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What is Lease Deed ?

What is a Lease Deed ?

A lease deed may be a written contract between a landlord (lessor) and tenant (lessee), which states that the owner would receive a periodic payment in exchange of allowing the tenant to use and occupy the property. The lease deed also defines the terms and conditions that govern the connection between a landlord and a tenant during the amount of lease. A lease deed is usually required when the property is leased for an extended period of your time , ranging between 1-5 years or maybe longer.

In such cases, a lease deed plays a crucial role to control the connection between the owner and tenant and lays down the provisions legally binding over them. A lease deed must be drafted by an honest documentation lawyer in India who can understand the wants of both the edges and draft an unbiased deed that protects the interest of both the owner and tenant. Consulting a documentation lawyer becomes more important when the lease deed is required for a billboard property like office, factory or shop.

Key Contents of a Lease Deed in India

The most important provisions that has got to be included in every lease deed in India are as follows:

1. Description of Property: The lease deed must contain the outline of the property just like the area, location, address, structure, furniture and fittings, etc.

2. Duration: The lease deed must clearly state the period of time that the lease deed are going to be valid. This provision also can include the knowledge concerning the renewal of the lease deed if both the parties wish to continue and renew their contract.

3. Rent, Maintenance, and Security: the quantity of rent, mode of payment, due dates, margin to be paid, interest on delay in payment, etc. must be clarified within the lease deed. The lease deed must also include the small print and responsibility for paying any maintenance charges, utility bills, society charges, etc.

4. Termination of Lease: The lease deed must state the explanations that the lease agreement are often terminated. this might include breach of lease deed, use of the property for illegal acts, failure to pay rent, nuisance by the tenant, etc.

5. Subletting: The lease deed must state whether the tenant is allowed to sublet the property or not.

6. Dispute Resolution: The agreement must mention the way during which the legal disputes between the owner and tenant arising out of breach of the lease deed are going to be addressed . This might include any ADR processes like Arbitration.

7. Applicable Laws: This provision states the laws which can be applicable over the lessor and lessee just in case of a dispute and which court will have jurisdiction to affect such matters.

The above-mentioned lease deed format are often utilized in both residential also as commercial leases. However, a company lease deed must be more detailed and include the small print of the business, indemnity, etc.

A documentation advocate in India can assist in drafting a customized lease deed in accordance with the sort of lease deed. Once the lease deed is drafted, it must be registered with the Registrar or Sub-Registrar of the district during which it’s located. A lease deed is registered after paying the requisite stamp tax , which differs from state to state. as an example , lease deed registration in Delhi is completed by paying stamp tax at 2% of the typical annual rent when the lease is for up to five years and three of the typical annual rent when the lease is for quite 5 years and up to 10 years.

Lease has been defined under section 105 within the Transfer of Property Act, 1882 

Lease defined—A lease of immoveable property may be a transfer of a right to enjoy such property, made for a particular time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of cash , a share of crops, service or the other thing useful , to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined—The transferor is named the lessor, the transferee is named the lessee, the worth is named the premium, and therefore the money, share, service or other thing to be so rendered is named the rent.

Stages of a Lease Deed

The entire transaction executing the Lease Deed are often weakened into the subsequent stages:

1. Negotiation Stage: this is often the very first stage of the transaction and it comes into effect right after the Lessee has identified a property suitable for his use. The parties involved shall got to discuss the varied commercial aspects of the deal like duration of the lease, consideration, mode of payment etc. the main target at this stage is more on the commercial aspects instead of the legal aspects.

2. Preliminary Documentation Stage: Once the commercial aspects of the transaction are prescribed , the parties involved can get into an Agreement to Lease or preferably a Memorandum of Understanding recording the commercial aspects of the deal and therefore the broad duties and obligations of the respective parties. This creation of an Agreement to Lease or Memorandum of Understanding is to put on record the intention of the parties and thus allow subsequent stage of the method .

3. Title Investigation or Due Diligence Stage: the main target of this stage is to verify the Lessor’s title to the property and therefore the Lessor’s ability to demise the property by way of the lease in favour of the Lessee. This typically involves a radical reading of the title deeds, verification with the govt records by way of a Title Search at the respective office and eventually the issuance of Public Notices inviting objections. The issuance of Public Notice isn’t mandatory and may be avoided supported things . At this stage, it’s also necessary to ascertain what permission are mandatory and therefore the steps required to get an equivalent .

4. Drafting and Payment of stamp tax Stage: The lease are often demised by way of an Agreement to Lease however the well-liked mode may be a Lease Deed because it isn’t contingent upon a future instrument. Once the document has been drafted taking into consideration the varied terms of the transaction and therefore the draft approved by the parties; the payment of stamp tax are often undertaken on the Lease Deed. Since stamp tax may be a State subject, allow us to consider an example of Maharashtra; an Agreement of Lease must be stamped as per Article 25 of Schedule I whereas a Lease Deed are often stamped as per Article 36 of Schedule I of Maharashtra Stamp Act (Schedule I of The Maharashtra Stamp Act, 1958).

5. Execution and Registration Stage: This stage involves the payment of premium by the Lessee to the Lessor. The parties can simultaneously exchange the consideration amount, take possession of the property and execute the Lease Deed. Though not mandatory, it’s accepted practice for 2 people to record their signature as witnesses to the execution of the Lease Deed. Once the instrument has been executed it are often put up for registration at the Office of the applicable Sub-Registrar of Assurances having suitable jurisdiction over the property.

6. Post Registration Stage: Once the registration of Lease Deed is completed and therefore the property is in possession of the Lessee, it’s advisable that the varied governmental and semi-governmental bodies having jurisdiction over the property be notified in writing about the change of holder. this is able to ensure a smooth transition and make the method of creating applications and acquiring Licenses relatively easy.

It is important to notice that as per Section 107 of the Transfer of Property Act, 1882 and Section 19 (1) (d) of the India Registration Act, 1908 it’s mandatory to register the lease of an immovable property for a term exceeding one year or system of yearly payment of rent(The Transfer of Property Act, 1982) (The Registration Act, 1908). A lease deed that must be mandatorily registered is void if not registered ( Usha Ranjan Ray Burman vs Sova Das, AIR 1990 Cal I)


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