Lease & Gift under Transfer of Property Act, 1882

To transfer property, there is a concept for temporarily allowing transfer, widely known as ‘Lease’ & ‘Gift’. In case of lease, the property is transferred to another person for a specific period of time. However, not all the rights are transferred while transferring the property, i.e., only possession is transferred and not the ownership. The person to whom the property is transferred on lease can enjoy all the rights of a person who has the possession of a property but cannot deal in the sale or further transfer of the property.

Lease deals with only the enjoyment of the transfer of immovable property. In exchange for the transfer of property the person to whom the property is transferred has to pay a specific sum (rent, premium) in consideration for lease. In a lease deed, the person who transfers the property is called a lessor and to whom such property is being transferred is called a lessee. Section 105 till Section 117 deals with lease under the Transfer of Property Act, 1882.

With respect to the concept of gift, it is a voluntarily transfer by a person made without any consideration. It is said to be done out of love and affection. A gift by a person can comprise movable or immovable property. The person who gifts property is called a donor and the person who receives it is called a donee. Section 122 till Section 129 deals with a gift under the Transfer of Property Act, 1882.

Lease

Section 105 of the Transfer of Property Act, 1882 defines lease as the transfer of right to enjoy an immovable property for a specific period of time (express or implied) or in perpetuity, for consideration of price paid or promised to pay or of money, service, the share of crops or any other valuable thing which the transferor accepts.[1]

Essentials of a Lease

  • Competent Parties: the parties to a lease deed must be competent i.e. they must be major, have a sound mind, etc.
  • Consideration: the lessee must pay consideration in exchange for the property and such consideration can be in monetary terms, the share of crops, service, or any other valuable thing that the lessor accepts.
  • Acceptance: there should be acceptance by both the parties upon the lease deed and also the lessor should accept the consideration which is being offered in exchange for the transfer.
  • Right of Possession: In transferring property in lease, the right of possession is only transferred with the property and not the right of ownership i.e. the lessee cannot further sell the property which is being transferred to him.
  • Time period: In a lease, the property can only be transferred for a specific period of time which has to be specified in a lease deed. Also, the time period can be extended if the lessor wants so.

How is a Lease Executed?

Section 107 of the Act talks about how a lease is made. The section states three things, which are:

  • When a lease of immovable property is made for a term of one year or more than that, it can be done only through a registered deed.
  • All other leases of immovable property can be done either by a registered deed or by an oral agreement or a settlement of the property.
  • When there is a lease of more than one property, both parties need to make the lease of such properties.

In the case of Ms. Poonam Kapoor vs. Sh. Bhushan Kumar[2], the court stated that according to Section 107 of the said Act, a tenancy period of one year or more than that must be through a registered deed only.

Rights and Liabilities of Lessor & Lessee

Section 108 of the said Act talks about the rights and liabilities of both the lessor and the lessee. They are explained below:

Rights of a lessor:

  1. A lessor has a right to recover the rent amount which is mentioned in the lease deed.
  2. He has a right to recover damages if the lessee has done any damage to the property during the time of the lease deed.
  3. He has a right to take back the possession of the property if the lessee has done a breach of contract.
  4. He has also a right to sue and claim damages for the breach of contract.
  5. He has a right to take back possession after the termination of the lease deed.

Liabilities of a lessor:

  1. The lessor has to disclose any material defect in the property to the lessee which the lessee is not aware of.
  2. After the lease deed is signed, the lessor has to give the right to possession to the lessee.
  3. The lessor can also enter into an agreement to allow the lessee to enjoy the possession of such property for the rest of the time period other than the agreement but on the obligation that the lessee has to pay the rent later on.

Rights of a lessee:

  1. If during the lease period any alteration is made to the property, such alteration will be the part of the same lease.
  2. If any damage is done to the property by an irresistible force (flood, fire, mob, etc.) and the part of such property is not beneficial for the lessee, then the lease deed is void at the option of the lessee.
  3. If the lessee has served a notice to the lessor about some damage to the property and the lessor has not repaired them, then the lessee can repair it on his own expenses and later on deduct the amount from the interest of the rent.
  4. If the lessor has not made any payment which he was bound to pay and if such payment is recovered from the lessee, the lessee has a right to deduct the said amount from the interest of the rent.
  5. The lessee has a right to remove all the things that were attached by him to the property within the time period of the lease and return the property to the lessor in a state in which the lessee has obtained that property.
  6. When the lease is made for an unspecified period of time, then the lessee or his legal representative can collect all the profits from the crops planted or sown by them in such property and will also have a free right of ingress and egress to carry and gather such crops.
  7. The lessee can also transfer the property absolutely or through mortgage or by sub-lease the whole or a part of the property.

Liabilities of lessee:

  1. The lessee must disclose all the material facts of his interest in the property which the lessor is not aware of or which are likely to increase the value of such property.
  2. The lessee is bound to pay the amount specified in the lease deed and at the proper time.
  3. The lessee is bound to restore the property in a good condition after the lease is terminated, except the damages done by the irresistible force.
  4. If the lessee comes to know about any legal proceedings relating to the property then the lessee must serve a notice to the lessor about the same.
  5. The lessee must not use or permit others to use the property for which he was not leased.
  6. The lessee must not construct any permanent structure on the property without the consent of the lessor except in the case of agricultural purposes.
  7. The lessee must return the right to possession of the property to the lessor at the time of the termination of the lease deed.

In the case of Ramanand & Ors. vs. Dr. Girish Sonil & Anr[3], the court held that even though the tenanted premises had been destroyed, it will not amount to the termination of the tenancy.

In the case of Lord Chloro Alkali Ltd. vs. Mohinder Pal Singh Khurana & Ors[4]., the court stated that internal changes in a property are not made by tenants who are not perpetual tenants. The erection of structures on the property by a lessee is not something unusual and this does not establish that the tenancy was permanent.

Determination of Lease

Section 111 of the Act talks about the scenarios in which a lease if an immovable property can be terminated. A lease can be terminated when:

  • The time period of the lease has expired.
  • There is a condition in the lease deed that upon the happening of such an event the lease will be terminated.
  • The interest of the lessee in the property terminates.
  • The interest of both the lessor and the lessee in the property is vested in one person at the same time.
  • There is an express surrender by the lessee which happens in case where the lessee yields up his interest under the lease to the lessor by a mutual agreement.
  • There is an implied surrender by the lessee where the lessee comes into a contract with another person for the lease of the property.
  • There is a forfeiture of the property which happens when there is a breach of condition or the lessee renounces his character or when the lessee becomes insolvent.
  • There is an expiry of notice i.e. a notice to quit by the lessor to the lessee expires.

In the case of Praveen Kumar vs. Dilip Jain[5], the court observed that the lessee is not entitled to terminate the lease for the breach of conditions enumerated in the lease agreement, but he can claim damages for the breach.

In the case of Govindaswami vs. Palaniappa[6], the court observed that section 111 of Transfer of Property Act contains no clause for termination of the lease for the breach of a term of the contract, nor there is anything in section 108 TPA to enable the lessee to avoid the lease.

Gift

Section 122 of the Act defines a gift as the transfer of certain movable or immovable property without consideration by one person to another.[7]

Essentials of a Valid Gift

  • Competent Parties: the parties to a lease deed must be competent i.e. they must be major, have a sound mind, etc.
  • Ownership transferred: when a property is being transferred from one person to another in the form a gift, the right of ownership is also transferred along with the right of possession.
  • Existence of a property: the property which is being gifted by one person to another should be in existence at the time of transferring such property.
  • Without consideration: a gift is a gratuitous transfer that is generally made out of love or affection, hence it does not involve any consideration at the time of transferring the property.
  • Voluntarily transfer: a gift is transferred voluntarily by one person without any specific conditions as there are in a contract.
  • Acceptance: there should be an acceptance by the donee when a property is gifted to him.

In the case of Ito vs. S.L. Choudhary[8], the court stated that Section 123 of Transfer of Property Act provides that a gift of immovable property must be effected by a registered instrument.

Kinds of Gifts

  • Onerous gifts: Section 127 of the act defines onerous gifts as a gift in a form of a single transfer to the same person of several things out of which one is and the other things are not burdened by an obligation. Also, where the gift is in the form of two or more separate transfers to the same person, the donee is at the liberty to accept one of them.

In the case of Meenakshiammal vs. Ramasamy Murthiriar And Ors[9]., the court stated that for the acceptance of an onerous gift, acceptance of the gift is not sufficient but an acceptance of the onerous condition is also necessary.

  • Lifetime gifts: these are those gifts when the donor transfers the property to the donee for a lifetime. These gifts are generally given on some occasions like birthday parties, weddings, etc.

Revocation of Gift

A gift can be accepted or can be revoked. A gift is accepted when the donee agrees to accept the gift; however, a gift can also be revoked under a few circumstances which are dealt under Section 126 of the act.

  1. A gift is revoked when both the donor and the donee agree that on the happening of a specified event which does not depend upon the will of the donor, such gift shall be revoked.
  2. A gift can also be revoked in case (save want or failure of consideration) in which it was a contract and it might get rescinded (cancelled).

In the case of Balbhadar Singh vs. Lakshmi Bai[10], the court held that under Hindu law if a person makes a gift to another person expecting that the donee will work in consideration of the gift and if the donee has failed to do so, the gift is revoked.  


[1] The Transfer of Property Act, 1882 ( 4 of 1882), s.105

[2] Suit No. 191/2013

[3] 21 May, 2020 RC, REV. 447/2017

[4] 28 February, 2013 RFA (OS)_96/2010

[5] CS NO. 487/11

[6] AIR 1925 MAD 833

[7] Supra note 1, s.122

[8] (2001) 73 TTJ NULL 699

[9] (1998) 3 MLJ 390

[10] AIR  1930 ALL 699

Kush Bisht from JEMTEC , Greater Noida

“I am a very focused person as my profession asks for it. My goal is to become a good corporate lawyer.”

Editor: Sanskriti Sood

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