Determination of Lease: Manners of Determination and Notice to Quit-Waiver

This article outlines the concept of a lease and the manner of determination of Lease under Indian law.

I. What is Lease and its Determination?

A lease in general terms is the act and the document of transferring the possession of immovable property, like a flat. Under the Transfer of Property Act, 1882 (‘the Act’), it is defined in Section 105 as containing the following ingredients –

• Immovable property
• Transfer of possession by someone who has the ownership
• For a fixed time
• In exchange for a consideration
• With terms and conditions which have been accepted by the people involved

The person making the transfer, i.e., one who has valid ownership title is the Lessor and the one acquiring possession is the Lessee. If the immovable property is taken to be a flat/apartment, the consideration could be the rent, and the terms could be the forfeiture of the security deposit upon any damage to property.

So, what is the determination of a lease? A lease is determined when it comes to an end. The simplest way could be the expiry of the fixed time period, while more complicated manner could be a forfeiture upon declaration of insolvency of the lessee. The various manners in which a lease can be determined have been enumerated in Section 111 of the Act which have been explained below.

II. Manners of Determination of Lease (Section 111)

A lease may be determined in the following ways:

• Efflux of Time: The most straight forward way for a lease with a fixed time specified beforehand is to determine on the expiry of such time. Here, determination occurs automatically when the given date is passed. This cannot take place in an unregistered lease deed. Also, in a lease with a fixed time no notice to quit needs to be served upon the lessee. This aspect shall be dealt with in detail later.
• On Occurrence of a Condition: If the lease agreed to have a term that on the occurrence of an event, it shall determine then on such occurrence, it is deemed to be determined. Say, the land is leased out for restructuring on the basis that the lease comes to an end when the restructuring is finished, or on the expiry of a year whichever is earlier. Here, on the occurrence of the event of a restructuring, the lease is determined.
• Termination of Lessor’s Interest in Property: The person leasing out the property needs to have a valid interest in the property. When the interest of the lessor in the property ends, so does the lease.
• Merger: This clause has also conferred the name ‘Doctrine of Merger’. It simply states that a person cannot be both the Lessor and the Lessee at the same time. The Bombay High Court explained in Ramesh Kumar Jhambh v. Official Assignee, High Court Bombay [1] that if the lessee buys the property from the lessor, the lease comes to a determination as he cannot be the tenant and the landlord. Hence, there cannot exist conflicting interest on a property.
• Express Surrender: The lease is determined when the lessee voluntarily surrenders the possession of the property through an agreement with the lessor. For surrender, possession must be relinquished. No written statement or act is sufficient to constitute it without delivery of possession. However, the act of delivery of possession itself is enough to constitute implied surrender without any written or oral declaration.
• Implied Surrender: As said, the act of relinquishing possession by the lessee implies his surrender. Another instance would be where the parties agree to a new lease and the lessee accepts the same. This determines the existing lease from that time of acceptance. Any other scenario where the new relationship comes to existence with respect to the property while an old relationship continues to exist, the older being incompatible with the new will cease to exist. When the lessee directs his sub-tenant to pay directly to the lessor, it can be an implied surrender. In PMC Kunhiraman Nair v. CR Nagaratna Iyer [2], it was held that if the lessor enters into a lease with a third party and the existing lessee accepts it and delivers the possession accordingly, this will constitute implied surrender.
• Forfeiture: Determination by forfeiture may occur in the three ways listed in this provision (111(g)).
• Breach of an express condition: If the lessee violates a condition expressly agreed upon, and the lease has a term that says the breach of said condition will allow the lessor to claim back possession, then the lease can be determined on such breach. Here, two things are necessary to be shown. One, the fact that the condition in question was in fact violated. Two, that the deed contained a provision for re-entry of the lessor on such breach. In absence of such provision which enables the lessor to claim back possession, the lease is not determined, as held in Nil Madhab v. Narottam [3].
• Renouncement of Character: This is when the lessee denies the fact that the lessor is the true title-holder of the property. That is, the lessee claims that the true owner of the property is not the lessor but a third person or himself. Since a conflict of rights and interests occur over the property, the tenancy becomes liable to be forfeited by the lessor and the lease stands determined. It was said in Guru Amarjeet Singh v. Ratan Chand [4] that this denying of title shall be clear, and relatable to the knowledge of the lessor.

A simple example of this provision is the case of Narendra Vyankrtesh Tambat v. Praveen Kumar Khushalchand Tated [5], where, in an ongoing lawsuit, the tenant came to challenge the title of the landlord on the property. The landlord served the notice of forfeiture of tenancy upon the tenant for the act. It was held that challenging the title in the proceedings was a conscious decision and hence opens up the property for forfeiture.

• Insolvency: If the lessee is adjudicated insolvent by a competent court, then that can be a ground for forfeiture of property, provided that the lease contained a provision to that effect which allows the lessor to reclaim possession if the lessee is adjudicated insolvent. A written notice from the lessor is necessary in this case.
• Expiration of Notice to Quit: A notice may be served by either party to the other for one of these purposes – to determine the lease, to quit and deliver possession, to state the intention of quitting. When the time stated in such notice expires, so does the lease unless another notice is served or extension is given in any other way. Periodic leases which operate on a month-to-month or year-to-year basis are required to operate on notice to quit. Lease with fixed pre-decided terms are not required to, but they may have a condition allowing the party to withdraw from it earlier than the fixed term upon serving a notice. In any case, expiry of notice is the determination of the lease.

In the case Vijay Kumar v. Harbhajan Kaur [6], a lease containing the term that the shop leased would be required to be vacated when the lessor needed it for personal use was held to be proper and the notice served under it was held valid, without requiring the person to prove that she needed the place for personal use.

III. Notice to Quit – Waiver

A little detail is pertinent to be provided on the specific form of notice – a notice to quit served by the lessor on the lessee either under the provision of Section 106 or under any ground in Section 111. It has been stated that the expiry of this notice would mean the determination of the lease. Two aspects remain to be discussed – can it be waived? And what happens if the lessee still doesn’t give up possession?

A notice to quit can be waived either expressly or impliedly by the Lessor. Accepting the rent from the lessee after the notice is served waives the notice. This is an express waiver. If the lessor issues another notice to the lessee on expiry of the first notice, it will be deemed that the first notice is waived. This is an implied waiver. Either way, a waiver of notice to quit means that the lease still exists.

Now, if the case arises that the lessee does not give up the possession after the lease is determined and continues to hold the property, it is not deemed as trespass to the property. This is called ‘sufferance’ and the person becomes a lessee at sufferance. He will be required to compensate the lessor for the use of his property for additional time beyond determination.

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References

[1] AIR 1993 Bom 374

[2] AIR 1993 SC 307

[3] (1890) 17 Cal. 826

[4] AIR 1994 SC 227

[5] AIR 2015 NOC 1279 BOM

[6] AIR 2013 NOC 217 J&K

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