Lease of Immovable Property | Property Law - CLAT PG PDF Download

Introduction

• According to Section 105 of the Transfer of Property Act, a lease is defined as the transfer of the right to enjoy immovable property for a specified duration in exchange for a price, which can be fixed or variable (like a share of crops). Leases can be either oral or written.
• When a lease is for one year or more, it must be in writing and registered. For leases of shorter duration, registration is optional, but delivery of possession is necessary in both cases.

Distinction between Lease and Licence

• A lease creates an interest in the property.
• The lessee gains exclusive possession of the immovable property.
• A lease is assignable.
• A lease is not revocable.
• The lessee can take legal action for trespass.
• According to the Transfer of Property Act, a lease must be registered if it is for one year or longer.

Licence:

• A licence does not create any interest in the property.
• It grants permission to perform an act on the immovable property that would be unlawful without the licence.
• A licensee does not have the same rights as a lessee.
• A licence is not transferable.
• A licence can be revoked.
• A licence holder cannot sue in their own name.
• Registration of a licence is not necessary.

Rights and Duties of the Lessor and Lessee

Rights and Liabilities of the Lessor:

• The lessor must disclose any material or latent defects in the leased property.
• The lessor is responsible for putting the lessee in possession of the property.
• If the lessee is paying rent, there is a covenant for quiet enjoyment of the property.

Rights and Liabilities of the Lessee:

• Lessee's Right to Accretions: The lessee is entitled to any accretions to the property, subject to laws regarding alluvion. For example, adjoining waste land brought under cultivation is not considered accretion.
• Voidable Lease: If a significant part of the leased property is destroyed by events like fire, flood, or violence, the lease is voidable at the lessee's discretion, provided the lessee is not responsible for the destruction. For instance, if a lessee's shop is burned down due to mob violence, the owner cannot claim compensation from the lessee.
• Right to Sub-Lease: Unless prohibited by the lessor in the lease agreement, the lessee has the right to sub-lease the property.
• Right to Fixtures: Any fixtures attached to the land become part of it, and the lessee is entitled to such fixtures.
• Right to Repairs: If the lessor neglects necessary repairs, the lessee can make the repairs after giving reasonable notice. The lessee can deduct the repair costs from the rent or seek reimbursement from the lessor.
• Payment on Behalf of Lessor: If the lessor fails to make payments like house tax, the lessee has the right to make these payments and get reimbursed.
• Right to Ingress and Egress: The lessee has the right to enter and exit the property freely and to carry away any crops grown during the lease when it ends.
• Duty to Restore Possession: The lessee must return the property to the lessor in good condition, as it was at the beginning of the lease, except for normal wear and tear. If the lessee causes defects, they should not use the property for purposes other than agreed upon, and should not damage or alter the property.
• The lessee should not erect permanent structures on the property, except for agricultural purposes.
• The lessee is obligated to pay the agreed-upon rent.

Cases Law:

• Spenser's Case.
• Katyayini Devi v. Udaya Kumar.

Termination of Lease

• By Efflux of Time: A lease with a fixed period, such as two years, automatically terminates when the specified time elapses.
• On the Happening of an Event: For example, a lease may be set for twenty years or until the death of the lessee, whichever occurs first. The lease ends either at the end of twenty years or upon the lessee's death.
• Merger: This occurs when the lessor and lessee become one entity, such as when the lessee purchases the leased property, acquiring the entire interest in it.
• Surrender: A lease can be terminated by surrender, which involves the lessee yielding up the term to the lessor, delivering possession back to the lessor, and the lessor accepting this surrender. Mutual agreement is essential for surrender.
• Implied Surrender: This happens when the lessor accepts a new lease with different terms while the existing lease is still in effect, leading to the implied surrender of the original lease.
• Forfeiture: A lease can be terminated by forfeiture under three circumstances:
  • If the lessee violates an express condition, the lessor serves a notice to quit.
  • If the lessee claims title to the property for themselves or a third party, the lessor must give notice to quit.
  • If the lease stipulates that the lessor may re-enter if the lessee becomes insolvent, the lease can be terminated by giving notice to the lessee.
  In these situations, accepting rent from the lessee waives the right to forfeiture.
• Notice to Quit: The lessor must give the lessee notice to quit or terminate the lease. If the lessor accepts rent after giving notice, it waives the notice to quit. For example, if lessor A gives lessee B notice to vacate, and after the notice period expires, A accepts rent from B, the notice is waived.

Exchange

Actionable Claim

Actionable claims encompass legal claims recognized by the courts for granting relief in cases involving:

• Unsecured debts
• Beneficial interest in movable property not in possession (actual or constructive), regardless of whether the interest is present or future, conditional or contingent. This definition has resolved various challenges that arose prior to 1900.\

Colonial Bank v. Whinney and Muchiram v. Ishan Chandar

• Section 130 of the T.P. Act addresses the transfers of actionable claims. It stipulates that a transfer of an actionable claim, whether with or without consideration, must be executed through an instrument. Upon execution, all rights and remedies of the transferor are vested in the transferee, regardless of whether notice is given. The transferee has the right to sue or proceed in their own name without requiring the consent of the transferor.
• For example, if A is the debtor and B is the creditor, and B transfers the debt to C, B can demand payment from A. If A pays B without being aware of the transfer, the payment is valid, and C cannot sue A for the debt. The debt is an actionable claim and can be transferred by B to C. However, C as the transferee has the same rights and remedies as B, meaning C cannot sue A for the debt. Similarly, if A assigns a life insurance policy to Bank B as security for a loan, and A dies, B is entitled to receive the policy amount and can sue without the consent of A's executors.
• The following are examples of actionable claims:
  • Share in a Company
  • Mortgage debt
  • Claim to copyright
  • Claim to mesne profits
  • Mere right to sue.