A lease agreement is governed by Section 105 of the Transfer of Property Act, 1882 (TPA). This section defines a lease as the transfer of a right to enjoy immovable property, for a certain time or in perpetuity, in exchange for a certain price or rent. The primary purpose of a lease is to allow one party (the lessee or tenant) to use and enjoy the immovable property for a specified period, while the other party (the lessor or landlord) retains ownership.

To ensure that a lease is legally enforceable, it must fulfill specific essential features that conform to the provisions outlined in the Transfer of Property Act. Below are the key elements that constitute a valid lease agreement under the Act:

1. Parties to the Lease
   A lease agreement must have two parties:
   • Lessor: The person who owns the property and grants the lease.
   • Lessee: The person who receives the right to use and enjoy the property in exchange for rent or another form of consideration.
   Both the lessor and lessee must have the legal capacity to enter into the lease. For instance, the lessor should be the owner or authorized person to lease out the property, and the lessee should be competent to contract under Indian law.
2. Transfer of Right to Enjoy Property
   The primary feature of a lease is the transfer of the right to enjoy immovable property from the lessor to the lessee. The lessor does not transfer the ownership or title of the property; rather, they transfer a right of possession and the use of the property to the lessee. This right is temporary and subject to the terms of the lease.
3. Consideration (Rent)
   A lease agreement must stipulate rent or another form of consideration, which the lessee is required to pay to the lessor in exchange for the right to use the property. The rent should be reasonable and agreed upon by both parties. The Act does not prescribe a specific amount for rent; it should be mutually agreed between the lessor and lessee.
   • Rent can be a fixed amount or based on usage, and the mode and frequency of payment (monthly, quarterly, annually) must be clearly outlined.
   • If rent is not paid, the lessor has the right to terminate the lease and seek eviction.
4. Immovable Property
   A lease under the TPA must concern immovable property, which can be land, buildings, or any other type of real property that is not movable. The property involved in the lease must be properly identified and described in the agreement, and its ownership or authority to lease it should be verified.
5. Duration of Lease
   The lease must specify the duration or term for which it is granted. It can be for a fixed period, a life term, or a periodic lease. The term of the lease must be clear and unambiguous:
   • Fixed-term lease: A lease for a specified period (e.g., one year, two years).
   • Periodic lease: A lease that automatically renews after each period (e.g., monthly or yearly) until terminated by either party.
   • Lease in perpetuity: A lease for an indefinite period, where the right to use the property may last forever unless terminated by mutual consent or specified conditions.
6. Possession
   The lessee must be granted possession of the property by the lessor. The possession means the actual use and enjoyment of the property, which should be transferred to the lessee. This right of possession should be explicit, as a lease is the transfer of possession rather than ownership.
7. Subsequent Ownership and Reversionary Rights
   While the lessee has the right to possess and use the property, the ownership of the property remains with the lessor, and at the end of the lease term, the right to the property returns to the lessor. This concept is known as reversion. The reversionary right allows the lessor to regain possession of the property after the lease expires or is terminated.
   • The lessor's interest in the property is typically subject to the lease during its duration, but it is always expected to revert back after the term ends.
8. Conditions and Covenants
   A lease agreement often includes several conditions and covenants that both the lessor and lessee must adhere to. Some common covenants in a lease include:
   • Maintenance of the property: The lessee may be required to maintain the property in good condition.
   • Use of the property: The lessee may be restricted to using the property for certain purposes (e.g., residential, commercial).
   • Alterations and subletting: There might be clauses governing whether the lessee can make alterations or sublet the property to others.
   The agreement may also outline the penalties or remedies available in case of breach of these covenants.
9. Right to Terminate
   The lease agreement should specify under what circumstances the lease may be terminated. The lessor may have the right to terminate the lease if the lessee fails to pay rent, damages the property, or violates other terms of the agreement. Similarly, the lessee may have the right to terminate the lease if the lessor fails to maintain the property or violates other conditions.
   • Termination conditions can be:
   • Expiry of the term: The lease expires automatically at the end of the term.
   • By mutual agreement: Both parties can agree to end the lease.
   • For breach: If either party fails to fulfill obligations, the lease can be terminated.
10. Rights and Obligations of Lessor and Lessee
    The lessor's rights include:
    • Receiving rent as per the agreement.
    • Regaining possession of the property after the lease ends.
    • Evicting the lessee if they violate the terms of the lease.
    The lessee's rights include:
    • The right to exclusive possession of the property.
    • The right to use the property for the agreed purpose.
    • The right to claim compensation if the lessor fails to maintain the property or breaches the terms of the lease.
11. Assignment and Subletting
    A lease agreement may specify whether the lessee has the right to assign or sublet the property. In the absence of any such clause, the lessee generally has the right to assign or sublet the property, unless specifically prohibited by the agreement. The Transfer of Property Act allows the lessee to sublet the property, but this can be restricted by the lease agreement.
12. Registration of Lease
    Under Section 107 of the Transfer of Property Act, a lease of immovable property for a term exceeding one year must be registered in accordance with the Indian Registration Act, 1908. Failure to register such a lease may render it invalid.
    • For leases less than one year, registration is not compulsory, but it is advisable to do so for clarity and proof of the lease.
13. Legal Remedy in Case of Breach
    If either party breaches the terms of the lease agreement, the other party is entitled to legal remedies:
    • For the lessor: The lessor can seek eviction and demand payment of arrears of rent.
    • For the lessee: The lessee can seek compensation if the lessor fails to maintain the property or violates the terms.

A lease agreement under the Transfer of Property Act, 1882 must have clear terms and conditions regarding the parties involved, the property, the rent, the duration, and the rights and obligations of both the lessor and the lessee. It must also ensure compliance with registration requirements when necessary and provide legal remedies in case of breach. Understanding these essential features helps ensure the enforceability of lease agreements and protects the rights of both parties.

Written By: Prithwish Ganguli, Advocate - LLM (CU), MA in Sociology (SRU), MA in Criminology & Forensic Sc (NALSAR), Dip in Psychology (ALISON), Dip in Cyber Law (ASCL), Dip in International Convention & Maritime Law (ALISON), Faculty, Heritage Law College, Kolkata