Transfer of property as defined under the Transfer of Property Act, 1882 is the act of conveying property by one person to one or more living persons. A property can be transferred in the form of sale, lease, mortgage, gift, and exchange. A lease of immovable property is the transfer of a right to enjoy such property for a certain period. The person who transfers the property is termed as the lessor and the one who accepts the transfer by paying consideration is termed as the lessee. Consideration can be made in the form of money, service, a share of crops, anything of value or the price paid or promised to be paid and is called the rent or the premium for the property. It is to be made periodically or on specific occasions.
Meaning of Lease Deed
The execution of the transfer of immovable property is done with the help of an instrument or a legal document that contains all the necessary information and details concerning the property to be transferred. Therefore, a lease deed is defined as a legal document or an instrument required for the execution of the transfer of property in the form of lease. It confirms the rights, interests of the lessee over the leased property.
Lease Deed Format
A lease deed should be drafted in a proper format. Firstly, it shall include the day, date and place where the deed will be executed. Then it should mention the details of the parties to the deed i.e., the lessor and the lessee. Next, This Deed contains all the details of the property that is to be leased, the amount of rent or premium to be paid periodically, rights of the lessee to enjoy the property, liabilities, and duties of the lessor, and the time period for which the property is to be leased. This deed may contain any other clause as decided by both the parties to this deed. Its must contain the following recitals:
• Name, Date, and Place- The lease deed shall contain the date and the day on which it is executed along with the place where it will be executed. The deed shall also contain the name, age, father’s name, occupation and place of residence of both the parties to the deed i.e., lessor and the lessee.
• Details of the property- This Deed shall contain the details and description of the property that will be put on the lease. The details of the property should include the area of the property, its exact location, registration details, description of structures standing on the property and any other relevant details.
• Time period- A property is given on lease for a specific time period only. This deed shall mention the time period for which the rights of the property are transferred to the lessee and the date on which the lease will expire.
•Consideration or Rent- A lessee is required to pay a certain sum of money periodically as consideration or rent to the lessor. This deed includes the amount of rent, the date on which the rent is to be paid, the mode of payment, increase in rent and the process for the delay in payment. It may also contain the amount of security deposit if it is to be paid.
• Utility and Maintenance charges and land taxes- A lease deed shall specify that will party will be responsible to pay the utility charges of the leased property such as water charges, electricity bills, telephone, and internet bills. Also, it should be specified that which party will be liable to pay the maintenance charges of the property, to repair any damage who will pay the land taxes or other such charges as levied by the government.
• Rights and duties of the lessor and the lessee- A lease deed shall mention the rights and liabilities of both the parties, their interests, benefits, claims, and duties. It shall also mention the reasonable hours during which the lessor is allowed to inspect the leased property.
•Termination of Lease- It is pertinent to mention the date on which the lease agreement or deed will come to an end. The lessee shall hold no rights after the lease deed is terminated. A lease can be terminated on the date of expiry as mentioned in the deed or on the grounds of a breach, failure to pay rent or any other ground of termination. The deed shall also include the process for the handover of possession of the leased property after the expiration of the lease.
• Sub-letting the leased property- It must include the clause of sub-letting the property i.e., whether the further letting of the property on lease is permissible or not. If permissible, it should be further leased only on the approval of the lessor and not otherwise.
• Payment of legal charges- The payment of stamp duty, registration charges, and any other government charge shall be borne by the parties to the deed. It shall be mentioned in the deed whether the charges are to be born by either of the parties or by both parties.
•Jurisdiction- This Deed shall mention the Court within whose jurisdiction the property lies or the parties live and the laws which it will be subjected to in case of any conflict.
• Indemnity- It is important to include an indemnity clause in the lease deed that will cover any possible loss or damage to the parties.
• Renewal- This Deed may contain the clause of renewal of the lease after a specific period. In the case of renewal, it should be specified whether there would be any alteration of the consideration or rent.
A lease is not the transfer of immovable property from one person to another but merely of transfer of rights of possession of a commercial property which can be further leased by the lessee. After the execution of a lease deed, the lessee enjoys the possession and rights over the leased property, the ownership of the property is not transferred, only the rights vested in the property are transferred to the lessee in return for rent or consideration. The lessee loses his rights over the property on termination of the lease deed.