LEASE

Definition of Lease:

A lease of immovable property is transfer of a right to enjoy such property made

for a certain time or in perpetuity.

The fundamental conception of lease is that it is the separation of the right of

possession from ownership.

According to Section 105 of the Transfer of Property Act, 1882, 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

 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.

In Mohsin & Tahir VS Ferez Nana Ghulamaly, it was held that, lease as defined
in section 105 of the Transfer of Property Act is a transfer of right to enjoy
immovable property, made for a certain time express or implied, or in
perpetuity, thus lease in ordinary parlance can be an absolute transfer without
any possibility of reversion to the lessor.

Definition of Lessor, Lessee, Premium and Rent:

According to Section 105, in case of Tease, the transferor is called the lessor,
the transferee is called the lessee, the price is called the premium, and the
money, share, service or other thing to be so rendered is called the rent.

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Essential Elements of Lease:

The essential elements of a lease are as follows:

1. The Lessor: He must be competent to contract and he must have title or

authority

2. The Lessee: He also must be competent to contract at the date of execution

of the lease. A sale or a mortgage to a minor is valid. But a lease to a minor is
void, as the lease is to be executed by both the lessor and the lessee.

3. Subject Matter of Lease: The subject matter of lease must be immovable

property. Immovable property has been defined in section 3 of this Act.

4. Transfer of Right to Enjoy: There must be a transfer of right to enjoy such

property. Right of enjoyment is transferred only when there is transfer of
possession. In mortgage and lease only a partial interest is transferred, therefore,
it is a transfer of a limited estate i.e., right of enjoyment of property which is
known as 'demise'.

5. Duration of the Lease: A lease must be made for a certain time, express or
implied, or in perpetuity.

6. Consideration: The consideration may be premium plus rent, as well as

premium alone or rent alone. Premium is the price or promised in consideration
of a transfer by way of lease. Any payment by the lessee that is part of the
consideration of the lease is rent.

7. Acceptance of Transfer: The lessee must accept the transfer.

8. Mode of Lease: It must be made in the mode indicated by section 107.

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Characteristic of a Lease:

The essentials characteristic of a lease is that the subject or the property is

occupied and enjoyed, but corpus of the subject does not disappear by the user.
Before the lease the owner had the right to enjoy possession of the land, but by
lease he excludes himself during the currency from the right. A lease is
therefore, not a mere contract, but a transfer of interest in land.

ESSENTIAL ELEMENTS OF LEASE

In the case of Abdus Sattar vs. Suresh Chandra Das), the court enshrined
essential elements for constituting a lease. These elements are the following:

 the right must relate to immovable property;

 the right must be that of enjoyment of immovable property;
 there must be a transfer of such right;
 the right of transfer is an interest in property;
 the transfer must be made for a certain time, express or implied, or in
perpetuity;
 the transfer must be one for consideration;
 The consideration must be of the particular kind namely, premium or
rent, as defined by the section either or both of them.

From the above discussion by the court, the following essential elements to
constitute a lease can be identified:

 The parties and the subject-matter of lease:

For a lease of immovable property, there must be a lessor and a lessee. Both the
parties must be competent to contract. A lease cannot be created without any
express or implied contract between two parties.

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The subject matter of a lease must be immovable property. There must be a
transfer of right to enjoy such immovable property.

 The duration:

The next element is that the right to enjoy the property must be transferred for a
certain time or in perpetuity. It may commence either in the present or on some
date in future or on the happening of an event which is bound to happen. The
court states that a lease may come into operation and commence on future date.

 The consideration and acceptance:

Consideration must be paid in respect of the right to enjoy the property. This
consideration may be premium plus rent, as well as premium alone and rent
alone.

Moreover, the lessee or the transferee must accept the transfer.

CREATION OF LEASES [SECTION 107]

Section 107 prescribes the procedure for execution of a lease between the
parties. This section contemplates two modes of executing of a lease, namely, a)
by registered instrument, and b) by oral agreement accompanied by possession.

 By registered instrument

Under the first paragraph of this section, a lease of immovable property from
year to year or for any term exceeding one year or reserving yearly rent can be
made only by registered instrument. In Bangladesh vs. Md. Aslam the court
observed that unregistered lease- deed of immovable property from year to year
is inadmissible in evidence for lack of registration.

 b) By oral agreement with delivery of possession

The second paragraph of the section governs the remaining classes of lease
which says that all other lease can be made either (i) by registered instrument or
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(ii) by oral agreement. But in case where the lease is executed by oral
agreement, it must be accompanied with the delivery of possession.

It is however, to be noted that, as per the proviso of the section the Government
may direct that leases of immoveable property, excepting the leases mentioned
in the first paragraph, may be made by unregistered instrument or by oral
agreement without delivery of possession.

Classification of Lease:

On the basis of duration, lease may be classified by following ways:

 Perpetual Lease:

Under section 105, a lease may be made in perpetuity. Under perpetual lease,
the lessee gets right of enjoyment of property permanently.

 Lease for a Certain Term:

Under section 105, a lease may be made for certain terms i.e., for 5 years or 10
years etc.

 Annual Lease:

Under Section 106, in the absence of a contract or local law or usage to the
contrary, a lease of immovable property for agricultural or manufacturing
purposes shall be deemed to be a lease from year to year.

 Lease for Life:

The lease which is made for the life time of lessee it is called lease for life. In
case of lease for life no notice is necessary for termination of lease and no
notice is required to sue the representatives of the lessee, because after the death
of the lessee the lease terminates automatically.

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  Tenancy at Will:

The Act has not defined the tenancy at will. In Halsbury's Laws of England
'tenancy at will has been defined as “it is a tenancy under which the tenant is in
possession and which is determinable at the will of either landlord or tenant. A
tenancy at will is implied when a person is in possession with the consent of the
owner and is not held in virtue of any tenancy for a certain term."

Where the agreement between the parties is to the effect that the tenancy should
be determinable by either party at any time, there is a contract to the contrary
and the provisions of section 106 will not be applicable.

 Monthly lease:

Under Section 106, in the absence of a contract or local law or usage to the
contrary, a lease of immovable property for any other purpose shall be deemed
to be a lease from month to month.

THE RULE OF IMPLIED DURATION [SECTION 106]

This section provides the rule of fixing the duration of leases according to their
purpose, where the leases are not governed by any local law, contract or usage.
This section lays down a rule of construction which is to apply when the parties
have not specifically agreed upon as to whether the lease is yearly or monthly.
In respect of the termination of lease, the section also provides the requirement
of serving notice which may either be of six months' notice or fifteen days'
notice depending upon the duration of lease.

For determining the duration of lease, the section has contemplated two classes
of 'periodic lease', namely, a) lease from year to year, and b) lease from month
to month:

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 a) Lease from year to year:

According to this section, a lease of immoveable property for agricultural or

manufacturing purposes shall be deemed to be a lease from year to year. It is
terminable by six months' notice expiring with the end of a year of the tenancy;

b) Lease from month to month:

A lease of immoveable property for 'any other purpose' (other than the
agricultural or manufacturing purposes) shall be deemed to be a lease from
month to month. This kind of lease is terminable by fifteen days' notice expiring
with the end of a month of the tenancy.

Leading Case: Bata Shoe Company (Bangladesh) Ltd. vs. Hassan Movies
Ltd. (70 DLR (2018) 389]

In this case, A had leased out a property to B as a monthly tenant on the basis of
written agreement for six years. Before expiry of the lease period, plaintiff
issued 4(four) notices to the defendant by registered post with a request to
vacate the property. These notices were duly delivered to the relevant staff of
B's company. But B, instead of vacating the premises, filed a suit. Later, A also
filed a suit.

In this case it was held by the court that it is evident that Section 106 of the Act,
1882 simply states that for terminating the lease of an immovable property
including a monthly tenancy the lesser must serve a notice. This Section also
specifies the manner of sending and delivery of the notice. And as A had duly
send notice as mentioned under section 106 of the Transfer of Property Act the
plea of B that, A has not fulfilled the requirements under section 106 is not
acceptable.

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DURATION OF LEASE FOR A YEAR [SECTION 110]

Where the time so limited is a year or a number of years, in the absence of an

express agreement to the contrary, the lease shall last during the whole
anniversary of the day from which such time commences.

However, where the time so limited is expressed to be terminable before its

expiration, and the lease omits to mention at whose option it is so terminable,
the lessee, and not the lessor, shall have such option.

Effect of Non-registration:

A lease is void, if unregistered in cases where registration is compulsory under

this section. An unregistered instrument required to be compulsorily registered
by virtue of section 107 read with section 17 and 49 of the Registration Act,
1908, cannot create a lease.

In Bangladesh v. Md. Aslam, it was held that, unregistered lease deed of

immovable property from year-lo-year is inadmissible in evidence for lack of
registration.

In Haji Md. Mobarak Ali v. Haji Mofiz Boksh, the Appellate Division held that,
section 107 provides that a lease for immovable property from year to year or
for any term exceeding one year, or reserving a yearly rent, can be made only
by a registered instrument. In the absence of any registered instrument the
tenancy will be treated as a monthly one.

Rights and Liabilities of Lessor and Lessee (Section 108):

Section 108 provides for rights and liabilities of both the lessor and lessee.
These rights and liabilities are subject to a contrary- contract, i.e., where the
lessor and lessee make an agreement to be governed by their terms and

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conditions during the subsistence of lease, their respective rights and liabilities
are determined by their own agreement. Section 108 does not apply in such a
case. Similarly, where there is any local custom or usage governing their rights
and liabilities, that usage or custom will govern their relationship during the
subsistence of lease and section 108 will not apply there. Section 108 expressly
permits contracts to its provisions. It imposes no restriction on the right of
parties to enter into a contract and stipulate terms, conditions and restrictions of
their own choice.

 Liabilities of Lessor:

Under section 108, the liabilities of lessor are:

1. Duty of Disclosure Section 108(a):

Clause (a) provides that, the lessor is bound to disclose to the lessee any
material defect in the property with reference to its intended use of which the
lessor is aware and the lessee is not aware, and which the lessee could not
discover with ordinary care.

Defects are of two types-those which are apparent and those which are not
apparently visible i.e., latent defects. The lessor is bound to disclose latent
defects only because such defects cannot be discovered with ordinary care.

But this section contains no provision as to title but only for quite enjoyment of
property. Therefore, the lessor has no duty to disclose defect in title.

2. Duty to Give Possession (Section 108(b)] :

Clause (b) says that, the lessor is bound on the lessee's request to put him in
possession of the property.

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This clause imposes a statutory obligation on the lessor into possession of the
property leased. However, this duty of lessor to deliver possession arises only
when there is a request by the lessee in this respect.

3. Covenant for Quiet Enjoyment Section 108(c)]:

Clause (c) provides that, the lessor shall be deemed to contract with the lessee
that, if the lessee pays the rent reserved by the lease and performs the contracts
binding on the lessee, he may hold the property during the time limited by the
lease without interruption.

It is the duty of the lessor to ensure that the lessee ought not to be interfered
with during the period of lease either by him or anyone else.

The covenant for quiet enjoyment under this clause is regarded as a covenant
running with the land so as to be enforceable by any assignee of the lessee
against the lessor and his assignee.

Where the quite enjoyment of the lease has been interrupted, he is entitled to
recover damages equivalent to the present value of the prospective profit of
which he is deprived.

 Rights of Lessor's Transferee (Section 109):

According to Section 109,

 If the lessor transfers the property leased, or any part of it, or any part of
his interest therein, the transferee shall possess all the rights in the
absence of a contract to the contrary, and if the lessee so elects, the
transferee will be subject to all the liabilities of the lessor as to the
property or part transferred so long as he is the owner of it; but the lessor
shall not, by reason only of such transfer, cease to be subject to any of the

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 liabilities imposed upon him by the lease, unless the lessee elects to treat
the transferee as the person liable to him.
 The transferee is not entitled to arrears of rent due before the transfer, and
that, if the lessee, not having reason to believe that such transfer has been
made, pays rent to the lessor, the lessee shall not be liable to pay such
rent over again to the transferee.
 The lessor, the transferee and the lessee may determine what proportion
of the premium or rent reserved by the lease is payable in respect of the
part so transferred, and, in case they disagree, such determination may be
made by any Court having jurisdiction to entertain a suit for the
possession of the property leased.

 Liabilities of Lessee:

According to section 108, the lessee is under the following liabilities:

1. Duty to disclose facts [Section 108(k)]

Clause (k) provides that, the lessee is bound to disclose to the lessor any fact as
to the nature or extent of the interest which the lessee is about to take, of which
the lessee is, and the lessor is not, aware, and which materially increases the
value of such interest.

Here the lessee is put under a duty to disclose to the lessor any fact known to
him which increases the value of the leased property. It is necessary that the
lessor must be unaware of that fact.

For example, when a lessee comes to know of existence of a gold mine in the
leased property he must tell the lessor about the gold mine. Omission or failure
of the lessee to inform the lessor about such facts is not a fraudulent act and

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lessor cannot terminate lease due to such omission. However, the lessor can sue
the lessee for damages.

2. Duty to Pay Rent (Section 108(0)]

Clause (1) provides that, the lessee is bound to pay or tender, at the proper time
and place, the premium or rent to the lessor or his agent in this behalf.

3. Duty to Maintain the Property Section 108(m)]:

Clause (m) provides that, the lessee is bound to keep, and on the termination of
the lease restore, the property in as good conditions it was when he was put in
possession. He is bound to allow the lessor and his agents at all the reasonable
times during the continuance of lease to enter upon the property inspect its
condition and give notice of any defect in it. When such defect has been caused
by any act or default on the part of the lessee or his servants or agents, he is
bound to make good it within three months after such notice.

Only the changes caused by reasonable wear and tear or irresistible 'force are
allowed under the duty of this clause.

4. Duty to Give Notice of any Encroachment Section 108(n)):

Clause (n) provides that, if the lessee becomes aware of any proceeding to
recover the property or any part of it, or of any encroachment made upon, or
any interference with, the lessor's rights concerning such property, he is bound
to give notice of such encroachment, interference etc. to the lessor with
reasonable diligence.

5. Duty to Use the Property in Reasonable Way (Section 108(e)] :

Clause (o) provides that, the lessee may use the property and its products (if
any) as a person of ordinary prudence would use them if they were his own. But
he is under duty not to use himself or allow any other person to use the property
for a purpose other than that for which it was leased. He must not cut down the

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trees or sell the timber or pull down or damage the buildings belonging to the
lessor or work mines or quarries not open when the lease was granted or commit
any other act which is destructive or permanently injurious to the property.

6. Duty not to Erect Permanent Structure without Lessor's consent

Section 108(p)]:

Clause (p) provides that, the lessee must not erect on the property any
permanent structure, except for agricultural purpose without the lessor's
consent.

Here only for agricultural purposes, the lessee is entitled to erect any permanent
structure on the leased property.

7. Duty to Retransfer Property (Section 108(q)]

Clause (q) provides that on the determination of the lease the lessee is bound to
put the lessor into possession of the property.

 Rights of Lessee:

Clause (d) to (j) of section 108 deal with the rights of a lease which are as
follows:

1. Right to Enjoy the Accretions (Section 108(d)]

Clause (d) provides that, if during the continuance of the lease any accession is
made to the property, such accession shall be deemed to be comprised in the
lease. However, such accession will be subject to the law relating to Alluvion
for the time being in force.

Accessions or accretions are additions made to the leased property. They may
be natural accretions or made by the lessee. For example, additions made by
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flood or alluvial activity. The lessee is entitled to such accretions during the
continuance of the lease but not afterwards. On the termination of the lease, the
lessee is bound to surrender the accession in the same way as he surrender the
leased property.

2. Right to fold lease [Section 108(e)]

Clause (c) provides that, if by fire, tempest or flood, or violence of an army or

of a mob or other irresistible force, any material part of the property is either
wholly destroyed or rendered substantially and permanently unfit for the
purposes for which it was given on lease, the lease shall be void at the option of
the lessee.

However, if the injury be occasioned by the wrongful act or default of the

lessee, he shall not be entitled to avail himself of the benefit of this clause i.e.,
he will not be entitled to avoid the lease.

3. Right to Repair Property [Section 108(f)]:

Clause (1) provides that, if the lessor neglects to make any repairs which he is
bound to make to the property after notice within a reasonable time, the lessee
may make repairs himself and deduct the expense of such repairs with interest
from the rent, or otherwise recover it from the lessor.

The lessor is not bound to make repairs to the leased property. But where he
agrees at the time of the lease with the lessee that he will make the necessary
repairs then he becomes bound to make the repairs and if the lessor does not do
so after notice within reasonable time, the lessee may make repairs the property.

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On that case the lessee can deduct the expense of such repairs with interest from
the rent, or otherwise recover it from the lessor.

4. Right to Make Payments [Section 108(g)]

Clause (g) provides that, if the lessor neglects to make any payment which he is
bound to make, and which, if not make by him, is recoverable from the lessee or
against the property, the lessee may make such payment himself, and deduct it
with interest from the rent, or otherwise recover it from the lessor.

Where the lessee makes the payment which the lessor was bound to make like
taxes, revenue etc. and which if not paid were recoverable from the lessee or the
land, the lessee may make the necessary payment and recover the amount paid
by him from the lessor or deduct it from the rent with interest.

The payment must not be voluntary and it must be compulsory and the lessee
must have under protest. If there is no evidence that he paid under protest, he
cannot maintain an action for recovery.

5. Right to Remove Fixtures (Section 108(h)]

The lessee may even after the determination of the lease remove, at any time
whilst he is in possession of the property leased but not afterwards all things
which he has attached to the earth provided he leaves the property in the state in
which he received it.

This clause enables the lessee to remove anything which he attached to the
property. The clause provides an exception to the general rule that things
attached to the earth become part of it. After the amendment of 1929, the lessee
has become authorized to remove trees or fixtures set up by him on the leased
property so long as he is in possession of the property even though the tenancy
has come to an end. However, while removing such states he must see that the
property is left the same condition in which he had received it.

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 6. Right to have benefit of Crops [Section 108(i)]

Clause (i) provided that, when a lease of uncertain duration determines by any
means except the fault of the lessee, he or his legal Representative is entitled to
all the crops planted or sown by the lessee and growing pee the property when
the lease determines, and to free ingress and egress to gather and carry them.

7. Right to Assign his Interest [Section 108 (j)]

Clause (j) provides that, the lessee may transfer absolutely or by way of
mortgage or sub-lease the whole or any part of his interest property, and any
transferee of such interest or part may again transfer it The lessee shall not by
reason only of such transfer, cease to be subject to any of the liabilities
attaching to the lease.

However, nothing in this clause shall be deemed to authorize a tenant having an

un-transferable right of occupancy, the farmer of an estate in respect of which
default has been made in paying revenue, or the lase of an estate under the
management of a Court of Wards, to assign his interest as such tenant, farmer or
lessee.

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