Rights and Liabilities of Lessor and Lessee

The relationship between lessors and lessees is fundamental to property leasing. As two integral parties in a lease agreement, the rights and liabilities of Lessor and Lessee play a pivotal role in shaping the dynamics of the arrangement. 

What is Lease?

Lease refers to a transfer of property wherein one party transfers or rents their property to another for a specified period, in exchange for regular or lump-sum payments.

For instance, A leases their house to B for 8 months, receiving Rs. 10,000 monthly as a periodic payment. This serves as a basic illustration of a lease.

According to Section 105 of The Transfer of Property Act, 1882, a lease of immovable property involves the transfer of the right to enjoy said property for a defined duration, either explicitly or implicitly, in return for a payment or consideration, such as money, a share of crops, services or any other valuable item, to be given periodically or on specific occasions to the party transferring the property (lessor) by the receiving party (lessee), who accepts the terms of the transfer.

Four terms related to the lease of immovable property are:

• Lessor: The individual transferring the immovable property is known as the lessor.
• Lessee: The individual receiving and using the immovable property is known as the lessee.
• Premium: The price paid to obtain the lease of immovable property is referred to as the premium.
• Rent: The payment, either in monetary form or through services, made by the lessee to the lessor, is known as rent.

Who is a Lessor and Lessee?

A lessor is an individual or entity who owns a property and grants the right to use and occupy that property to another party, known as the lessee, through a legal agreement called a lease or tenancy agreement. The lessor is often referred to as the landlord in common parlance. The lessor retains the ownership of the property, while the lessee obtains the right to use the property for a specific duration as outlined in the lease agreement, typically in exchange for rent or other forms of consideration. 

The lessee is commonly referred to as the tenant and is responsible for adhering to the terms and conditions of the lease, including paying rent and taking care of the property during the lease period.

Rights and Liabilities of a Lessor and Lesse

The rights and liabilities of lessor and lessee are discussed below:

Rights and Liabilities of a Lessor

Rights of a Lessor

Right to Accretions

The lessor has the entitlement to any further accretions, accumulations or additions made to the property during the tenancy period. These additions could be natural growth or improvements made by the lessee. After the lease terminates, the lessee must transfer the title to these additions to the lessor.

Right to Collect Rent

The lessor has the right to collect rent or any other form of consideration, as specified in the lease agreement, from the tenant without any interruptions.

Liabilities of a Lessor

Duty of Disclosure

The lessor is obligated to disclose any material defects in the property to the lessee. There are two types of defects:

a. Latent Defect: These defects cannot be discovered through rational inspection by the lessor.

b. Apparent Defect: These defects can be easily discovered through inspection.

The lessor must disclose any apparent defects to the lessee as they may affect the lessee’s enjoyment of the property.

To Give Possession

The lessor must provide possession of the property to the lessee upon the lessee’s request. However, this liability only arises when there is a specific request from the lessee.

Covenant for Quiet Enjoyment

The lessee has the right to peacefully enjoy the property during the tenancy period. It is the lessor’s duty not to cause any interruption or interference that hinders the lessee’s peaceful enjoyment of the property. Courts have held that direct or physical interference with the premises by the lessor constitutes a breach of the lessee’s right to enjoyment.

Rights and Liabilities of a Lessee

Just like a lessor, a lessee also has certain rights and liabilities granted to them by the Transfer of Property Act

Rights of a Lessee

Right to Charge for Repair

If the lessor fails to make necessary repairs to the property, the lessee has the right to undertake those repairs at their own expense. The lessee can either deduct the cost of repairs from the rent or charge the lessor separately for the repair work.

Right to Remove Fixtures

During the lease period, the lessee has the right to remove fixtures they may have installed in the property. However, upon the termination of the lease, the lessee must return the property to the lessor in the same condition as it was received. Failure to do so may result in legal action by the lessor.

Right to Assign Interest

The lessee can sub-lease the property or transfer their lease rights to another party. However, if the lease agreement restricts the lessee from doing so, they must adhere to the terms of the agreement and even after the transfer, the lessee remains responsible for fulfilling all lease-related obligations.

Right to Have Benefits of Crops

If the lease duration is uncertain, the lessee or their legal representative has the right to enjoy the benefits of any crops grown on the property during the lease period.

Liabilities of a Lessee

Duty to Disclose Material Facts

The lessee is obligated to inform the lessor of any material facts relevant to the property that the lessee is aware of but the lessor is not. Failure to disclose such facts may lead to the lessee being liable for any resulting losses suffered by the lessor.

Duty to Pay Rent

The lessee must pay the rent or premium to the lessor or their agent at the specified time and place as per the lease agreement. Non-payment of rent may lead to eviction or legal action for the arrears.

Duty to Maintain the Property

The lessee is responsible for maintaining the property in the same condition as it was when they took possession. The lessor or their agent may inspect the property reasonably, with exceptions for changes caused by uncontrollable forces.

Duty to Give Notice

If the lessee becomes aware of any actions that may harm the lessor’s rights or endanger their title to the property, the lessee must notify the lessor.

Duty to Use the Property Reasonably

The lessee must use the property in a reasonable manner as if it were their own.

Duty Not to Erect Permanent Structures

Unless agreed upon, the lessee cannot construct permanent structures on the property, except in agricultural contexts.

Duty to Restore Possession

After the lease ends, the lessee must return the property to the lessor. Failure to vacate the premises even after the notice period may make the lessee liable for damages.

Conclusion

The rights and liabilities of lessor and lessee are critical aspects that govern the dynamics of a property lease. The rights of lessor include entitlement to property accretions and the collection of rent without interruptions. Liabilities of lessor involve disclosing material defects in the property and ensuring the lessee’s peaceful enjoyment. 

On the other hand, lessee rights encompass charging for repairs, removing fixtures, and benefiting from crops during uncertain lease durations. Liabilities consist of disclosing material facts to the lessor, paying rent on time, maintaining the property, and restoring possession after the lease ends. Understanding these rights and liabilities lessor and lessee is crucial for a successful and harmonious leasing relationship.