Rule
A lease of immovable property is a transfer of a right to enjoy it, made for a certain time, express or implied, or in perpetuity, in return for a price paid or promised, or money, a share of crops, service or any other thing of value given periodically or on set occasions (S.105).
- The transferor is the lessor and the transferee the lessee.
- The price is the premium. The periodic payment is the rent.
- Ownership stays with the lessor. He keeps the reversion: the right to get the property back when the lease ends.
A lease passes the right to use and enjoy, not ownership. That is why the lessor can take the property back at the end, and why the law fixes default terms when the parties are silent.
| Provision | What it says |
|---|---|
| S.105 | Definition of lease, lessor, lessee, premium and rent |
| S.106 | Default duration and notice when there is no contract |
| S.107 | Form: when a registered instrument is needed |
| S.108 | Rights and liabilities of lessor and lessee |
| S.111 | How a lease ends |
| S.116 | Holding over |
Requirements
| # | Requirement | What to check |
|---|---|---|
| 1 | Parties competent to contract and transfer | Lessor has title or authority |
| 2 | Immovable property | Land, building or interest in land |
| 3 | Transfer of a right to enjoy | Possession and use pass. Exclusive possession is a strong sign |
| 4 | For a certain time or in perpetuity | The term is fixed, can be found, or is perpetual |
| 5 | Consideration | Premium, rent, crop share, service or other value |
| 6 | Proper form | S.107 and S.17(1)(d), Registration Act |
Lease and licence
| Basis | Lease (S.105, TPA) | Licence (S.52, Easements Act) |
|---|---|---|
| Nature | Transfer of an interest in property | Permission to do something on land that would otherwise be unlawful |
| Interest created | Yes | None |
| Possession | Usually exclusive | Use only |
| Transferable | Yes, unless restricted (S.108(j)) | No, it is personal |
| Ending | By the S.111 modes | Revocable, except in the cases in S.60 |
- The label in the document does not decide the question. The court looks at the substance and the real intention of the parties (Associated Hotels of India v RN Kapoor, 1959).
Default duration (S.106)
| Purpose of lease | Default lease | Notice to end |
|---|---|---|
| Agricultural or manufacturing | Year to year | 6 months |
| Any other purpose | Month to month | 15 days |
- The notice must be in writing, signed and properly served. Since the 2002 amendment, the notice period runs from the date the notice is received. It need not end with a month or year of the tenancy.
Form (S.107)
| Lease | Form |
|---|---|
| From year to year | Registered instrument |
| For any term over one year | Registered instrument |
| Reserving a yearly rent | Registered instrument |
| Any other lease | Registered instrument, or oral agreement with delivery of possession |
Kinds of lease
| Kind | How it ends |
|---|---|
| For a fixed term | When the term ends (S.111(a)) |
| Periodic (year to year, month to month) | By notice (S.106, S.111(h)) |
| In perpetuity | Only by surrender, merger, forfeiture or similar modes |
| Holding over (S.116) | Renewed year to year or month to month, as S.106 provides, once the lessor accepts rent or otherwise assents |
| At sufferance | The tenant stays on without the lessor's assent. He is not a lessee |
Illustrations
1. Hotel guest
- Facts: A guest stays in a hotel room for three nights. Staff enter daily to clean.
- Result: A licence, not a lease.
- Why: The guest has only permission to use. No interest in the room passes to him.
2. "Leave and licence" of a shop
- Facts: Y takes a mall shop for 5 years under a "leave and licence". He has exclusive possession, his own lock and the right to run his business there.
- Result: Most likely a lease.
- Why: The court looks at substance and intention, not the label.
3. Monthly tenancy
- Facts: Ramu rents a flat for Rs.15,000 a month. No term is fixed. The flat is for living in.
- Result: A lease from month to month (S.106). Either side may end it by 15 days' written notice.
- Why: S.106 fills the gap when the parties fix no term.
4. Unregistered three-year lease
- Facts: Raju leases his shop to Suresh for 3 years by a written but unregistered deed. Suresh takes possession and pays rent monthly.
- Result: The deed cannot create a 3-year lease (S.107; S.49, Registration Act). From possession and payment of rent, a monthly tenancy can be inferred.
- Why: A lease over one year needs a registered instrument.
5. Holding over
- Facts: A 3-year lease of a flat ends on 31 March. The tenant stays on and the landlord accepts rent for April.
- Result: The lease is renewed from month to month (S.116, read with S.106).
- Why: Acceptance of rent is assent to the tenant staying on.
Key Cases
Associated Hotels of India v RN Kapoor, AIR 1959 SC 1262
- Facts: Rooms in a Delhi hotel were let to a hairdresser for his salon under a document called a licence.
- Held: The transaction was a lease. The court looks at the substance and intention of the parties, not the form. Exclusive possession is a strong but not conclusive sign of a lease.
- Principle: Lease or licence depends on intention found from the whole document and the facts.
Do not say that exclusive possession alone decides the question. It is a key sign, but the test is the real intention of the parties.
Distinctions
| Basis | Lease (S.105) | Sale (S.54) |
|---|---|---|
| What passes | Right to enjoy | Ownership |
| Time | Fixed term or perpetuity | Permanent |
| Reversion | Lessor keeps it | None |
| Payment | Premium or rent | Price |
| Registration | Year to year, over one year, or yearly rent | Rs.100 or more |
Exam Scenario
X lets a shop to Y for 5 years at Rs.50,000 a month under a document called "Leave and Licence". It is not registered. Y has exclusive possession, his own lock and runs his business. After 3 years X tries to revoke the "licence" and evict Y. Advise Y.
Approach
- Issue: Lease or licence. Exclusive possession and the commercial use point to a lease, whatever the label (Associated Hotels, 1959).
- Not met: Registration. A lease over one year needs a registered instrument (S.107), so the document cannot create a 5-year lease.
- Not met: S.53A protection. A contract made after 2001 must be registered to support it.
- Met: Y is in possession and pays monthly rent that X accepts. A monthly tenancy can be inferred.
Conclusion: X cannot revoke at will as if it were a licence. But Y has only a month-to-month tenancy, not a 5-year lease.
Remedy: X can end the tenancy by 15 days' written notice (S.106), subject to any rent control law that applies. Y can insist on proper notice and resist eviction without it.
Recall Check
- What are the elements of a lease under S.105?
- How do you tell a lease from a licence?
- What are the default terms under S.106?
- Which leases need a registered instrument?
Flashcards
How does S.105 define a lease?
Transfer of a right to enjoy immovable property for a certain time or in perpetuity, in return for a price paid or promised, or money, crop share, service or other value given periodically or on set occasions.
What is the *Associated Hotels* test for lease vs. licence?
Substance and the real intention of the parties, not the label. Exclusive possession is a strong sign of a lease but is not conclusive.
What is "reversion" in a lease?
The interest the lessor keeps: the right to get the property back when the lease ends.
Under S.106, what is the default notice period for a month-to-month lease?
15 days' written notice. Since 2002 the period runs from receipt of the notice.
What mode is required for a lease exceeding 1 year?
Registered instrument (S.107).
What is "holding over" (S.116)?
Where a lessee stays on after the lease ends and the lessor accepts rent or otherwise assents, the lease is renewed from year to year or month to month, by the purpose, as S.106 provides.
Define "lease" under S.105.
A transfer of a right to enjoy immovable property for a certain time or in perpetuity, in consideration of a price paid or promised, or of money, crop share, service or other thing of value given periodically or on specified occasions.
What is the hallmark test to distinguish a lease from a licence?
The intention of the parties from the substance of the deal. Exclusive possession is the strongest sign of a lease, but not conclusive.
Under S.107, what formality is required for a lease exceeding 1 year?
Must be made by a registered instrument.
What is the default duration of an urban building lease under S.106?
Month to month, ended by 15 days' written notice.
What is "merger" under S.111(d)?
When the interests of lessee and lessor in the whole property vest at the same time in one person in the same right, the lease ends.
Can a lessee assign/sublet the leased property?
Yes, unless the contract says otherwise (S.108(j)).