Transfer of the Lessor's Interest, and Computing the Term
Chapter Forty-Three
Syllabus topic 3.1, "Specific Transfers under the Transfer of Property Act, 1882: Lease [Sections 105 - 117]"
Pages 225 to 228 of 378
In one line
When the landlord sells, the buyer steps into his shoes but the old landlord is not automatically released; and the Act says how to count a lease's term.
In exam wording: section 109 provides that if the lessor transfers the property leased, or any part of it, or any part of his interest in it, the transferee shall, in the absence of a contract to the contrary, possess all the rights and, if the lessee so elects, be subject to all the liabilities of the lessor as to the property transferred so long as he is the owner of it; but the lessor does not, by reason only of the transfer, cease to be subject to the liabilities imposed on him by the lease, unless the lessee elects to treat the transferee as the person liable to him.
Section 109: the lessor's transferee
The rights pass automatically. The transferee gets all the rights of the lessor as to the property or part transferred, so long as he is the owner of it. He can sue for rent, enforce the covenants and take the reversion.
The liabilities pass only if the lessee elects. This is the part students state backwards. The transferee is subject to the lessor's liabilities if the lessee so elects, and the original lessor is not released by the transfer unless the lessee elects to treat the transferee as the person liable to him.
The reason is straightforward. The tenant chose his landlord and took his covenants; he should not have them exchanged for a stranger's, who may be less able to honour them, without his agreement. So the election is the lessee's, and until he makes it he may hold the original lessor to the bargain.
Two protections in the proviso.
Arrears. The transferee is not entitled to arrears of rent due before the transfer. Those stay with the transferor, which is the same rule as section 8.
Payment in ignorance. If the lessee, not having reason to believe that the transfer has been made, pays rent to the lessor, he is not liable to pay it over again to the transferee. This is section 50 wearing a lease's clothes: an honest payer is not made to pay twice.
Apportionment on a partial transfer. Where part only is transferred, the lessor, the transferee and the lessee may determine what proportion of the premium or rent is payable in respect of the part transferred; and if they disagree, the determination may be made by any Court having jurisdiction to entertain a suit for possession of the property leased.
Section 110: computing the term
Three short rules, each of which decides real disputes.
Transfer of the Lessor's Interest, and Computing the Term
Exclusion of the first day. Where the time limited by a lease is expressed as commencing from a particular day, that day is excluded in computing the time. Where no day of commencement is named, the time begins from the making of the lease.
Duration of a lease for a year or years. Where the time limited is a year or a number of years, then in the absence of an express agreement to the contrary, the lease lasts during the whole anniversary of the day from which the time commences.
Option to determine. Where the time is expressed to be terminable before its expiration, and the lease omits to mention at whose option it is terminable, the lessee, and not the lessor, shall have that option.
That third rule is the examinable one, and the reason for it is worth stating. A break clause silent as to who may use it is construed against the grantor of the lease and in favour of the tenant, on the ordinary principle that a document is read against the person who put it forward and who reserved the right.
A worked example
Damini lets a shop at Beed to Eknath for five years "commencing from 1 April 2026", with a clause that the lease may be determined at the end of the third year. Two years in, she sells the shop to Farhan and tells nobody.
Computing the term. Under section 110 the first day, 1 April 2026, is excluded, and the lease being for a number of years, it lasts through the whole anniversary of the day from which the time commences.
The break clause. It does not say whose option it is. Section 110 gives it to Eknath, the lessee, and not to Damini.
Farhan's rights. Under section 109 he possesses all Damini's rights as to the shop while he owns it, so he may collect the rent and enforce the covenants.
Farhan's liabilities. He is subject to the lessor's liabilities only if Eknath so elects. Until Eknath elects, Damini remains liable on the lease, including the covenant for quiet enjoyment. The transfer alone does not release her.
Arrears. Two months' rent was unpaid when the shop was sold. Farhan is not entitled to it; it remains Damini's to recover.
A payment in ignorance. Not knowing of the sale, Eknath pays the next month's rent to Damini. He is not liable to pay it again to Farhan.
A partial transfer. Suppose Damini had sold only the rear half. She, Farhan and Eknath may agree what proportion of the rent is attributable to that half, and if they cannot agree, a Court with jurisdiction to entertain a suit for possession may decide it.
Transfer of the Lessor's Interest, and Computing the Term
What it does NOT mean
A transfer does not release the lessor. He stays liable unless the lessee elects to treat the transferee as the person liable.
The liabilities do not pass automatically. Only the rights do; the liabilities depend on the lessee's election.
The transferee gets no arrears. Rent due before the transfer stays with the transferor.
A tenant who pays in ignorance is not penalised, and the test is whether he had reason to believe the transfer had been made.
The day of commencement is not counted.
A silent break clause is not the landlord's. Section 110 gives the option to the lessee.
Distinctions
| Passes to the lessor's transferee | Stays with the lessor | |
|---|---|---|
| Rights under the lease | Yes, while he owns the property | |
| Liabilities under the lease | Only if the lessee elects | Yes, unless the lessee elects otherwise |
| Arrears of rent due before the transfer | No | Yes |
| Rent paid in ignorance of the transfer | Cannot be claimed again | Validly received |
| Section 110 rule | Effect |
|---|---|
| Term expressed to commence from a day | That day is excluded |
| No day named | Time runs from the making of the lease |
| Term of a year or years | Lasts through the whole anniversary of the commencing day |
| Break clause silent as to whose option | The lessee's |
Quick revision
- s.109: the lessor's transferee takes all the rights while he owns the property; the liabilities pass only if the lessee elects, and the lessor is not released unless the lessee elects to treat the transferee as liable.
- Proviso: no arrears to the transferee; a lessee who pays the lessor without reason to believe in the transfer need not pay again.
- On a partial transfer, the three of them may apportion the rent, and a Court may do so if they disagree.
- s.110: exclude the day of commencement; where none is named, time runs from the making of the lease; a lease for a year or years lasts through the whole anniversary; and a break clause silent as to whose option belongs to the lessee.
Test yourself
1. Does the lessor's transferee become liable on the lease automatically? No. He is subject to the lessor's liabilities only if the lessee so elects, and the lessor does not by reason only of the transfer cease to be liable unless the lessee elects to treat the transferee as the person liable to him.
2. Can the transferee recover rent that fell due before the transfer? No. The proviso to section 109 denies him arrears of rent due before the transfer.
3. A tenant, unaware of the sale, pays rent to his old landlord. Must he pay the buyer as well? No, provided he had no reason to believe the transfer had been made. The proviso protects him from paying twice.
Transfer of the Lessor's Interest, and Computing the Term
4. A lease is expressed to commence from 1 July. Is 1 July counted? No. Section 110 requires the day of commencement to be excluded in computing the time.
5. A break clause does not say who may exercise it. Who may? The lessee, and not the lessor, under the third rule in section 110.
6. Part only of the leased property is transferred and the parties cannot agree on the rent for that part. What happens? Any Court having jurisdiction to entertain a suit for possession of the property leased may determine what proportion of the premium or rent is payable in respect of the part transferred.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.