The concept of Lease:
A lease is an agreement between a lessor and lessee that states the time duration of renting of a property or an asset and mentions other housing-related specifications.
Section 105 of the TPA or Transfer of Property Act, 1882 deals with the term lease. Under the Act, the term ‘Lease’ is defined as:
“105. 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. 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 things to be so rendered is called the rent.”
In other words, lease is a procedure in which the rights of the property is transferred by the original owner or the Lessor to the Lessee for a certain period, as stipulated in the Agreement. This period is usually around 99 years and the stamp duty charged on the lease varies based on the statewide Stamp Acts.
A lease can be granted with an expressed amount of time duration mentioned in the Agreement, or implied term or in perpetuity. A lease guarantees the lessee the use of an asset and warrants the lessor or the landlord or the property owner, for regular payments for a specified period in exchange.
Procedure for Registration of Lease
Leases are legally binding contracts that specifies the terms of rental agreements in real estate or personal property. They are formed like regular Agreements and are formulated after paying the government fees.
Stamp duty is calculated based upon the duration of the lease as under:
- 5 Years - 10% of Market Value
- Duration above 5 Years and but up to 10 Years- 25% of Market Value
- Above 10 Years and but up to 29 Years- 50% of Market Value
- Above 29 Years- 90% of Market Value
Section 107 of TPA, mentions how the leases of immoveable property shall be made in the law. The said section states:
“A lease of 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. All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee:
Provided that the State Government may from time to time, by notification in the Official Gazette, direct that leases of immoveable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.”
Hence, it classifies the procedure into 2 parts viz
- When the lease of the immovable property is from year to year, or for a term exceeding a year, or lease reserving a yearly rent, and this can only be made by a registered document; and
- All other leases can be either made by a registered instrument, or the said lease to be made by an oral agreement accompanied by the release of possession.
Renewal of Lease:
Once the period of lease is nearing the end, if the Agreement provides the same can be renewed by expressly writing to the Lessor, preferably almost 3 months in advance, then the Lease is a renewable one. After this, a new lease Agreement is required to be created.
Note: The lease renewals are taken care by the district collector.
The Maharashtra government under the lease renewal policy made it compulsory that no lease would be renewed for more than three decades, and rents would be revised every five years for the government plots in the State except, Mumbai. The major reason for this is that approximately 1,843 plots were leased out in Maharashtra and about 776 plots had expired leases, but they could not be renewed in the absence of a sound renewal policy. Moreover, approximately 537 plots were let out for residential purpose in the State out of which, the lease of 285 plots were ended and was waiting for the renewal. Thus, in order to accelerate the lease renewal, process the State government of Maharashtra made it obligatory to renew the lease policy in the State, except for Mumbai.
However, for a cooperative housing society, the Lease rent is fixed at one percent. In case the lease terms are violated by the lessor, the renewal of the lease of the plot would take place only when the violator pays a fee to regularize the violation. Nonetheless, if the lessor is unable to apply for lease renewal before its termination, a penalty in addition to the rent is imposed which is 0.1 percent on 25 percent of the RRR.
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