Legally Speaking: All You Need To Know About A Lease Deed

 All You Need To Know About A Lease Deed

Leasing out your property can earn you continuous income for years. Here’s why a lease deed is important and what it means for both landlords and tenants

Owning a property is a matter of pride. And if the property owner can further earn an income from it, it becomes a lucrative investment. One of the best ways to earn income through your property is by leasing it out to tenants.

What does a 'Lease' mean?

A ‘lease’ is defined under Section 105 of the Transfer of Property Act, 1882. It is a legal contract that specifies the exact terms under which a party agrees to rent a property owned by another party.  Here, the lease guarantees the tenant or lessee the use of the property. According to the terms in a lease, the tenant is granted exclusive possession of a property for a period of time specified in the contract. During the lease tenure, it is the lessee’s responsibility to take care of the property.

The lease deed

A lease deed is the contract signed between the property owner and the tenant for the use of the specific property on a lease rental basis. A lease contract is typically executed for a longer tenure, often exceeding a year or more. In a lease deed, the lessee ‘buys’ the lease rights to the lessor’s property for using the said property. A lease deed, therefore, contains all the important official information regarding the terms and conditions, the financial aspects such as the rent amount and deposit, sub-letting clause, renewal period, etc.

Conditions of a lease deed

For a lease deed to qualify as a legal instrument, it has to fulfil certain conditions which include the following:

• The landlord (lessor) has to transfer the right to use the property being leased out to the tenant (lessee)

• The landlord has to receive a monthly rent in exchange for transferring the right to make use of the property to the tenant

• Both parties can enter into an agreement where the tenant could pay a share of crops, service or any other thing of value’ to the landlord besides cash payment

Contents of a lease deed 

A typical lease deed must contain the following details to qualify as a legal document:

• Property description: This includes the type of property/structure, the area, location, address, furniture, and fittings, etc.
• Lease period: The specific tenure of the lease agreement must be mentioned. It can range from 12 months to more
• Lock-in period: This is the minimum period for which both parties should be in agreement about; they cannot terminate the agreement during the lock-in period
• Rent amount: The monthly/quarterly/ annual rent amount and the date on which it has to be paid
• Security deposit: The refundable deposit amount which the landlord will hold as security. The refund process should also be outlined
• Rent escalation: If both parties agree for an increase in the rent or want to keep it the same
• Terms of usage: The conditions for the use of the property must be detailed. These can include the tenant’s responsibility to maintain it, the maintenance fee, if any, sub-letting of the property by the tenant to another party, etc.
• Notice period: The lease agreement should contain the period of notice each party needs to give to end the agreement
• Termination: The reasons for which the lease agreement can be terminated must be mentioned. This can include the use of the property for any illegal acts, failure to pay rent on due date, tenant creating nuisance, etc.
• Dispute resolution mechanism: Description of the manner in which any legal dispute between the landlord and tenant arising out of breach of the lease deed will be dealt with, such as Alternative Dispute Redressal (ADR) processes like mediation or arbitration, which court will have the jurisdiction, etc.

Lease deed registration

The tenant leasing out the property has to pay the lease deed registration and stamp duty fees. In some cases, this is split equally between the landlord and tenant. Both of these payments can be done online in Maharashtra through the official portal.

Documents for submission

In order to register the lease deed, the following documents are required to be uploaded:

• The rental agreement printed on stamp paper and signed by the landlord, tenant, and two witnesses
• Property documents of the property to be leased out such as a tax receipt
• The original proof of ownership of the property from the landlord
• Address proof copy of the landlord, the tenant, and the witnesses, such as bank passbook, passport, etc. While a lease deed is vital for both residential and commercial properties, it can be more detailed if it is a corporate lease. A qualified advocate can draft a customised lease deed as agreed upon by the landlord and the tenant.