Lease: Rights and Liabilities of Lessor and Lessee

Lease and rights of lessor and lessee

Lease

Generally, lease means when one person has rented out his immovable property to other person to enjoy that property for a long term of period for example, 12 months or more, on a specified consideration.

Definition

Under Section 105 of Transfer of Property Act, 1882, (here referred Act, 1882) the term “Lease” has been defined according to which-
“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.”

Essential ingredients of Lease are

1. Parties to lease- Lessor and Lessee

1.1- There must be at least two parties in an agreement of lease. The person who transfers his property is known as “LESSOR” and the person to whom transfer is made is known as “LESSEE”.
1.2- Both parties should be of sound mind and competent to contract.
1.3- A lease of immovable property can be transferred by its absolute owner or by any person authorized on behalf to dispose property which is not his own.
1.4- A lease may be granted to one or more than one person jointly. In the case of joint tenancy, in the absence of a clear provision to the contrary, the entire body of tenants constitute single tenant.
1.5- A person cannot grant lease to himself.

2. Immovable property

2.1- A lease can only be granted of an Immovable property and not of a movable property. Under Section 3 of Act, 1882 the term “Immovable property” has been defined according to which standing timber, growing crops or grass are expressly excluded from immovable property.
2.2- However, in case of T Lakshmipathi v P Nithyananda Reddy, AIR 2003 SC 2427, Court held, A lease of a house or of a shop is a lease not only of the superstructure but also of its site.
2.3- Also, in the case of Annick Chaymotti Devyani v Prem Mohini Mehra, 2003 (1) Ren CR 709 (Del), Court held, leased premises is not only a building or part of building but also the land and other things appertaining to it and also furniture and other fixtures provided by the landlord.
2.4- Therefore, it can be said that immovable property not only include land, building or minerals but also includes the minerals attached to it.

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3. Transfer of “right to enjoyment”

The right to enjoyment of a property can only said to be transferred when the possession of property is given. Transferring the right to enjoyment does not contemplate that the all the ownership rights have been given but only means that partial rights/interests have been transferred. The interests of the lessor and lessee in the leasehold property are heritable and vests in their heirs after their death.

4. Contract can be express or implied

The contract of lease can either be made in written form or orally. Mere fact that lease deed was unregistered although the possession of suit property was entrusted by lessor to lessee will not affect the jural relationship of lessor and lessee created by virtue of such lease deed.

5. Time duration

Lease must contain the time duration for which the right to enjoyment of property is being given to lessee by lessor, as to when lease will commence and when it will cease to operate. That is to say, a lease must contain whether it is for specified period or in perpetuity i.e., for eternal.

6. Consideration given to transferor

Consideration is an essential element of lease contract and in absence of same, it would rather become a gift. Consideration can either be premium or rent or premium plus rent. Price paid or money promised to be paid is known as Premium and rendering crops, services or other valuable things, periodically or on specific occasion is known as Rent.

7. Acceptance of lease on such terms by transferee

The lease contract must be bilateral which means that transferee must agree to the terms and conditions of lease agreement with full consent and not under any pressure.

RIGHTS AND LIABILITIES OF LESSOR AND LESSEE- Section 108, TPA, 1882.

Since, the rights and liabilities of Lessor and Lessee are determined by the lease contract which specifies their terms and conditions to which both parties agree, but if no such contrary-contract exists then in absentia, the rights and liabilities of lessor and lessee are determined by Section 108 of Act, 1882. However, under said Section, the rights of lessor are not specifically provided but the liabilities of lessee are regarded as rights of lessor those are as follows-

Rights of lessor

1. Lessor has right to obtain back the possession of land after termination of lease.
2. Lessor has right to collect rent or premium from the lessee.
3. He has right to be known of any fact of such nature and extent which increases the value to his leased land from the lessee.
4. He has right to inspect the leased land during the period of lease to keep a check whether his property is maintained in good condition or not.
5. He has right to terminate lease if the lessee acts or performs in contravention to lease agreement.

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Liabilities of Lessor

1. Duty of Disclosure

There can be two types of defects, first, the apparent defects which can be easily visible and second, the latent defects which are not easily discoverable. According to Sec. 108, the lessor is under liability to disclose to lessee, the fact of any latent defect, being a material defect, which lessor knows that it will be intended to use by lessee. The Latent defect becomes material, if it infringes to right to enjoyment of property of lessee and in such situation the lessor is bound by law to disclose.

2. Duty to give possession

The lessor is under statutory obligation to put lessee in possession of property but only on request of lessee and not otherwise and if lessor fails to do same then lessee can sue him to obtain possession. Also, if the lessee has paid the consideration in rent, then he can sue lessor for damages along with possession.

3. Covenant for quiet enjoyment

Lessee should not be interrupted or interfered by lessor till the duration of lease in enjoying property until and unless he is not complying with the terms and condition of lease and has not paid rent as per lease.

Rights of Lessee

1. Right to accretion

If during the term period of lease, the leased land gets accreted then such accretion shall constitute the part of leased land and lease and lessee will have the right to enjoy the land with such accretion. And on termination, lessee will be under obligation to surrender the accretion.

2. Right to avoid lease

The lessee has right to terminate the lease if
2.1 – whole or any part of leased land gets “destroyed” or rendered “substantially and permanently unfit”,
2.2 – that such destruction forbids lessee to enjoy property for which it was leased out.
2.3 – Destruction must be caused by fire, tempest, flood or violence of an army or of a mob or any other irresistible force.
2.4 – destruction/injury must not be caused by lessee’s own wrongful act or default otherwise he will not be entitled for such right.

3. Right to repair property

When lessee gives notice to lessor to repair a defect and the latter neglects to do same within reasonable time, then in such a situation, lessee has a right to repair the defect in property and to deduct the expense incurred of such repair from the interest of rent or to otherwise recover from lessor.

4. Right to make payment

When a lessor is under obligation to make a payment eg. Taxes, bills, etc. and he fails to do, such payment being recoverable from lessee or property, is made by lessee then he has right to recover such payment amount from lessor or to deduct it from the interest of rent.

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5. Right to remove fixtures

Lessee has right to remove any fixture which is attached to property during the period of lease agreement and while he is in possession of land. Otherwise, after the termination of lease, he in not entitled to remove any fixture rather, he is under obligation to leave the land in the same situation as it was prior to lease agreement.

6. Right to have benefit of crops

When the lease is of unspecified period and ceases (determined) to operate due to any reason but not due to fault of lessee, then in such a situation lessee or his legal representative are entitled to take all the crops planted or sown by lessee and growing upon on such land at the termination of lease.

Liabilities of lessee

1. Duty to disclose facts- If lessee came to know about any fact as to nature or extent which increases the value of land and lessor is unaware of same, then it is lessee’s duty to disclose the fact to lessor.
2. Duty to pay rent– The lessee is under obligation to pay or tender rent or premium to lessor or his agent at proper time and place as agreed in lease agreement.
3. Duty to maintain property- Lessee is bound to keep the property in good condition and not to destroy or cause injury to property which degrades its value. Also, on termination of lease, the lessee should make sure that property is restored to lessor in good condition. The only exception attached to this liability is that he is not liable for any change made in property due to reasonable wear and tear or irresistible force. The lessee should allow lessor and his agents to enter upon his land to inspect the condition of property at all reasonable times. If the lessor points any defect caused by wrongful act of lessee, then lessor should give notice of same to lessee and latter is bound to make it good or repair within three months from date of notice.
4. Liability of not constructing- Without lessor’s consent, the lessee is not liable to erect or construct any building or permanent structure except for agricultural purposes.
5. Duty to re-transfer the possession of land– After determination of lease, the lessee is under obligation to re-transfer the possession of land to lessor.
6. Duty to give notice of any encroachment- Where lessee came to know about any “proceeding of recovering land or any part of it” or of any “encroachment or interference made in the lessor’s right” then he has to inform the lessor about this fact so that he may timely take an action to protect his interest.

Author: kashish gupta,
Invertis University, 4th year

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