Law of Registration
The Lease and the Agreement to Lease Distinguished: Present Demise Against a Promise to Grant, and How to Tell Which a Document Is
A lease is a transfer. Section 105 of the Transfer of Property Act, 1882 defines it as a transfer of a right to enjoy the property for a term, and that right is an interest in the land. An agreement to lease transfers nothing: it is a contract that a lease shall be granted, and it stands to a lease as an agreement to sell stands to a sale deed. The distinction decides whether Section 107 and Section 17(1)(d) apply, and it is not settled by what the document is called. A writing that operates as a present demise is a lease however it is headed, and if it falls within the first paragraph of Section 107 it must be registered.
The two compared, and the words that show which one a document is
1. The Two Provisions
Sections 105 and 107, Transfer of Property Act, 1882 105. Lease defined. 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. 107. Leases how made. A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument. All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. Where a lease of immovable property is made by a registered instrument, such instrument shall be executed by both the lessor and the lessee. |
- A lease is a transfer of an interest, which is why Section 17(1)(d) catches it and why a lessee may sue a trespasser as a person interested in the land.
- An agreement to lease creates no interest. It gives the promisee a right to call for a lease, enforceable against the promisor and no one else.
- Section 17(1)(d) mirrors the first paragraph of Section 107 exactly, and contains no monetary threshold.
- Execution by both parties is peculiar to leases. A sale deed is executed by the vendor alone; a registered lease must be signed by lessor and lessee both, because a lease imposes obligations on each.
2. The Two Compared
Agreement to lease | Lease | |
What it does | Binds the parties to execute a lease in the future | Passes a present right to enjoy the property |
The interest | None in the land | An interest in the land, for the term |
Statutory source | The general law of contract, with the Specific Relief Act, 1963 | Sections 105 to 117 of the Transfer of Property Act |
Registration | Outside Section 17(1)(d); but Section 17(1A) applies where Section 53A is relied on | Compulsory if from year to year, exceeding one year, or reserving a yearly rent, Section 17(1)(d) |
Execution by both parties | Not required | Required by the third paragraph of Section 107 where the lease is by a registered instrument |
Possession | Not delivered; if it is, Section 53A may be attracted | Delivered, and the lessee holds as tenant |
Remedy on breach | Specific performance, or damages | The remedies of landlord and tenant under the lease and Sections 108 to 117 |
Determination | By breach, frustration or the terms of the contract | By efflux of time, forfeiture, notice and the other modes in Section 111 |
Stamp duty | Ordinarily nominal, unless possession is delivered | The lease article, calculated on the rent and the term |
Against a third party | None; the promisee has no standing as a tenant | The lease binds a transferee of the reversion |
3. How to Tell Which It Is
The question is whether the document passes a present right to enjoy the property, or only binds the parties to execute a lease later. Courts look at the whole document and at the surrounding circumstances, and the following are the indications that carry weight.
Points to a lease | Points to an agreement |
Words of present demise: "hereby demises", "hereby lets", "hereby grants a lease of" | Words of contract: "agrees to grant", "shall execute a lease", "undertakes to let" |
A fixed commencement date from which the term runs | The term to begin on execution of a future lease |
Delivery of possession on execution | Possession to follow the lease when granted |
Rent reserved and made payable from a stated date | Rent to be as agreed in the lease to be executed |
Execution by both parties, which Section 107 requires of a registered lease | Execution by the lessor alone, or by neither in the form of a deed |
The parties described as lessor and lessee | The parties described as promisor and promisee, or as intending lessor and lessee |
No further document contemplated | The document expressly contemplates a formal lease to follow |
The covenants drawn as the terms of a subsisting tenancy | The covenants drawn as the terms to be embodied in the lease |
⚠ A document contemplating a later lease may still be a present demise The presence of a clause providing that a formal lease shall be executed later is a strong indication, but it is not conclusive. Where the document itself passes the right to enjoy the property, fixes the term and the rent, and puts the lessee into possession, it operates as a lease, and the contemplated formal document is treated as intended merely to record what has already been granted. The consequence is severe: if the term exceeds one year and the document was not registered, it fails as a lease under Section 107 and Section 49, and the parties are left with a month to month tenancy arising from possession and payment of rent. The safe course, where a long lease is intended, is to register the operative document, whatever it is called. |
4. Registration of an Agreement to Lease
1. An agreement to lease is not within Section 17(1)(d), which covers leases, and is not within Section 17(1)(b) either, because it creates no interest in immovable property.
2. Section 17(2)(v) confirms it, excepting a document which merely creates a right to obtain another document which will create an interest.
3. It is optionally registrable under Section 18(f), as a document not required by Section 17 to be registered.
4. Section 17(1A) may apply. It covers documents containing contracts to transfer for consideration any immovable property for the purposes of Section 53A. A lease is a transfer of an interest for consideration, so an agreement to lease under which possession is delivered, executed on or after 24 September 2001, must be registered if Section 53A is to be relied on.
5. Registration is prudent in any event, because a registered agreement gives constructive notice under Explanation I to Section 3 of the Transfer of Property Act and defeats a later transferee's plea of want of notice.
6. An unregistered agreement remains admissible as evidence of a contract in a suit for specific performance, under the proviso to Section 49, and for collateral purposes.
5. Enforcing an Agreement to Lease
- Specific performance is available. Since the amendment of 2018, Section 10 of the Specific Relief Act, 1963 provides that specific performance shall be enforced, subject to Sections 11(2), 14 and 16.
- Readiness and willingness must be pleaded and proved under Section 16(c), and must be continuous.
- Limitation is governed by Article 54 of the Limitation Act, 1963: three years from the date fixed for performance, or from when the plaintiff has notice that performance is refused.
- The decree directs execution of a lease, and under Order XXI Rule 34 of the Code of Civil Procedure the court may execute it through an officer if the defendant will not.
- The lease so executed must itself be registered if it falls within the first paragraph of Section 107; the decree does not dispense with registration of the instrument executed under it.
- Damages are the alternative, and where the agreement was for a commercial letting the measure is the loss of the bargain.
6. The Position of a Promisee in Possession
A person let into possession under an agreement to lease is in a curious position, and it is worth setting out because it is common in practice. He is not a lessee, because no lease has been granted. He is not a trespasser, because he entered with the owner's consent. What he has is a contractual right and, if the conditions are met, the protection of Section 53A.
1. He may plead part performance under Section 53A, which debars the promisor and those claiming under him from enforcing rights against him in respect of the property of which he is in possession.
2. The conditions of Section 53A must be satisfied: a signed writing with ascertainable terms, possession taken in part performance, an act in furtherance of the contract where he was already in possession, and continuous willingness to perform.
3. Section 17(1A) must be satisfied where the agreement was executed on or after 24 September 2001, failing which the shield is not available.
4. Section 53A is a shield and not a sword. It protects his possession against the promisor; it gives him no title, no right to sue a third party, and no standing as a tenant.
5. He may in the alternative be held a tenant by implication, where rent has been paid and accepted, on the reasoning in Anthony v. K.C. Ittoop & Sons, (2000) 6 SCC 394; in that case the tenancy takes its terms from Section 106 and not from the agreement.
6. His safest course is to sue for specific performance and obtain a registered lease.
7. The Parallel With Sale
Agreement to sell and sale deed | Agreement to lease and lease | |
The provision denying an interest | Section 54, third paragraph: a contract for sale creates no interest in or charge on the property | No equivalent express provision; the result follows from Section 105, which makes a lease a transfer |
The mode prescribed | Section 54: only by a registered instrument above Rs. 100 | Section 107: only by a registered instrument for the three categories |
The registration clause | Section 17(1)(b) | Section 17(1)(d) |
The exception for the contract | Section 17(2)(v) | Section 17(2)(v) |
Section 17(1A) | Applies where Section 53A is relied on | Applies on the same terms |
Remedy on breach of the contract | Specific performance under the Specific Relief Act, 1963 | The same |
What the decree produces | A conveyance, which must be registered | A lease, which must be registered if within Section 107 |
8. The Position Stated Shortly
1. A lease is a transfer of a right to enjoy the property for a term, Section 105, and is therefore an interest in the land.
2. An agreement to lease transfers nothing and gives only a right to call for a lease.
3. A lease from year to year, exceeding one year, or reserving a yearly rent can be made only by a registered instrument, Section 107, and must be registered, Section 17(1)(d).
4. A registered lease must be executed by both the lessor and the lessee.
5. An agreement to lease is outside Section 17(1)(d), and outside Section 17(1)(b) by force of Section 17(2)(v); it is optionally registrable under Section 18(f).
6. Section 17(1A) applies where possession is delivered and Section 53A is relied on, for documents executed on or after 24 September 2001.
7. The label does not decide the character of the document; a writing that operates as a present demise is a lease.
8. Words of present demise, a fixed commencement, delivery of possession, rent reserved from a stated date, and execution by both parties point to a lease.
9. A clause contemplating a formal lease later does not prevent the document from being a present demise.
10. An agreement to lease is enforceable by specific performance under Article 54, and the lease executed under the decree must itself be registered.
11. A promisee let into possession may plead Section 53A as a shield, and may be held a tenant by implication whose terms come from Section 106.