Lease Defined, and How a Lease Is Made

In one line

A lease transfers the right to enjoy property for a time in return for rent, and above a year it can only be made by a registered document signed by both sides.

In exam wording: section 105 provides that 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 specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

The definition, broken down

"A transfer of a right to enjoy." Not a transfer of ownership. That single phrase separates a lease from a sale, and it is why the lessor keeps a reversion, the interest that comes back to him when the lease ends.

"Made for a certain time, express or implied, or in perpetuity." A lease must have a term, though it may be implied rather than stated, and a perpetual lease is expressly permitted.

"In consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value." Consideration is essential. It need not be money: a share of the crop, or service, will do. What matters is that something of value is rendered.

"To be rendered periodically or on specified occasions."

The four terms defined in the same section: the transferor is the lessor; the transferee is the lessee; the price is the premium; and the money, share, service or other thing to be rendered is the rent.

That last pair is regularly confused and is worth fixing now. Premium is the lump sum paid for the grant of the lease itself. Rent is what is rendered periodically during it. A lease may have both, one, or, in the case of rent, none if a premium is paid instead.

"Who accepts the transfer on such terms." Acceptance by the lessee is part of the definition, so a lease is bilateral in a way a gift is not.

Lease against licence

A licence is defined by section 52 of the Indian Easements Act 1882 and is taught in [Licences, and Licence against Lease and Easement]. In short, it is a permission to do something on another's land which would otherwise be unlawful, and it creates no interest in the land.

The distinction matters enormously in practice, because a lessee has an interest in the property, has possession, and is protected by rent legislation, while a licensee has none of that and can generally be turned out on reasonable notice.