MODULE 07

Determination of lease

Determination of lease means termination of the contract of lease. After the determination of lease,
the legal relation between the lessor and lessee comes to an end. Section 111 deals with the various
situations in which a lease is determined. Section 111 of the Transfer of Property Act, 1882 reads as
follows:

Determination of lease.—A lease of immoveable property determines—

(a) by efflux of the time limited thereby;

(b) where such time is limited conditionally on the happening of some event—by the happening of
such event;

(c) where the interest of the lessor in the property terminates on, or his power to dispose of the same
extends only to, the happening of any event—by the happening of such event;

(d) in case the interests of the lessee and the lessor in the whole of the property become vested at the
same time in one person in the same right;

(e) by express surrender; that is to say, in case the lessee yields up his interest under the lease to the
lessor, by mutual agreement between them;

(f) by implied surrender;

(g) by forfeiture; that is to say, (1) in case the lessee breaks an express condition which provides that,
on breach thereof, the lessor may re-enter; or (2) in case the lessee renounces his character as such
by setting up a title in a third person or by claiming title in himself; or (3) the lessee is adjudicated an
insolvent and the lease provides that the lessor may re-enter on the happening of such event; and in
any of these cases the lessor or his transferee gives notice in writing to the lessee of his intention to
determine the lease;

(h) on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property
leased, duly given by one party to the other.

A lease may be determined in the following situations:

 By Lapse of Time

At the expiration of the time period a lease of immovable property comes to an end. This is known
as determination by lapse of time. There is no requirement of any notice or formality for the
determination of the lease. A lease made for an indefinite period does not mean that his heirs will
have interest in the property unless the agreement has words that indicate a hereditary interest.

 By happening of Specified Event

Illustration

a. A lease shall come to an end if the lessee dies before the expiry of ten years, the time till
which the lease was made.

 By termination of Lessor’s Interest

When the lessor has a limited interest in the property then with the termination of the lessor’s
interest, the lease also comes to an end. If a lessee sublets the property, the sublease comes to an
end upon the death of the lessee.

In the case, Atyam Veeraju v. Pechettti Venkamma, the Supreme Court held that the lease granted
by the manager of the temple comes to an end with the expiry of the office of the manager or his
successor.

 By Merger

In simple terms, in a merger, a greater estate coincides with a lesser estate (the lesser estate is said
to be merged in the greater) and meets in one and the same right and in the same person, without
any intermediate estate. This doctrine is applicable only when the entire interest of both the lessor
and the lessee becomes vested in the same person.

In Parmeshwar Singh v. Sureba Kuer, it was held that the doctrine of merger is only applicable in the
case where the entire interest of the lessor and the lessee becomes vested in the same person and
in the same time.

 By Express Surrender

In surrender, the smaller interest unites with the larger interest. It becomes effective at once and the
lease is determined immediately. The surrender of the estate may be express or implied.

The lessee’s right to enjoyment of the property reverts back to the owner when he vacates the
property before the expiry of the month.

 By Implied Surrender

In simpler words, it means that when a lessee accepts the same property already leased to him by
the lessor, there is implied surrender of the former lease. If the surrender takes place by the
operation of law, it is implied surrender.

 By Forfeiture

It is another mode for the determination of the lease. If the lessee losses the right to use the
property by his own fault, forfeiture is said to take place. Notice is mandatory for the forfeiture.
This clause provides that a lease terminates by forfeiture in the following circumstances:- (a) in the
case lessee breaks on express condition which provides that on breach of it, the lessor may re-enter
the property, or (b) in case the lessee renounces his character as such by setting up a title in a third
person or by claiming title in himself, or (c) the lessee is adjudicated an insolvent and the lease
provides that the lessor may reenter on the happening of such event.

 By expiry of notice to quit

When there is a requirement to terminate the lease, then the lease is determined after the expiry of
the notice to quit. When the lease is for year to year, the notice expires after six months and when it
is for month to month, the notice expires after 15 days. It is not mandatory to state any ground for
the notice to quit.

Notice to quit and its effects

A formal statement that is issued to the lessee if the lessor desires to end the lease agreement
whether on the grounds as specified under Section 106 or 111 of the Act, is known as a Notice to
quit. The lease can be forfeited as mentioned in the sub-clause (g) of Section 111, by accepting the
notice to quit.

Section 112 of the Act states that if the lessor accepts any rent from the lessee after initiating the
process of termination of the lease on the grounds of forfeiture, it will be assumed that the notice to
quit has been waived and the lease still exists.

Section 113 of the Act, provides the ways, i.e., expressly or impliedly in which a notice can be
waived.

1. Impliedly Waiver of notice to quit: When a lessor issues notice to quit to the lessee and on
the expiry of that notice, another notice is issued to quit to the lessee by the lessor. The first
notice to quit is impliedly waived.

2. Express Waiver of notice to quit: The acceptance of rent by the lessor from the lessee after
the notice to quit has been served is called expressly waived.

Illustrations

 A, the lessor, gives B, the lessee, notice to quit the property leased. After the expiry of the
notice, the lessor accepts the rent by B. The notice in this case is waived.

 A, the lessor, gives B, the lessee, notice to quit the property leased. After the expiry of the
notice, the lessee remains in the possession of the property. A issues another notice to quit
to B. Here, the first notice to quit is impliedly waived.

Kinds of Lease

The rights of different properties are transferred through different types of lease in property law.

It is important to know which lease is used for what kind of asset. The types of the lease in property
law are as follows:
  Financial lease: This kind of lease is not reversed and is permanent. In this type, the property
rights are transferred for a long time after property document verification. The lessee bears
the burden of any charges or liability or property after the transaction is complete. These are
mostly done for long durations, and thus the parties may consider taking legal consultancy
services.

Example: A person may have asked a friend or relative or any other individual to look after their
farm, grow crops, and maintain the land for a longer period. It is then called a financial lease.

 Operating lease: This type of lease in property law is contractual for a short period after the
document verification, and the lessee bears no burden to maintain or manage the property
in any way. The entire management is done by the Lessor. In this type of lease in property
law, services are rendered for a shorter period within the law provisions and regulations.

 Sales and leaseback leasing: In this type of lease in property law, the Lessee is selling the
property to the Lessor for an agreement in advance that states are leasing back the assets
for a fixed duration. It is also called a Bipartite lease.

 Direct lease: This type of lease in property law is Tripartite and can be used commercially or
non-commercially.

It includes parts and equipment suppliers, Lessor, and Lessee. They form a mutual contractual
agreement where additional clauses can be implemented according to the requirements.

 Single investor lease: The lessor has to clear and arrange cash for financing their asset
through debt or equity. This type of lease in property law means the lessee is not
accountable for any defaults by the lessor. The lender takes action against the Lessor only
who has defaulted on any payment.

 Leveraged lease: In this type of lease in property law, three parties are involved who form
the contractual agreement and act accordingly.

They are Lessor, Lessee, and the lenders.

Here, the Lessor has to arrange for the equity, and the lender or the financier finances the debt as
per rules and regulations in these types of the lease in property law.

 Domestic lease: The type of lease in property law that is made within the country is called a
domestic lease. It is not outside our country’s area or bounds and can function only within it.

 International lease: Any lease accommodation outside our country is known as an

Two Types of the International lease are available:

1. Cross-border lease and

2. Import lease.

When the equipment seller or provider lives in a different country, it is called an import lease.If the
Lessor and lessee are in different countries, then it is a cross-border lease.