Define a lease . Explain in detail the distinction between a lease and a licence.

Introduction

Chapter V Sections 105 to 117 of The T.P.Act 1882 deals with lease. The Transfer of Property Act,1882 (Further T.P.A) is not exhaustive on the point of lease. It is to be read with Rent Control Act, Indian Contract Act then it is completed.

Definition of lease.

According to Salmond ” The fundamental concept of lease is that it is a separation of right of possession from ownership.” In other words lease is separation of possession from ownership.”

As we know that ownership includes right to enjoy, manage, possession, dispose of property. In case of lease only the right of enjoy and possession of property is transferred to lessee from lessor and after termination of lease it revert back to the lessor owner). 

According to Mulla ” lease is contract between lessor and lessee.” Lessor gives possession i.e right to enjoy to lessee and in consideration lessee pays rent to or premium.

Definition of lease in T.P.A. 1882.

Section 105 of T. P.A. 1882 defines lease. According to it .

A lease of immovable property  is a transfer of a right to enjoy such property, 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 occasion, to the transferer by the transferee, who accepts the transfer on such terms.

Section 105 of T. P.A. 1882

Essential ingredients of lease.

On the basis of above mentioned definitions following are essential ingredients of lease

1. Parties of lease
2. Immovable property
3. Transfer
4. Right to enjoy
5. Duration of lease
6. Consideration 

Parties of lease 

A lease is a transfer of interest in immovable property between two persons i.e. lessor and lessee. The person who transfers (transferer) the interest is called lessor and the person in whose favour(transferee) transfer is made is called lessee.

Lessor

The lessor must be a person competent to transfer. According to section 7 of the act, every person who is competent to contract and entitled to transferable property or authorised to dispose of transferable property not his own, is competent to transfer such property. A person is said to be  competent to contract when he has attained the age of majority and is of sound mind.So a minor can not be lessor,  a lease granted by minor is void. The lessor must not only be competent to contract but also he must also have authority to dispose of the property, he has authority if he is owner of property or have the possession of property because in lease possession is transferred not ownership. The person who has only  possession of property may lease the property.

Lessee

Lessee is the person in whose favour transfer of interest is made . Lessee must be competent to contract at time of execution of lease. It means he must be of the age of majority and must be of sound mind. Lease in favour of minor is void. Lessee may be juristic person e.g. a company or registered  firm.

Immovable Property

The second important essentials of lease is the immovable property.The subject matter of lease is immovable property as defined under section 3 of The Transfer of Property Act,1882. Property may be of  two type movable and immovable. Immovable property may be tangible or intangible. Lease may be made of both tangible and intangible immovable property. The Property may be house,minerals, benefit arising out of land such as right of fisheries,or right to collect rent from a market etc. However the leased property must be definite and ascertainable.

Transfer of interest

In a lease there must be a transfer of interest, if there is no transfer of interest there will be no lease. It means creation of new interest in transferee , if any  one has already interest of enjoy,it is not a transfer within the meaning of section 5 of The T P Act,1882.

Right to enjoy

Ownership includes a bundle of rights such as right to use and enjoy,right to sell, right to mortgage, sale, gift and to dispose off the property. When all the interests in property is transferred it is called absolute transfer and when some of the interest  in property is transferred it is called limited transfer. Example of absolute transfer is sale, gift and exchange. Mortgages and Lease is the example of limited transfer. In case of lease only the interest of right to enjoy the property is transferred out of ownership is transferred.

Duration of Lease

A lease of Immovable property is a transfer of a right to enjoy such property for a certain time express or implied. It may be either for certain time or for perpetuity.The period for which right to use the property is transferred is called ‘term of the lease’.The lease period may longer or shorter. However it must be ascertainable. It should not be ambiguous or uncertain.

When term of lease is not fixed.

If the period of lease is not  expressly fixed or lease deed is silent about the term of lease, it should be presumed as follows:
a. A lease for agriculture or manufacturing purposes shall be deemed to be a lease from year to year.
b. The other types of lease must be deemed  to be the lease from month to month.

Tenancy at will

Duration of lease depends upon the intention of the parties it may be fixed or may not be fixed.The lase may continue as long as the both the parties intend .This is known as tenancy at will .It Will remain as long as parties desire. The term tenancy  at will has not been defined in T.P A., 1882.But it simple meaning is that it is a tenancy which can be terminated by the lessor or lessee at any time at will.

Perpetual Lease

Lease can be for permanent period.  A lease for infinite period is called perpetual  lease. No law prohibit perpetual lease.  Ina case of Hamidullah V. Abdullah S.C. it was held that whether lease is perpetual or not it is a matter of construction.Lease for 999 year is valid.

Consideration

Consideration is essential ingredients of lease. according to section 5, lease of immovable property is a transfer of right to enjoy such property made for certain time in consideration of price.Consideration Must be lawful and valuable. The form of consideration may be price,premium or rent.The price is called the premium,and the money,share,service or other thing is called the rent.The price may may be fixed,or it may be rendered periodically. It is called Salami in local languages. Commissioner of Income Tax V. Panbari Tea Co. Ltd. 1965 S.C. it was held where the interest of lessor is parted with a price, The price is premium or Salami, This is known as premium but periodical payment for continuous enjoyment of the benefit under the lease is in the nature of rent.The price is capital income and rent is revenue receipt. Services may be the consideration for lease. According to Mulla, tuition is also a service and it can be rent. Doctor may give the rent by giving the service as family doctor.

Distinction between lease and licence

There is similarity between the lease and license on the point of use and enjoyment. The main test to decide the nature of lease and licence is to find out the possession. If the person who has possession over the property is authorised to use the property exclusively it is lease, but if he has authorised to use the property in certain way and certain terms and conditions and property is in possession of owner it is licence. Lease is a transfer of right of enjoyment in immovable property.Licence on the other hand is right to use the land of another while it remains in the possession of another.
The fundamental difference between lease and licence is that in the lease there is transfer of interest in an immovable property whereas in licence there is no transfer of interest. Lease and licence both are the rights of a person to use and enjoy the immovable property of another person but there is following distinction between the both –

1. Lease is a transfer of interest therefore it is transfer of property.In licence there is no transfer of interest so it is not a transfer of property.
2. In lease the transferee (lessee) gets a proprietary right in respect of the land. Licence on the other hand is a personal right of the person using the licence. The the right of the licensee is in the nature of a permissions to or continue to do certain things on another`s land. It is therefore personal right.
3. Lease is a transferable right because it is a proprietary right. Licence is not transferable and can’t be assigned to third party.
4. Lessee is entitled to maintain action against any trespasser where as the licensee cannot take action against the trespasser.
5. Lease cannot be revoked before expiry of the term and without breach of any express condition by the lessee. On the other hand subject to certain exceptions a licence it is generally revocable.
6. The definition of lease has been given under section 105 of the Transfer of Property Act 1882 whereas licence has been defined under section 52 of the Indian easement Act 1882.

In Associated Hotel of India Versus R.N. Kapoor 1959 SC. The supreme court held that the real test is intention of the parties. If the Instruments creates an interest in the property it is a lease where it permits the Grantee to make use of the property while possession continue with its owner. It is a licence.

List of Important Books on T.P.A 1882

• The transfer of property Act 1881,with case law, Universal Publication.
• The Transfer of Property Act, 1882 by R.K.Sinha 
• The Transfer of Property Act by S.N SHUKLA
• The Transfer of Property by Mulla