Leasing

Leasing refers to a contractual arrangement where one party (the lessee) obtains the right to use an asset from another party (the lessor) for a specified period, in exchange for periodic payments. This arrangement is common in scenarios where acquiring the asset outright may be financially prohibitive. Leasing is particularly common with assets like real estate, vehicles, and equipment.

Definition

• Lessor: The owner of an asset who allows another person, known as the lessee, to use the asset in exchange for rent.
• Lessee: The person who uses an asset owned by another person, known as the lessor, for a specified period by paying some periodic rent as per the terms of an agreement.

Duties and Liabilities of the Lessee

• Pay rent on time.
• Use the leased property according to the lease contract and for its usual and ordinary purpose.
• Take care of the leased property as a person of ordinary prudence would take care of their own property, and do ordinary maintenance and petty repairs.
• Allow the lessor or their agent(s) to inspect the leased property at a reasonable time.
• Not make alterations or additions to the leased property without the consent of the lessor.
• Be liable for any loss or damage caused to the leased property by their own fault or by the fault of persons living with them or their sub-lessee.
• Not be liable for loss or damage resulting from proper use.**
• Be liable to the lessor for any injury resulting from the delay occasioned by their failure to forthwith inform the lessor of the following occurrences:
  • If the leased property is in need of repairs by the lessor.
  • If a preventive measure is required for avoiding a danger.
  • If a third person encroaches on the leased property or claims a right over it.

Rights of Lessee

• Fundamental rights: During the continuing period of the lease, if any accession is made (alluvion for the time being in force), then that accession or area will be taken under such lease.
• Termination of lease: During the continuing period of lease, if the material part of the property is destroyed wholly or partly through by fire, or by flood, or by war, or by the violent act of the mob, or by any other means and it becomes permanently unfit for the use for which it is to be rendered, then it becomes void at the option of the lessee.
• Deduction of expenses: During the continuing period of lease, if the lessor avoids making any repairs to the property which they are obliged to do on a reasonable time even after notice, and if such repairs are done by the lessee themselves, then they have a right to deduct such expenses from the rent or can recover from the lessor.
• Recovery of payments: If the lessor avoids making any such payment which a lessor is bound to make and if such payment is recoverable from the lessee or recovered against the property, then the lessee has a right to recover it from the lessor or can deduct it from the interest of the rent.
• Removal of attachments: Lessee has a right to remove all such things which they have attached themselves to the earth provided that lessee has to leave the property in such a state in which they has received it.
• Right to collect crops: When a lease is of such duration which is not specified by any means, except the fault of the lessee, the lessee or their legal representative have had a right to collect all the crops which are planted, sown or growing by the lessee at the leased property and they are free to ingress and egress from such property.
• Sub-lease or mortgage: Lessee has a right to transfer the property absolutely or any part of their interest by the way of sub-lease or through the mortgage. But, by such reason, a lessee cannot by any means ceases themselves from the liabilities which are attached to the leased property.

Right/Obligation of Lessor

• Recover rent from the Lessee in accordance with the Lease Deed.
• In case of any breach of any of the conditions of the Lease Deed, the Lessor may take the property from the possession of the Lessee.
• Lessor entitled to take the property back from the Lessee on the termination of agreement.
• Lessor entitled to recover the amount of damage caused to the property so leased out from the Lessee.
• Seek compensation from the Lessee on not vacating the property after the termination of the Lease Deed.

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