subject: Avoid Legal Hassles By Understanding The Clauses That Can Lead To The Termination Of A Lease [print this page] For many individuals, giving acommercial or residential property on leaseis an attractive source of additional income.
Nonetheless, our courts are overflowing with cases concerning leased properties. It is pertinent to mention that most disputes over leased properties arise due to unclear terms and conditions in the lease deed, stemming from ignorance of law on the part of lessor and/or lessee.
Before entering into any transaction of lease of an immovable property, both parties must exercise due care by clearly defining the terms and conditions of the lease including but not limited to capturing specifics such as the term, method of renewal and grounds of termination of lease, to name a few.
Further, both the lessor and lessee should also take note that as per Section 111 of theTransfer of Property Act1882 (Act), lease of an immovable property terminates for the reasons given below. Therefore, they should draft the lease deed accordingly to avoid any disagreements.
By efflux of time limited thereby: Wherever a specific time period for a lease has been provided in the lease deed, the lease comes to an end upon expiry of such period. In such cases, the lessor is not required to give prior notice to the lessee. Both parties should also take into consideration the fact that, in the absence of a registered lease deed specifying the term of lease, such tenancy shall amount to month-to-month tenancy. Lessors have the right to terminate month-tomonth tenancy contracts after giving a termination notice to the lessee. Hence, the lease deed should specify the duration of lease and notice period. Lease deeds should also be duly registered with competent authorities, if required.On happening of conditional event: Where a lease deed specifies that the duration of lease is conditional upon the occurrence of an event, such lease expires upon the occurrence of the conditional event. However, if fulfillment of the conditional event is impossible, forbidden by law, against public policy, fraudulent or involves/ implies injury to the person or property of another, such lease shall not be considered as a valid lease to begin with.Hence, lessors should take care before making the duration of lease conditional on the happening of an event.On termination of lessor's interest in the leased property: When the lessor no longer holds title or hasinterest in the leased propertysuch lease automatically terminates. For example, if the lessor only holds life estate in the property, then the lease automatically terminates upon his death. Similarly, if the property being leased is a leasehold property, the lessee should know in advance the period remaining before the lessor's interest in the property i.e. the lease term, is due to expire. In this case, the lease will automatically terminate, subject to renewal of lease, upon expiry of the lease period. However, it is pertinent to mention that if the lessor sells his property to a third party (buyer), the lessee retains his right to continue living in the leased property as the third party (buyer) has merely stepped into the lessor's shoes.On vesting of interest of lessor and lessee in one person: A lease terminates when both parties' interest in the entire property becomes vested at the same time in one person, and in the same right. This is because an individual cannot simultaneously be the landlord and tenant of the same property. If only partial interest of the parties in the property merge, then the lease is not extinguished.For exampletransfer of rights in the leased property through saleby the lessor to leesee, would terminate the original lease.By express surrender: A lease stands terminated by express surrender such as when the lessee yields/surrenders his interest under the lease, to the lessor by mutual agreement between them. Ordinarily, surrendering a tenancy is not necessary to be conducted in writing. If the original lease deed was registered, surrendering the tenancy should also be affected by a registered instrument because surrender involves change in the original contract of tenancy.By implied surrender: Implied surrender comes into play when a lessee signs a fresh lease deed during the continuance of the lease period, in respect of the same property for which he had executed the previous deed.Signing the new lease deed implies automatic surrender of the previous one.By forfeiture: A lease automatically terminates upon forfeiture of the immovable property if: The lessee breaches an express obligation in the lease deed that stipulates its violation shall entitle the lessor to re-enter the leased property; or The lessee renounces his character by setting up title in a third person or by claiming title in himself; or The lessee is declared bankrupt/insolvent and the lease deed provides that the lessor may re-enter on the happening of such event; and In any of these cases, the lessor gives a written notice to the lessee stating his intention to terminate the lease.On expiry of notice period to terminate the lease: A lease can be terminated by either party giving a written notice to the other party, stating his intention to end the lease and vacate the property On the expiry of the period of such notice, the lease automatically terminates (unless the parties agree to renew the lease) and the lessee is bound to vacate the leased property.In case the lessee does not vacate the property even after expiration of the notice, the lessor does not have the right to forcefully evict the lessee. The lessor can seek eviction only by taking actions through due course of law. However, on account of income lost due to lessee's unlawful possession of lessor's property, the lessor is entitled to receive mesne profits from the lessee for the time period the lessee overstays.To protect their interests, both parties should take these provisions of TPA into account when finalising the lease transaction to avoid future disagreement and disputes. Before executing the lease deed, the lessee should conduct prior due diligence of the property in question and be fully aware of the nature of lessor's interest in the property.The author is Senior Partner, ZEUS Law Associates, a corporate commercial law firm.One of its areas of specialisation is real estate transactional and litigation workCourtesy ht estate dtd:-09/10/2010For more information about real estate, property, residential property, commercial property, realty firms, property investment, investment portfolio log on to http://www.zameen-zaidad.com by: raj 02
