the term is not given, the lease is fixed on the basis of local laws and customs.
And, in the absence of the term or local laws and customs, Section 106 of the Act ascertains the
term of the lease.

In a lease agreement, there are two parties, the lessor and the lessee. These parties have certain
rights and since duty is correlative to rights, hence, the lessor and the lessee also owe certain
duties to each other and on the infringement of these rights and liabilities they have the remedy
to either sue or claim damages from the other party. Therefore, a lessor has the duty to disclose
all the material facts to the lessee and avoid inter
the property and on the other hand, the lessee should pay the rent on time and must not cause
damage to the property leased to him.

Furthermore, under Section 111 of the Transfer of Property Act, 1882, the topic determination
of lease is very wide and covers the day-to-day life issues. It specifies different modes by which
the lease may be determined. Whatever may be the grounds of determination of a lease, the
person who is in the possession of the property, even after the lease has expired, cannot be
disposed of by the lessor or his legal representatives without recourse of law as given under
Section 111 of the Transfer of Property Act, 1882. This section does not apply to a lease created
by the will and to the agricultural leases, exempted from its operation by Section 117 of the Act.

After the lease is determined, the lessee loses his right to possession over the property. But when
the lessee still continues to hold possession with the consent, either by express or implied, the
lessee is called a tenant by holding over.

In this time when people are career-oriented thus, it is their need to leave their native place and
move to a new city or state. People are emotionally attached to their property and hence, they
cannot sell of them. In order to protect their property or there are times when people are in urgent
need of money, at that point of time people prefer to lease out their property instead of selling it
off. Simultaneously, there may be times when people moved to new place may require a place
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to live in or land to cultivate then, to take a property on lease may be a feasible option for them.

In past few years, it is evident that the government is focusing too much on lease for many
important purposes. Thus, there must be some initiative taken by the governmental and non-
governmental organizations to ensure or to impart knowledge about lease so that there may not
be any kind of infringement of rights on part of lessor and lessee. It is very common that lease
is generally of agricultural land in India, and almost 99% of the farmers are poor and illiterate
so, the education regarding lease will safeguard their interest.

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