What to do for the valid re­newal of a lease

Do not go by an old lease, or sign any agree­ment for rent un­less it has been reg­is­tered anew

HT Estates - - Front Page - Su­nil Tyagi

Lessor X had rented out his res­i­den­tial prop­erty to lessee Y for a lease term of three years. In the lease deed, the par­ties had stip­u­lated that the lease term, upon ex­piry af­ter three years, could be re­newed for the same pe­riod if both par­ties had a mu­tual agree­ment. This deed was duly stamped and reg­is­tered by the par­ties. A month be­fore ex­piry of the ini­tial term of three years, lessee Y in­ti­mated lessor X of his in­ten­tion to con­tinue rent­ing the prop­erty. Lessor X agreed to re­new the lease of his prop­erty for an ad­di­tional term of three years. Lessee Y in­sisted that as the term of orig­i­nal lease deed had ex­pired, the par­ties should ac­cord­ingly ex­e­cute a new lease deed. How­ever, lessor X was of the opin­ion that as the orig­i­nal lease deed had al­ready been duly stamped and reg­is­tered and as the par­ties shared a good re­la­tion, a sim­ple let­ter of re­newal of lease would suf­fice.

Ac­cord­ingly, lessor X is­sued a let­ter to lessee Y con­firm­ing that the lease term stood re­newed for an ad­di­tional term of three years. The let­ter also stip­u­lated that the lessee’s du­ties and obli­ga­tions would con­tinue to re­main the same as con­tained in the orig­i­nal lease deed, sub­ject to escalation of rent. Un­for­tu­nately, af­ter a few months, re­la­tions be­tween the par­ties soured. Lessee Y sub­se­quently ap­proached the courts for re­lief. In court, the par­ties were asked to pro­duce all orig­i­nal doc­u­ments ev­i­denc­ing lease of the dis­puted prop­erty. The par­ties sought to ad­mit the orig­i­nal lease deed and the ac­com­pa­ny­ing let­ter of re­newal. How­ever, the court re­jected ad­mis­sion of the orig­i­nal lease deed in ev­i­dence on the grounds that the term of lease deed had ex­pired and that the doc­u­ment was no longer valid. The court also re­jected ad­mis­sion of the let­ter of re­newal in ev­i­dence on the grounds that ap­pli­ca­ble stamp duty had not been paid and the doc­u­ment had not been duly reg­is­tered.

Prop­erty dis­putes in lease trans­ac­tions are com­mon­place. In the above case, the par­ties jeop­ar­dised their in­ter­ests by not ex­e­cut­ing proper le­gal doc­u­ments for ef­fec­tu­at­ing re­newal of the lease. First, as the ini­tial lease deed had ceased to be valid, the par­ties should have ex­e­cuted a new lease deed for the new term. In sev­eral judg­ments, the courts have held that re­newal of a lease ac­tu­ally amounts to a fresh lease. In the case of Delhi Devel­op­ment Author­ity v. Durga Chand Kaushik (1973), the Hon’ble Supreme Court had ob­served that a re­newal of a lease is ac­tu­ally the grant of a new lease in all respects. It is called a ‘re­newal’ of lease sim­ply be­cause the term pos­tu­lates the ex­is­tence of a prior lease for the same prop­erty.

Sec­ond, un­der the In­dian Reg­is­tra­tion Act, 1908, the lease deed of a prop­erty given from year to year or for a term ex­ceed­ing one year, or re­serv­ing yearly rent re­quires com­pul­sory reg­is­tra­tion. Merely ex­e­cut­ing let­ters or is­su­ing in­for­mal no­tices for ex­ten­sion or re­newal of lease will not cre­ate a valid lease in the ab­sence of a reg­is­tered lease deed. In the above case study, as the par­ties sought to cre­ate a lease for a term ex­ceed­ing one year, they were re­quired to ex­e­cute a doc­u­ment which was duly stamped and reg­is­tered. With­out such a doc­u­ment the ten­ancy can­not be said to have been re­newed and should be con­sid­ered ter­mi­nated. In a month-to-month ten­ancy, both par­ties have the right to ter­mi­nate ten­ancy at any time sim­ply af­ter giv­ing a ter­mi­na­tion no­tice.

Third, a doc­u­ment which re­quires com­pul­sory reg­is­tra­tion by law but is not ac­tu­ally duly reg­is­tered by the par­ties is in­ad­mis­si­ble as ev­i­dence in courts. Cases where courts have re­ceived an in­stru­ment that is not duly stamped or reg­is­tered as ev­i­dence are few and far be­tween. To se­cure one’s rights and pro­tect one’s in­ter­ests in cre­ation of an ini­tial lease and re­newal of a lease, par­ties must bear th­ese is­sues in mind.


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