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Overview of Lease Registration

An act of transfer of possession of a property from the owner to another person for a definite time period and consideration is called a lease. The person who leases out the property is called a lessor and the person to whom the property is leased out is called a lessee. A lease is made out for immovable property. An agreement of lease between parties does not involve the transfer of title of the property from one person to another. The lessee is provided with a time period to enjoy the property leased out by the lessor. A lease involves the transfer of possession of the property in exchange for consideration in the form of lease rental.

The term lease has been defined under Section 105 of the Transfer of Property Act, 1882.

What is a Lease Deed?

A lease deed is a Document that contains terms and conditions between parties for taking a property on lease for some consideration. It has to be signed by both parties, i.e. the lessor and the lessee. The deed includes details such as the amount for lease rental and its payment schedule, security deposit if any, other rights and obligations of the property over its use, etc which are decided mutually by the parties to the deed. It is a legal Document in written form to ensure that there might not occur any future disagreements between the parties.

It is usually suggested to put a clause related to dispute resolution between the parties in case of any disagreements that might arise in the future course of action.

It is important for both parties to mutually decide on a sufficient amount of consideration and other terms and conditions before signing the deed. A harmonious lease experience can be enjoyed by the parties only if are well-informed about the clauses and terms of the lease deed. It is necessary for the person who drafts the deed to consider all the wishes and obligations of both parties.

A Basic Lease Deed should Contain:

  • Details with regard to the nature, size and address of the property in concern.
  • The time duration for which the property has been taken on lease.
  • The mutually decided amount as consideration.
  • A termination clause for termination of lease.
  • A clause stating a method for dispute resolution by a competent authority having jurisdiction.

There is a method specified for making a lease under Section 107 of the Transfer of Property Act. As per the Registration Act of 1908, it is mandatory to get certain agreements and Documents registered under the competent government authorities so that such Documents can hold legal value in the eyes of the law. It is done to maintain a record with the government department.

As per Section 17 of the Registration Act, 1908, it is mandatory for certain Documents to be registered with the registrar's office of a district. One such Document is a lease deed entered for a lease of immovable property. The minimum duration for a lease to be registered is a lease for more than 1 year. Any lease deed made for duration less than one year is exempted from being registered. This has been defined under Section 18 of the same Act.

Why should Lease Deeds be Registered?

A lease deed is mandatory to be registered as per the laws related to the transfer of immovable property and the registration of such transfer Documents. There are certain legal complications which might arise if a Document which lies under the list of mandatory Documents to be registered is not registered. Registering gives legal sanctity to a necessary paper mentioning an agreement between the parties relating to the transfer of property. It also helps the parties to approach the authorities to solve any disputes between the parties and protect the interest of the parties. Thus, it is important for a lease deed to be registered as:

  • It safeguards the interest of the parties involved in a lease deed.
  • It gives legal validity to the transaction that occurred between the parties to a lease deed.

Documents Required for Lease Deed Registration

There are certain Documents which are required to be submitted by the parties for registration of a lease deed. These are as follows:

  • The title Document states ownership of the lessor on the property which is being leased out.
  • Other property Documents such as tax payment receipts of the said property.
  • 2 photographs of both parties along with one picture of each witness.
  • Address proof copy of the lessor, lessee and the witnesses to the deed. Documents such as Aadhar cards, passports, etc are used to prove the address of the parties.
  • The lease agreement is printed on the stamp paper of the pre-decided stated value.
  • As payment of stamp duty lies down under the ambit of state laws, the rate/value of the stamp duty varies from place to place.

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Process of Registration of a Lease Deed

It is essential to register a lease deed if the duration of such a deed exceeds 12 months. If such a lease deed is not registered, then the Document will not act as valid proof in the eyes of the law. A lessor agrees to enter into a lease agreement more comfortably if such a deed has been drafted considering all the legal aspects and has been registered before the competent authority.

It is a usual practice in India that people enter into a lease agreement for 11 months to save money and time from registration of the deed. A deed entered for a time period of 11 months is exempted from the mandatory registration provision of a lease deed.

Before applying for registration of a lease deed, it is important to check whether all the essential clauses have been stated in the deed or not. The important clauses are as follows:

Duration: The parties should clearly state the duration for which a property will be leased out. If the duration is less than 12 months, then it is not mandatory for such a lease deed to be registered.

Amount of Rent: The lease rental to be paid to the lessor as consideration must be defined along with the payment schedule.

Security Deposit: If the lessor demands any security deposit for recovering losses, if any caused due to damage to the property, the deed should contain the amount of security with the refund policy.

Lock-in Period: A lock-in period is defined as a time period decided by the parties for which they need to work as per the agreement without having any rights to terminate the lease deed.

Notice Period: If a party to a lease deed is willing to terminate the agreement to lease between them, then the party needs to send a prior notice to the other party as per the time period mentioned in the deed.

Usage: It is an obligation upon the lessee to use the property carefully without damaging it.

  • All the terms and conditions with regard to the sub-lease of the said property, if allowed.
  • Rent escalation clause.
  • Any maintenance fees are to be paid by the lessee.

After the lease deed has been drafted and signed by both parties and the witnesses, parties need to take such deed to the sub-registrar's office in an area where the leased out property is situated for registration of the lease deed. The parties are provided a window time of 4 months for registration of the lease. If the parties are unable to meet the above-mentioned requirement, they can seek an extension.

It is important for both parties to be present at the time of registration of the lease deed. The presence of two witnesses at the time of registration is mandatory. If either of the party is not able to be present during the registration process is going on, then such a person can appoint another person on his/her behalf by granting a power of attorney. The person having power of attorney will act as a party to the deed and be present at the time of registration. When either party is not able to be present, this is the only option available to the parties.

Online Lease Agreement Registration

In India, some states have provided a service for online lease deed registration. For example, Maharashtra is one such state providing online lease registration services. The process for online registration has been stated below:

  • The first step is to check whether the state where you live provides such a service of online lease deed registration or not.
  • If the state has such services, you need to visit the state government's website and make a profile.
  • After creating a profile, you need to fill in basic details such as address of the property, size, location and measurement of the area of the property, etc.
  • After you have filled in all the details, the website will generate a token number which can be used as a login ID for logging into the account.
  • You are then required to enter the details of parties to a lease deed. It is important to mention the nature of the party is an individual/company/group of individuals, etc with their occupation and proper address.
  • After entering all the details, you will be required to pay lease registration charges and stamp duty online by means of an online challan. Information such as the name of the lessor and the lessee, address and proper location of the property, etc is required to be entered.
  • After payment of the required cost for the lease deed online registration and stamp duty, the parties need to visit the sub-registrar's office where the property is located by scheduling a meeting. You are mandatorily required to visit the office of the sub-registrar in person for various purposes even if the process of registration is going online.

After a time for meeting the sub-registrar's office has been finalized, you need to carry all the required Documents to the office and submit them to the competent authority in the office. The Documents which are required to be submitted while making an online registration of a lease deed are the same as the Documents required to be submitted while making an offline registration of a lease deed.

It has been found that the online registration process is much easier as compared to an offline registration process. But this online service is not available in all the states in India.

It is suggested that parties should contact a legal professional for drafting and registration of a lease deed. A professional will help in drafting a legally sound deed containing all the legal complexities which might be useful for future purposes.

Effect of an Unregistered Lease Agreement

A lease deed must be mandatorily registered as per the prevailing provisions of law. Thus, a non-registration of the same will not be considered valid proof and evidence of a contract entered between the parties.

The governing laws of lease deeds are the Registration Act, 1908 and the Transfer of Property Act, 1882. As per Section 17 of the Registration Act, a lease deed made for duration more than 12 months is under an obligation for compulsory registration. Also, Section 107 of the Transfer of Property Act states that a contract for lease for more than one year can only be made between the parties by a registered and written Document.

Frequently Asked Questions

Yes, the registration of the lease deed is mandatory as per the provision stated under the Registration Act, 1908. The Act states that if any immovable property is being leased out for purposes such as commercial, fishery, residential or cultivation for more than 11 months, then registration of such a lease deed is mandatory. A lease agreement entered between parties for a period of less than 11 months is free from the provision of mandatory registration.

For lease deed registration, both, the tenant and the landlord, should be present at the sub-registrar’s office and pay the stamp duty on the instrument.

A lease deed is a legal and written necessary paper entered between two parties namely, the lessor and the lessee. It contains terms and conditions agreed by the parties for the transfer of possession of property of the lessor to the lessee for a purpose and defined time period in exchange for lease rental paid by the lessee to the lessor. A lease deed is generally made for more than a time period of 11 months.

If the parties to the deed agree for settling disputes, if any arising out of the lease agreement has to be solved by means of arbitration, they can do so by mentioning a clause in the deed relating to dispute resolution by arbitration. If such a clause is mentioned in the deed and the deed is not registered, such a clause will be treated as a separate agreement from the lease deed and has no negative effects when the deed is not registered.

There are certain Acts which contain provisions related to the lease deed and its registration. These are as follows:

  • The Registration Act of 1908
  • The Transfer of Property Act, 1882

A Lease deed should cover the following:

  • The name and personal details of the lessor and the lessee,
  • The duration of a lease,
  • The amount of lease rental as consideration for leasing the property and the security deposit amount, if any,
  • A time defined as a notice period,
  • Termination clause and conditions attached in the lease deed as mutually agreed by both parties,
  • Any terms for renewal of the lease, if possible,
  • A clause related to sub-leasing the property is agreed upon by the lessor.

The duration for which the parties have agreed to enter into a contract differentiates a rent agreement from a lease deed. When a contract is entered between the parties (tenant and landlord) for a time period of less than 11 months, such a written contract is termed a rent agreement. Whereas a contract is entered between the parties for a time period of more than 11 months, it is called a lease deed.

As stamp duty is levied as per various state laws, there is no specific stamp duty amount. It varies from state to state and is decided by the state revenue department where the property is located.

A lease deed which is unregistered does not hold a legal value in the eyes of the law. It does not create a legal relationship between parties.

Section 18 of the Registration Act states that any agreement for a lease entered between the parties for a time period of less than 11 months is exempted from the mandatory rule of registration of lease deeds in India.

Whenever a property is leased out to a lessor for a certain purpose, he/she needs to pay some amount in consideration of leased out property, such an amount of consideration is termed as Lease rental.

No, the service of online lease registration is available in only a few states in India.

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