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According to Section 105 of the Transfer of Property Act, a lease is the transfer of a right to enjoy property, land, or an estate for a specified period or permanently. A lease involves the payment or agreement to pay an amount, share of commodities, services, or any valuable consideration periodically or on specific occasions from the lessee to the lessor. To fully understand a lease, one must know the following terms:
- Lessor: The property owner who grants the lease and retains complete authority over the property.
- Lessee: The individual who receives the rights to use and possess the property as per the lease agreement.
- Duration: The time period for which the lessee holds the property rights.
- Premium or Rent: The amount or share paid for the right to use and enjoy the property, either periodically or as a lump sum, as stipulated in the agreement.
A lease agreement is a written contract between a lessor (landlord) and a lessee (tenant), specifying that the lessor will receive periodic payments from the tenant in exchange for the right to use and occupy the property. Lease agreements are typically necessary when a property is leased for an extended period, usually ranging from 1 to 5 years or more. Such agreements play a crucial role in defining the relationship between the landlord and tenant and establishing the legal provisions that bind them. An expert documentation lawyer should draft the lease deed, ensuring it meets the requirements of both parties and protects the interests of the landlord and tenant equally.
Difference between Lease and Sale
Lease
- The tenant enjoys only the rights to use the property.
- Except in cases of perpetuity, the lessee's rights to the property end when the lease is terminated.
- Payments are made as a premium or at specific intervals.
- The lessee can use the property and typically transfer the lease, but ownership remains with the lessor.
- A lease is generally more affordable.
- The lessee does not receive the residual value of the property.
- Lease documents are known as lease agreements or deeds of lease.
Sale
- The buyer obtains full ownership rights of the property.
- There are no usage limits for the property.
- The cost of the property is paid in a single transaction.
- Ownership allows the buyer to sell the property in the future.
- The purchase price is higher than the lease cost of the same property.
- The residual value of the property can be transferred to the buyer.
- Sales typically involve an agreement of sale, deed of conveyance, or sale deed.
Key Contents of a Lease Deed in India
There are certain important provisions that should be included in every lease agreement in India:
- Description of Property: The deed should contain a detailed description of the property, including area, location, structure, address, and other relevant information.
- Duration: The lease agreement should clearly state the duration for which the lease is valid. This provision may also include information about the renewal of the lease deed if the parties wish to continue the contract.
- Rent, Maintenance, and Security: The lease deed must specify the rent amount, payment mode, due dates, security deposits, interest for late payments, and information regarding maintenance charges, society charges, and utility bills.
- Termination of Lease: The deed must outline the reasons for termination of the agreement, which might include breach of the deed, illegal activities on the property, failure to pay rent, or nuisance caused by the lessee.
- Subletting: The lease deed must state whether the tenant is permitted to sublet the property or not.
- Dispute Resolution: The deed should mention the method of resolving legal disputes arising from breaches of the agreement, including any ADR processes such as arbitration.
- Applicable Laws: This provision should state the laws applicable to both parties in case of a dispute and the court that will have jurisdiction to handle such cases.
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Receive a Call from Our Expert Legal Team
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Provide Necessary Information to the Lawyer
04
Our Expert Legal Team Drafts the Deed
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Deed Sent to You for Approval
06
Download the Approved Deed
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Frequently Asked Questions (FAQs)
A lease deed is an agreement where the tenant has agreed to pay a periodic rent to the landlord
If the leasing period is more than 12 months, registration of lease agreement is mandatory according to the Registration Act, 1908. If an agreement is registered then stamp duty and registration fee is applicable and needs to be paid.
Although the term rent and lease are synonymous in nature renting a property is not akin to leasing a property. A rent agreement can either be a lease or a license. It will be treated as per the terms and conditions and renting period mentioned in the agreement.