LEASE OF GOVERNMENT LAND

What is Lease?

A lease refers to a contract where one party grants a right to use a property or land to another party in return for consideration and for a specific period of time. Both the parties enter into a lease agreement specifying the terms and conditions of the agreement. The lease agreement guarantees the rights and obligations of both the parties. The consideration for the lease and the period of the lease are part of the agreement. Other conditions include the responsibilities of both the parties, deposit, due dates, consequences in case of violation of the lease. One lease agreement may be different from the other. However, certain terms and conditions are the same, such as the clause on the amount of rent, names and address of both the parties, due dates, and notice period. Both the parties sign the lease agreement and date the same. A lease agreement may be for a residential property or a commercial property. In the case of commercial properties, the lease agreements can contain complex terms and conditions. A commercial lease can be for the use of the premises with furniture and fittings. The agreement can be longer than the usual duration. There may be other conditions for the use of the property, including sub-letting to another party.

Lease Of Government Land

Leasing and purchase of government land was earlier not allowed in order to keep away the unregulated players from entering the market. There is a process which is to be followed in order to take a government land on lease.

Process:

• Apply to the authority with all the documents attached. If approved, a letter will be issued to the applicant to appear before the Land Allotment Committee (LAC). Projects with foreign direct investment are considered on priority and given preference in the allotment of land.
• Once the LAC approves the application, the authority issues the offer letter for payment of 25 per cent as earnest money deposit within 15 days of issuance of the letter. After this payment, the authority will issue the allotment letter with the plot number at which the applicant has to pay the remaining amount within 30 days of issuance of the letter.
• Also, for plots up to 10 acre, the applicant needs to pay the road width charges while for plots sized between 10 and 25 acre, applicants get a concession of 50 per cent of road charges. There are no road width charges for plots above 25 acre or if the investment is above Rs 100 crore.
• In cities where development authorities are not yet formed, applicants can apply following the same process at the sub-registrar office.

Reason behind lending Government Land

Land is a premium asset and an important resource which contributes significantly to the economy of the State. Government lands not required for immediate use are given on lease to various individuals/institutions for various purposes such as residential, industrial, commercial and others. The leased lands also enable the Government to augment their revenue by levy of lease rent, premium/unearned income for change in use of the leased lands, development charges, transfer charges, etc. The Government leases the land for various purposes such as agricultural, residential, industrial, commercial, social, etc.

Transfer of Property Act

Under the Indian legal system, properties are divided into two categories – movable and immovable. The Transfer of Property Act (ToPA), 1882, which came into force on July 1, 1882, deals with the aspects of transfer of properties between living beings. One of the oldest laws in the Indian legal system, the ToPA is an extension of the law of contracts and runs parallel to the succession laws. For those planning to transfer their immovable property, knowing the key aspects of this Act is important.

SECTION 105: A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specific occasions to the transferor by the transferee, who accepts the transfer on such terms. Lessor, lessee, premium and rent defined.—The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be rendered is called the rent.

SECTION 106: Duration of certain leases in absence of written contract or local usage.—

1.  In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months’ notice; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days’ notice.
2.  Notwithstanding anything contained in any other law for the time being in force, the period mentioned in sub-section (1) shall commence from the date of receipt of notice.
3.  A notice under sub-section (1) shall not be deemed to be invalid merely because the period mentioned therein falls short of the period specified under that sub-section, where a suit or proceeding is filed after the expiry of the period mentioned in that sub-section.
4.  Every notice under sub-section (1) must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.

SECTION 108: Rights and liabilities of lessor and lessee- In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased:-

• Rights and Liabilities of the Lessor

  1. The lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the former is and the latter is not aware, and which the latter could not with ordinary care discover;
  2. The lessor is bound on the lessee’s request to put him in possession of the property;
  3. The lessor shall be deemed to contract with the lessee that, if the latter pays the rent reserved by the lease and performs the contracts binding on the lessee, he may hold the property during the time limited by the lease without interruption. The benefit of such contract shall be annexed to and go with the lessee’s interest as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested.

• Rights and Liabilities of the Lessee

  1. If during the continuance of the lease any accession is made to the property, such accession (subject to the law relating to alluvion for the time being in force) shall be deemed to be comprised in the lease;
  2. If by fire, tempest or flood, or violence of an army or of a mob, or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void: Provided that, if the injury be occasioned by the wrongful act or default of the lessee, he shall not be entitled to avail himself of the benefit of this provision;
  3. If the lessor neglects to make, within a reasonable time after notice, any repairs which he is bound to make to the property, the lessee may make the same himself, and deduct the expense of such repairs with interest from the rent, or otherwise recover it from the lessor;
  4. If the lessor neglects to make any payment which he is bound to make, and which, if not made by him, is recoverable from the lessee or against the property, the lessee may make such payment himself, and deduct it with interest from the rent, or otherwise recover it from the lessor;
  5. The lessee may, 1.[even after the determination of the lease] remove, at any time, 2.[whilst he is in possession of the property leased but not afterwards] all things which he has attached to the earth; provided he leaves the property in the state in which he received it;
  6. When a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or sown by the lessee and growing upon the property when the lease determines, and to free ingress and egress to gather and carry them;
  7. The lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease; Nothing in this clause shall be deemed to authorize a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee;
  8. The lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take, of which the lessee is, and the lessor is not, aware, and which materially increases the value of such interest;
  9. The lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf;
  10. The lessee is bound to keep, and on the termination of the lease to restore, the property in as good condition as it was in at the time when he was put in possession, subject only to the changes caused by reasonable wear and tear or irresistible force, and to allow the lessor and his agents, at all reasonable times during the term, to enter upon the property and inspect the condition thereof and give or leave notice of any defect in such condition; and, when such defect has been caused by any act or default on the part of the lessee, his servants or agents, he is bound to make it good within three months after such notice has been given or left;
  11. If the lessee becomes aware of any proceeding to recover the property or any part thereof, or of any encroachment made upon, or any interference with, the lessor’s rights concerning such property, he is bound to give, with reasonable diligence, notice thereof to the lessor;
  12. the lessee may use the property and its products (if any) as a person of ordinary prudence would use them if they were his own; but he must not use, or permit another to use, the property for a purpose other than that for which it was leased, or fell 3[or sell] timber, pull down or damage buildings 3[belonging to the lessor, or] work mines or quarries not open when the lease was granted, or commit any other act which is destructive or permanently injurious thereto;
  13. he must not, without the lessor’s consent, erect on the property any permanent structure, except for agricultural purposes;
  14. on the determination of the lease, the lessee is bound to put the lessor into possession of the property.

Cases on Lease Agreements

1. The Supreme Court of India in the matter of R.V. Bhupal Prasad vs State Of Andhra Pradesh & Ors , explained the concept of Tenant at Sufferance as follows, ‘tenant at sufferance is one who comes into possession of land by lawful title, but who holds it wrongly after the termination of the term or expiry of the lease by efflux of time. The tenant at sufferance is, therefore, one who wrongfully continues in possession after the extinction of a lawful title. There is little difference between him and a trespasser. In Mulla’s Transfer of Property Act (7th Edn.) At page 633, the position of tenancy at sufferance has been stated thus: A tenancy at sufferance is merely a fiction to avoid continuance in possession operating as a trespass. It has been described as the least and lowest interest which can subsist in reality. It, therefore, cannot be created by contract and arises only by implication of law when a person who has been in possession under a lawful title continues in possession after that title has been determined, without the consent of the person entitled. A tenancy at sufferance does not create the relationship of landlord and tenant. At page 769, it is stated regarding the right of a tenant holding over thus : The act of holding over after the expiration of the term does not necessarily create a tenancy of any kind. If the lessee remains in possession after the determination of the term, the common law rule is that he is a tenant on sufferance. ‘The expression “holding over” is used in the sense of retaining possession. A distinction should be drawn between a tenant continuing in possession after the determination of the lease, without the consent of the landlord and tenant doing so with the landlord’s consent. The former is called a tenant by sufferance in the language of the English Law and the latter class of tenants is called a tenant holding over or a tenant at will. The lessee holding over with the consent of the lessor is in a better position than a mere tenant at sufferance. The tenancy on sufferance is converted into a tenancy at will by the assent of the landlord, but the relationship of the landlord and tenant is not established until the rent was paid and accepted. The assent of the landlord to the continuance of the tenancy after the determination of the tenancy would create a new tenancy. The possession of a tenant who has ceased to be a tenant is protected by law. Although he may not have a right to continue in possession after the termination of the tenancy, his possession is juridical.’ 
2. High Court of Patna, in the matter of Surajmal Marwari And Ors. v. Rampearaylal Khandelwal And Ors , had said that,‘but Clause (q) of Section 108 lays down that on the determination, the lessee is bound to put the lessor in vacant possession of the property. Having regard to these two provisions, it is abundantly clear that when the term of a lease has expired, the lessee can determine the lease by fulfilling his obligation of putting the lessor into possession of the property. But if the lessee does not put the lessor into possession of the property, and on the contrary, remains in possession thereof, then he does not become a trespasser in relation to the property, but his status is that of a tenant on sufferance.
3. In the matter of M.R.S. Ramakrishnan v. Assistant Director of Ex-Servicemen Welfare, the Madras High Court said that, ‘the law in India and English Law in this respect are different. The landlord in India, even if the lease had expired, will not be entitled to dispossess his tenant except by due process of law, and the principles of English Law that a tenant whose term of the lease had expired, could not complain against his landlord’s entry of his property, so long as it has been peaceably made is not applicable to India, and under Indian Laws a person continuing in possession of the property after the expiry of his tenancy, is not regarded as a trespasser, for his entry was lawful.’ 

Conclusion

• If someone stays in a property for more than 12 years against the expressed wish of its owner and no judicial intervention is sought, then the occupier is treated as owner of the said occupied property due to adverse possession.
• Justice Bhagwati in the matter of Nanalal Girdharlal v. Ghulam Nabi Jamalbhai Motorwala had explained the concept of a tenant remaining in possession of the property after determination of the lease in India. He had said, ‘……but we do not think that a tenant in possession of the property after determination of the lease can be equated to a trespasser. The law in India on this is different from that in England. When a tenant remains in possession of the property-after determination of the lease in India, he undoubtedly becomes a tenant at sufferance but if the landlord accepts rent from him or otherwise assents to his continuing in possession, the tenancy is, in the absence of an agreement to the contrary, renewed from year-to-year or month-to-month according the purpose for which the property is leased vide Section 116 of the Transfer of Property Act. Even if the landlord does not assent to the tenant continuing in possession of the property and the tenancy is not renewed as provided in Section 116 of the Transfer of Property Act, the tenant does not become a trespasser. The tenant has juridical possession of the property and no one can deprive him of such juridical possession except in due course of law. The tenant can as pointed out by Mr. Justice Batchelor in Rudrappa v. Narsing Rao, (1905) LR 29 Bom. “recover as against a third party who unlawfully dispossesses him.” Even the landlord cannot suo motu dispossess a tenant without his consent and if he does so, the tenant would be entitled to recover possession from him by resorting to the remedy provided under Section 915 of the Specific Relief Act. The possession of an erstwhile tenant remaining in possession of the property after determination of the lease is thus fundamentally different from that of a trespasser. Whereas a trespasser is never in juridical possession of the property, and he can always be thrown out if the landlord can do so peaceably, the possession of an erstwhile tenant is juridical and he is protected from dispossession otherwise than in due course of law. Therefore, as far as the Indian Law is concerned, a tenant remaining in possession of the property after determination of the lease can never become a trespasser. This view is supported by at least two decisions of the Bombay High Court. One is the decision of Jenkins, C.J. and Batchelor J. in (1905) ILR29 Bom. 213 (supra) and the other is the decision of Chagla C.J. and Dixit J. in K.K. Verma v. Union of India.’
• In the event the lessee continues to retain possession of the premises after determination of the lease, the lessee may either become a ‘Tenant at Will/ Holding Over’ or a ‘Tenant at Sufferance’, depending upon having the consent (implied/ express) of the lessor to retain such possession.
• In no event will such a lessee/ tenant be classified as a ‘trespasser’, as a tenant/ lessee has juridical possession over the property and the said tenant/ lessee cannot be deprived of such juridical possession except in due course of law.
• A suit for ejectment may be instituted once it is established that the tenancy has expired by efflux of time or otherwise by service of a notice to quit expiring with the end of a particular tenancy month and there being no assent to continuation or waiver of the quit notice.
• If a tenant refuses to handover possession of the premises despite determination of a lease by efflux of time, the lessor has a right to regain possession of the premises by instituting a suit for ejectment against the lessee (tenant), in the competent court.