Section 107 of the Transfer of Property Act, 1882 - Leases How Made

Section 107 of the Transfer of Property Act, 1882 prescribes how a lease of immovable property may legally be created. It distinguishes leases that require a registered instrument from other leases that may be created by a registered instrument or an oral agreement accompanied by delivery of possession. The provision should be read with the Registration Act, 1908, and any applicable State law.

Section 107 - Statutory provisions

107. Leases how made. A lease of immoveable 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 immoveable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.

Where a lease of immoveable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee:

Provided that the State Government may, from time to time, by notification in the Official Gazette, direct that leases of immoveable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.

Official source: Transfer of Property Act, 1882 (India Code).

Meaning of important terms

Lease: Under Section 105, a lease transfers the right to enjoy immovable property for a certain time, express or implied, or in perpetuity, for consideration. The transferor is the lessor and the transferee is the lessee. A price paid for the transfer is called a premium; recurring consideration such as money, crops or services is rent.

Registered instrument: A written lease instrument registered under the applicable registration law. Section 107 also requires execution by both lessor and lessee when a lease is made through a registered instrument.

When is registration compulsory?

Under Section 107, a registered instrument is necessary for a lease that:

runs from year to year;
has a fixed term exceeding one year; or
reserves a yearly rent.

These are alternative grounds: satisfying any one is enough. Section 17(1)(d) of the Registration Act, 1908 likewise provides for compulsory registration of such leases, subject to legally applicable exemptions or special provisions.

Leases not falling in these categories

Other leases may ordinarily be created either by a registered instrument or by an oral agreement accompanied by delivery of possession. The fact that a lease is for 11 months does not by itself override other applicable laws, including State rent-control, stamp-duty and registration requirements. A written but unregistered lease cannot automatically be treated as an oral lease merely because possession was delivered.

Execution by both parties

If a lease is made by a registered instrument, the lessor and the lessee must both execute it. If more than one instrument constitutes the registered lease, each must be executed by both parties as required by Section 107.

State Government notification

The proviso permits a State Government, through an Official Gazette notification, to allow specified classes of leases outside the compulsory-registration categories to be made by an unregistered instrument or by oral agreement without delivery of possession. Whether such a relaxation applies must be checked against the relevant State notification; it should not be assumed to operate generally.

Section 106 - Duration and termination

Section 106 supplies default rules for duration and notice of termination where no contrary contract, local law or usage applies. It does not eliminate the formalities prescribed by Section 107.

Sections 17 and 49 - Registration Act, 1908

Section 17 identifies documents requiring compulsory registration. Section 49 generally prevents an instrument requiring registration but remaining unregistered from affecting immovable property or being received as evidence of a transaction affecting that property, subject to statutory exceptions including use for certain collateral purposes. The legal effect depends on the document and facts.

Section 108 - Rights and liabilities

Section 108 sets out default rights and obligations of the lessor and lessee, subject to applicable contract and usage.

Section 116 - Holding over

Section 116 addresses the legal effect where a lessee remains in possession after the lease ends and the lessor accepts rent or otherwise assents to continued possession. Mere continued occupation alone does not necessarily establish holding over.

Practical examples

Three-year commercial lease: A registered instrument is required because the term exceeds one year.
Year-to-year tenancy: Registration is required even where no single fixed term exceeding one year is stated.
Short oral letting: Where otherwise legally permissible, an oral agreement accompanied by delivery of possession may create a lease; relevant State requirements must still be examined.

Important: Stamp duty, registration fees, rent-control statutes, State amendments, local laws and the terms of the transaction may impose additional requirements. Section 107 concerns the manner of making leases, not every aspect of their validity or enforceability.