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LEASE : Understanding the jargon..


LEASE : Understanding the jargon..

Last updated: July 17 2012
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  • LEASE : Understanding the jargon..

    Ashish Gupta, June 24, 2007
    The Economic Times (Delhi edition)

    Lease creates a right to use a property for the lessee. Unless there is a transfer of such an interest, there can be no lease. Section 105 of the Transfer of Property Act 1882 defines what a lease is. As per the Act, 'a lease of immovable property is a transfer of a right to use the property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised to the transferor by the transferee, who accepts the transfer on such terms'.

    The transferor of the property is referred to as the lessor. The transferee of the property is called the lessee. The price paid for the transfer is called the premium. The money is called the rent for the lease.

    In order for a lease to exist, these prerequisite should be present:

    - There should be a transfer of right from lessor to lessee

    - The lessee should have a separate alienable interest in the property

    - The interest should be in the immovable property

    - The interest should entitle the lessee to the right to possession of the property in accordance with the lease agreement

    - The right to use such property should be for a certain time period

    - The right should be given in return for some consideration to be paid periodically or on certain specified occasions

    In case of a lease, there is a separation of the right of possession from ownership of property. The word 'use' includes possession also. It is to be noted that a mere personal right of possession of immovable property will not constitute a lease. The right to possess immovable property, which is subject matter of the lease, is vested in the lessee.

    When a lease is executed, the transfer that takes place is a transfer of limited right to use the property during the period of the lease. The lessee has the right only to use the property - the ownership of the property continues to remain with the landlord.

    It is important to note that mere transfer of right of possession without a right to use or is not a lease. Similarly, a mere right of use, without the right of possession in respect of the immovable property cannot be termed as a lease.

    After a lease is created, the lessor cannot reserve to himself any share in the right of possession.

    A lease can be made from year to year. Also leases for a term exceeding a year, leases reserving a yearly rent and permanent leases are possible. These leases can be made only by way of a registered document. Both the lessor and the lessee or their duly constituted authorities should execute such registered instruments. The instrument creating the lease needs to be properly stamped, executed and registered.
  • #2


    Re : LEASE : Understanding the jargon..

    Can anyone throw some more light on the above. Please.


    • #3


      Re : LEASE : Understanding the jargon..

      Enough light is thrown already. Where do you find dark spots?

      I disagree with the requirement of registration of a lease deed. Lease agreements with tenures less than a year do not require registration. This is why 99% leases are made for 11 months max, just to avoid registration expenses. Lease agreements for 12 months or more, however, are to be registered mandatorily as per law.


      Have any questions or thoughts about this?