Section 106 of the Transfer of Property Act of 1882 deals with the duration of certain leases in the absence of a contract. According to this section, a six-month notice period should be served by the lessor or lessee for immovable property. This clause is applicable on properties used for agricultural and manufacturing purposes. For a lease of immovable property for any other purpose, a 15-day notice should be served by the lessor or lessee. The notice should be a written piece of communication, expressing the intention to terminate the lease and must end on a day corresponding to the end of the tenancy period
Introduction
A transfer of property is a gift, sale, mortgage, lease or exchange of immovable property from the owner to another living person, who can make use of the land or enjoy the possession of land for a period of time or permanently. In other terms, transfer of property is the act of transferring property from one person to another.
the term ‘lease’, which refers to the transfer of property from one person to another in exchange for money, for a set period of time. Without selling the property, another person can utilise it as his own property for the duration of the agreement. Even if the owner’s property is leased to someone else, the owner will always be the owner. For a fixed period of time, the other person may utilise that property as his own. The parties’ agreement might be written or verbal in their contract.
Section 106 of the Transfer of Property Act, 1882 governs the tenure of leases in the absence of a documented contract or local practice. Let us go through some more details concerning lease under the Transfer of Property Act of 1882.
Essential elements of lease under Section 105 of Transfer of Property Act, 1882
Section 105 of the Transfer of Property Act of 1882 addresses the essential elements of a valid lease of immovable property.
The parties
There are two parties in a lease: the lessor and the lessee. The word “lessor” refers to the party, who transfers the immovable property, i.e. the owner or transferor. The word “lessee” refers to the person, who receives the property from the owner, also known as the holder of the property or the transferee.
The demise
The term “demise” implies to transfer property by lease or to give a property at lease. It is the transfer of immovable property from the lessor to the lessee through a lease. The property obtained from the owner is enjoyed by the lessee. It is the right to enjoyment known as demise.
The term (duration)
The duration of time is limited to the time indicated by the owner or lessor. The lessor specifies a time frame for transferring his immovable property for lease. It is entirely up to the owner to reach an agreement with the lessee for a specific span of time, to use or enjoy a hold of his property.
The consideration
The owner fixes the lease price, which is known as the premium, and the money or value, contribution, service, or other things that are delivered is known as rent. The immovable property is leased for a certain amount, determined by the owner as the consideration. Consideration is the price to be paid or the promised amount to be given to the transferor on a regular or specified basis by the transferee.
Agreement to lease
The lease agreement is a deed between two parties, the lessor and the lessee, who both enter into a lease agreement. The lessor is the person who rents out his immovable property to the lessee on a monthly or annual basis for a fixed cost that the owner has agreed to or set. Under this agreement, the owner retains ownership of his property but transfers it to the other person for his use or enjoyment in exchange for a premium or rent. It is up to the parties whether the agreement is written or implied. The owner may establish the rate of premium for the immovable property.
For example: When ‘A’ leases his house to ‘B’ for a year at a payment of Rs.50,000. This is an agreement between ‘A’ and ‘B.’ As a result, ‘A’ does not lose ownership throughout this one-year period.
Duration of certain leases : Section 106 of Transfer of Property Act, 1882
In the absence of a formal contract or local practice, Section 106 of the Transfer of Property Act, 1882 governs the lease. There are two uses, agricultural and manufacturing, that are made to be assumed to lease on a year-to-year basis and can be terminated by either the lessor or the lessee with six months’ notice. If it is for any other reason, it will be treated as a lease from month to month basis by giving 15 days’ notice.
Sample notice under Section 106 of the Transfer of Property Act
For owners or legal counsellors, it is essential to include key details when drafting a notice under Section 106. Particulars such as the date of the notice, names of parties, a description of the property, lease terms, and the termination date must be mentioned in the notice. Here is a sample format:
[Owner’s name]
[Owner’s address]
[City, State, PIN code]
[Date]
[Tenant’s name]
[Tenant’s address]
[City, State, PIN code]
Dear [Tenant’s Name],
Subject: Termination of tenancy for [Property address]
This notice is to inform you that your tenancy of the property at [Property address] will be terminated effective from [Termination date]. You are requested to vacate the premises by the mentioned date.
Thank you for your cooperation.
Sincerely,
[Owner’s name]
[Signature]
Supreme Court judgment on Section 106 of the Transfer of Property Act
A public trust, led by Shri Ramanand rented out two shops on an oral Rental agreement to Nand Lal and Jitendra Rai. The trust sent lease termination notices under Section 106 of the Transfer of Property Act after the tenants stopped paying rent. When the trust filed an appeal in the court, it was dismissed because it was not registered under the Rajasthan Public Trust Act. In the initial appeal, the court ruled against the trust, emphasising the importance of the trust’s registration.
Later, the Supreme Court allowed the appeal against the lower court’s judgment. It clarified that while the suit was initially barred due to the trust’s unregistered status, the later registration allowed it to proceed with the suit. The case was handed to the Trial Court to be decided on its merits, and justice was served in favour of the trust. The case highlights the importance of registration and application of Section 106 of TPA in lease terminations
Notice to terminate the lease (Section 106 of the Transfer of Property Act,1882)
In the absence of a written lease contract, the lessee will be given 6 months’ notice to terminate the lease, if it is used for agricultural or manufacturing purposes on a yearly basis. In the case of other purposes on a monthly basis, the lessee will be given 15 days’ notice to terminate the lease. The notice period will begin from the date when the lessee receives the notification.
Shanthi Prasad Devi and Anr. v. Shankar Mahto and Ors. (2005)
The appellant secured possession on lease for the purpose of running a petrol pump for a term of fifteen years under a registered lease deed in this case. Although the lease was for a year, the payments were made monthly. After the period of fifteen years has passed, the lessee issued a notice under Section 106 of the Transfer of Property Act of 1882, to renew the lease deed. Even after the lease time had expired, the lessee continued to pay the rent, which the lessor accepted. The lessee took the acknowledgement of rent as an assent to the notice and remained on the premises. The Supreme Court concluded that Section 106 of the Transfer of Property Act, 1882, was not required for the renewal of the deed, hence, the appellant was ordered to depart the premises within two months in the same condition.
FAQs
What is the notice under Section 106 of TPA?
A notice under Section 106 of TPA is a written communication sent by the landlord to terminate a lease.
What are the tenant's rights under Section 106 of TPA?
Tenants have the right to receive prior information about the lease termination.