Transfer of Property Act

Introduction

A right in property is generally created through the sale of such property. However, lease is an exception to this rule where a right in the immoveable property is created without selling it.

• Provisions relating to Lease are mentioned under Section 105 to 117 of Transfer of Property Act, 1882 (TPA).

Classification of Leases on the Basis of Interest

• On the basis of interest, leases can be classified into categories:
  • Absolute Lease – it is granted by a person who has an absolute interest over the property and can be granted for any number of years or for any time.
  • Derivative Lease – it is granted by a person who himself has a limited interest in the property.
  • Illustration – A grants a lease of his house in B’s favour for a period of 10 years. This is an absolute lease. B, who is inducted into the premises as a tenant grants a sub lease of the same premises in C’s favour. This sub lease would be a derivative lease.

Classification of Leases on the Basis of Duration

• Lease can be classified in three categories from the point of view of their duration:
  • Lease for a Fixed Period
  • Periodic Leases
  • Lease in Perpetuity

Lease for a Fixed Period

• A fixed-term lease covers a set amount of time, the most common being 1 year, 5 years or 10 years.
• When a fixed term ends, you and your tenant can agree to a further lease.
• The lease becomes a periodic (month-to-month) agreement if a further fixed-term lease isn't agreed to, and the tenant doesn't vacate.
• A fixed term indicates permanency, but permanency does not necessarily imply fixing of rent.

Periodic Lease

• A lease whose duration or the term is continuous from period to period is called a periodic lease.
• A lease from year to year is a periodic lease.
• The period may be a year, a quarter, a month or even a week.
• The mode in which the rent is reserved may afford a presumption as to the period of lease.

Lease in Perpetuity

• A lease in perpetuity is usually granted in India for agricultural property.
• They are created by an express or a presumed grant.
• A slight increase in rent will not, by itself destroy the permanent character of the tenancy.
• A contract of lease providing that the tenant is to continue in possession as long as he paid rent, indicates a tenancy for the lifetime of the tenant and not a permanent tenancy.
• A lease does not cease to be a lease in perpetuity only because there is a forfeiture clause.