Leasing out your Property in India: The law of the land

Indian property transactions are governed by several enactments of the Central Government.  Civil rights relating to leasing out of residential or commercial property are enforced by the Civil Procedure Code which ensures that the rights of the landlord and the tenant are safeguarded. The Transfer of Property act defines the laws relating to transfer or lease of property.  License is defined under the Indian Easements Act 1882.  Any person wanting to lease out his property in India must work within the ambit of the provisions contained in these enactments.

“Lease” as described in Section 105 of the Transfer of Property Act 1882, states that “A lease of Immovable Property is a transfer of a right to enjoy such property made for a certain time, express or implied or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value to be rendered periodically or on specified occasions to the transferor by the transferee who accepts the transfer on such terms”

“License” is defined under Section 52 of the Indian Easements Act 1882.  The provision reads as: “Where one person grants to another, or to a definite number of other persons, right to do or continue to do, in or upon the immovable property of the grantor, something which would in the absence of such right be unlawful and such right does not amount to an easement or an interest in property, the right is called a License.”

Several Supreme Court and High Court judgments on the distinction between Lease and License elucidate the principles of these definitions.  While Lease transfers interest in property, License does not. Lease confers a right in rem, License confers only a right ot occupy the property. License can be terminated at the will of the licensor.  Lease can be terminated by mutual agreement or by either party giving notice to the other of their intention to terminate the Lease.

What is contained in a Lease deed? Section 107 of the Transfer of Property Act conjoins that any lease of property from year to year or for a period exceeding one year should be done by registering the lease deed.  This is mandatory. The lease deed contains mutually agreed terms and conditions between the parties to the lease deed. (The owner of the property is known as the Lessor and the tenant is known as the Lessee.)  The deed takes into consideration the rights and duties of both parties and protects the individual interests in the property. 

The deed is legally binding and is the basic document that is relied upon in determining whether the deed is a lease or a license to use the property.  Hence the provisions of the lease deed should be carefully drafted and should be read over by both parties.  The parties to the lease must certify that they have read and understood the terms and conditions set forth in the document, before appending their signature to the document.

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