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Subleasing may lead to eviction


Subleasing may lead to eviction

Last updated: April 27 2007
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  • Subleasing may lead to eviction

    Subleasing immovable property without the landlord’s permission amounts to a breach of contract and invites legal consequences

    In principle the tenant can sublease because the interest in immovable property is also called immovable property. But the landlord and tenant are free to have certain terms in lease deed prohibiting subleasing. Where there is such a contradictory term in the deed to which the tenant agreed, he cannot sublease the whole portion or part of it to another. The only exception is if the landlord gives a written agreement to sublease. If not, it amounts to breach of contract leading to legal consequences.
    M/s Rose and Company, which was running some hotels at prominent centres in the city took premises on lease from Mr Abraham. The deed of lease specifically prohibited the transfer of whole leased premises to another or any part of it. M/s Rose and Co entered into a deal with M/s Sky park & Co saying that the right to manage the hotel business at Abraham’s place has been transferred with the right to occupy the leased premises, which virtually meant that the M/s Skypark people would sit in the office and manage the entire hotel business. When Mr Abraham questioned it, M/s Rose & Co said it didn’t sublease the premises but only allowed Skypark to manage their business.
    It also asked how could anybody manage the business without occupying the premises. It was also assured that there would be no default in payment of rent, along with periodic increments in rent. The conduct of the tenants and subtenants clearly proved that the transaction was in fact a transfer of premises and transfer of entire business, which means that the tenant has deprived the owner of the building of his choice of selecting a new tenant after the existing tenant has decided to terminate the lease. Also, the tenant wanted to exploit the goodwill generated in that premises. It was prohibited in the contract.

    Here, even Skypark is at a disadvantageous position because it could be evicted, its investment could go waste, the lease deed would be absent, the term would be short or cut short, and finally there would be no legal status at all. Skypark should have entered into a deal with Mr Abraham, or at least it should have involved the landlord to achieve a legal status and protection of the law.
    When Mr Abraham approached the court of law for evicting the tenant for the breach of contract by subleasing, M/s Rose & Co hurriedly got Skypark to vacate the premises and started running the hotel business by itself. It also pleaded that it was the original tenant and there was none occupying the premises. What would be the rights of a house owner like Abraham in such cases?
    In a similar situation, the High Court of Andhra Pradesh justified in taking the view that the tenant and his transferee used all ingenuity at their command to camouflage the real nature of the transaction and made it appear that there was only a transfer for man aging rights of business and not a transfer of the business in toto together with the right to occupy the leased premises. Even the conduct of the parties afforded material to conclude that what was transferred to the transferee was much more than the right to run the hotel business for a limited period.
    In such a case, the fact that the transferee subsequently vacated the premises and tenant was himself running the hotel would not affect the rights of the landlord to have the tenant evicted on the ground of subletting against the prohibitive term of contract.
    This decision was reported in K. Achyuta Bai vs V. Manga Devi, AIR 1989 SC 93. Thus, Mr. Abraham can still evict M/s Rose & Co and re-enter the premises to lease it out to a fresh party according to his terms and conditions.
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