Introduction: The laws pertaining to the transfer of property and/or the usage rights of property are covered under the Transfer of Property Act, 1882. It broadly covers various modes of transfer such as Sale, Mortgage, Exchange, Lease, Gift etc; Lease is covered in detail in Chapter 5 of the Transfer of Property Act.
As per Section 105 of the Transfer of Property Act, the definition of ‘Lease’ can be understood as a transfer of a right to enjoy property for a certain time or in perpetuity; in consideration of a price paid or promised or of money, a share of crop, service or any other thing of value to be rendered periodically or on specific occasion to the Lessor by the Lessee who accepts the transfer on such terms.
In this context,
- Lessor is the absolute owner of the property which is the subject matter of the lease;
- Lessee is the person acquiring the rights to use and enjoy the property on lease from the Lessor;
- Duration is the term for or period for which the rights to use and enjoy the property is granted. The duration of the lease can be for a certain time, express or implied or can also be in perpetuity;
- Rent is the consideration for granting the rights to use and enjoy the property can be in the form of a one-time price paid or promised i.e. Premium or on payment of money or any other thing of value, periodically or on specific occasions or intervals, known as Rent.
What is a Lease Deed?
A lease deed is a written contract between a landlord (lessor) and tenant (lessee), which states that the landlord would receive a periodic payment in exchange of allowing the tenant to use and occupy the property. The lease deed also defines the terms and conditions that govern the relationship between a landlord and a tenant during the period of lease. For the renter, this gives stability for the period of the lease. For the landlord, they can expect to consistently get rent of a specific amount for the period of the lease.
Key Clauses/Contents of a Lease Deed in India
The most important provisions that must be included in lease are as follows:
- Description of the Parties to the lease
- Description of Property
- Duration of lease deed
- Purpose of lease – residential or commercial purpose
- Security deposit and the interest to be paid on it, if any
- Monthly payable Rent, Maintenance, and Security
- Date of paying the rent and payment mode
- Monthly maintenance charges and who bears it
- Other charges like tax and parking fee, and who pays
- Access to common terrace and common areas
- Notice period given by either party to terminate the lease
- Subletting allowed or not
- Misuse or building Violation
- Who will bear the routine repair/maintenance expenses
- In case the lease deed needs to be registered, distribution of the stamp duty and registration expenses
Difference between Rent and Lease deed
Rent and Lease are most confused words in English language. To appreciate the difference it is necessary to first understand the true meaning of each of these words:
- RENT (n.): Rent is the value one pays for using something to its owner and the said value can be either in cash or in kind. Rent is an essential element of a Lease Agreement as it specifies the value to be paid for leasing any property.
- LEASE (n): Lease is a written agreement in which the owner of property (either real estate or some object like an automobile) allows use of the property for a specified period of time (Term) for specific periodic payments (Rent) and other terms and conditions.
From the above definitions you can appreciate how the words “Rent’ and “Lease” have been interchangeably used without caring for their proper definitions.
What is the Procedure to Register a Lease Deed?
- Pay the stamp duty fees
- Drafting the lease deed on legal paper or stamp paper
- Submit for its registration along with relevant documents
- Visit the registration office
- Pay the registration fees
