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A lease deed is an instrument to transfer the right to possession and enjoyment, though not the title, of immovable property, from the transferor to the transferee, in consideration of a price in the form of rent or premium. The transferor is called the Lessor and the transferee is called the lessee.
A residential lease deed is executed for the purpose of allowing the Lessee to possess and reside at the premises for a certain period of time in return for rent. A Lease Deed protects the interest of the Lessor by placing restraints on the Lessee, and also of the Lessee by providing them legal rights to enjoy the peaceful possession of the premises.
A lease deed is a legally binding document between property owner or landlord and the tenant. The former is referred to as the lessor while the latter is termed as the lessee. The document contains all important information pertaining to the property such as amount of rent to be paid, duration of the agreement, security deposit payable, etc. If the term period of a lease deed is more than 11 months, it must be registered.
Some of the details that should be included in a lease deed are listed below:
- Details of the property including location, address, structure, and furniture, if applicable.
- Other inclusions of the property such as parking space, etc. It should be clearly mentioned whether such spaces are payable extra or covered within the monthly rent payable.
- Duration of the lease, provision of its renewal, and terms and conditions applicable for renewal.
- Financials involved such as rent payable, maintenance fee, security deposit, and the due date for the rent. The lease deed can also include terms of penalty and interest applicable in case the payments are delayed. There can be other charges such as water bill, electricity charges, and other utility bills which should be mentioned if they have to be paid by the tenant.
- Another important point to be mentioned is the termination clause. Reasons under which the lease deed can be terminated and the duration of notice to be given by either party to the other in case one intends to terminate the deed must also be mentioned.
The maximum term of a lease deed is usually 99 years, after which the ownership should be shifted back to the lessor. This is also true in cases when a builder is allotted land from the development authority. The period of 99 years is usually considered a safe period which will cover the entire lifespan of the lessee and the ownership of the land will be returned to the lessor afterwards.
The Registration Act 1908 states that any property that is being leased for different purposes such as residential, commercial, hereditary allowances, cultivation, or fisheries should be registered if the period of leasing is more than 11 months. However, if a lease deed is made for a period of 11 months of lesser, it need not be registered.
Here are the documents that are required for the registration of a lease deed:
- Identity proof of the lessor and lessee. Documents such as Aadhaar Card, passport, driving license are considered valid.
- Address proof of both parties
- Passport-sized photos of both lessor as well as lessee
- In case it is a commercial property, company PAN Card and stamp or seal are also required
- Title of the property or original proof of ownership
- Different documents pertaining to the ownership of property such as tax receipt, Index II, etc.
Q.1 Is registration of the lease deed mandatory?
Section 17 of the Registration Act 190 provides that the registration of a lease deed of immovable property is mandatory if the lease period is for a duration exceeding 12 months. However, lease deed below a year is not required to be registered. Registration, however, is advisable in both cases as a registered deed has a higher evidentiary value in the courts of law.
Q.2 Can restraints be placed on the use of the property by the tenant?
Section 108(o) of the Transfer of Property Act 1882 provides that the lessee may use the leased property as a man of ordinary prudence would use them if they were his own; but the lessee must not use, or permit another to use, the property for any other purpose other than for which it was leased. The Lessee cannot use the leased property in violation of the lease deed or any activity that may cause destruction to the property.
Q.3 Can the property be transferred by the Lessor if it is leased?
Under section 109 of the Transfer of Property Act 1882, the Lessor can transfer the leased property to another person (the “transferee”), who shall then be subject to the rights and liabilities as of the Lessor, post the transfer. However, such transfer of leased property can be limited as per the terms of the lease deed executed between the Lessor and Lessee.
Q.4 Does leasing the property to the Tenant/ Lessee allow them to further lease the property?
Under section 108(j) of Transfer of Property Act 1882, the lessee may sub-lease, mortgage or assign his interest in the leased property, however, the lessee by not, by reason of such transfer, cease to be the subject to any of the liabilities attaching to the lease. This right of the lessee is subject to the terms of the lease deed, which may place restraints on the lessee.
Q.5 Can the Lessor access the property during the tenure of the lease?
Under section 108(m) of the Transfer of Property Act 1882, the Lessor may enter and access the property and inspect the condition of the property at reasonable times.
Q.6 I am renting an apartment to a family member, should I enter into a lease deed?
While there is no law that mandates the requirement of entering into a lease deed when renting an apartment to a family member, it is advisable that a deed is executed to protect the interests of the parties.