Lease Deed Registration
This lease deed is designed for leasing or renting of commercial property. Lease deed is a legal document which includes the prescribed terms and conditions under which the property is leased out. Lease deed must contain information about the lessor, lessee, tenure of lease, lease payments payable and other terms to be followed by the lessee and lessor during the lease term. Though the relationship between the land lord and the tenant is cordial most of the time, it is good to have a written rental agreement in place if the relationship turns sour or becomes fraught with complaints and misunderstandings.
Execution of Lease Deed:
The lease deed can be used by the lessor or lessee for leasing out commercial property. It is signed by the lessee and lessor to indicate agreement to the conditions placed by the lessor during the lease terms. It is a legal document having force of law which may be referenced by courts in the event of a disagreement. The lease deed must be printed on a Non-Judicial Stamp Paper. The value of the non-judicial stamp paper or stamp duty payable on the lease agreement would depend on the State and the value of the lease payable as per the lease agreement. Lease deeds can also be registered at a Sub-Registrar Office having jurisdiction over the premises to be leased. Two copies of the lease deed are usually executed, with each party retaining one of the original copies.
Lease Deed Vs Rental Agreement:
Based on the term and tenure of the agreement, the document can be termed as a lease deed or rental agreement. Lease deeds and rental agreements are treated differently under the Laws in force in India.
Lease deeds are agreements entered for letting out of property for more than 12 months. Lease deeds have to abide by strict rent control laws that are mostly favorable to the tenants. Further, rental control laws currently prevent the landlords from overcharging the tenants and protect the tenants from sudden or unfair eviction. Also, the right to ownership of the property gets transferred from the landlords to the tenants in case of a lease agreements, making it harder for the landlord to vacate a tenant. Hence, most landlords do not prefer to enter into registered lease deeds that are over 12 months.
Rental agreements on the other hand are entered into for a period of 11 months, with an option to renew the agreement at the expiration of the agreement. As a rental agreement that is 11 months long is just a license for the tenant to occupy the premises for a short duration, rent control laws do not apply. Further, rental agreements that are 11 months long allow the landlord to take more measures in case of eviction of tenant from the property. Hence, most landlords prefer to enter into a rental agreement that is 11 months long, with an option to renew at the end of the agreement period.
Stamp Duty And Registration Of Lease Deed
Stamp Duty: For the execution of any lease agreement, stamp duty needs to be paid in the manner prescribed under the relevant stamp laws of the State in India where the property is situated. Stamp duty on such instruments is a ‘State Subject’ under the Constitution of India and therefore, the applicable stamp duty / rate may differ from State to State. Generally, stamp duty is chargeable on the basis of the tenure of the lease, the amounts of rent, premium and / or any other form of rent and premium which may be mentioned in the lease agreement proposed to be executed
What happens if one does not pay the requisite stamp duty:
If proper stamp duty is not paid on lease instruments, any government authority competent to take evidence on oath can impound it and send it to the jurisdictional Collector of Stamps for adjudication and payment of proper stamp duty, along with a penalty which may extend up to ten times of the deficient stamp duty amount. Further, if in court proceedings, the court comes to the conclusion that the instrument is not properly stamped with applicable duty, it would not be admissible as evidence until the stamp duty (with penalties) as adjudicated by the Collector of Stamps is fully paid.
When and why should a person register a lease agreement:
In terms of the Transfer of Property Act, 1882 and the Registration Act, 1908, leases of immovable properties from year to year or for any term exceeding twelve months or reserving a yearly rent requires mandatory registration at the office of the Sub Registrar of Assurances having jurisdiction over the location where the property to be leased is situated. In terms of the Registration Act 1908, an instrument which requires mandatory registration, should be registered within a period of four months from the date of its execution. An extension of an additional four months may be granted by the aforementioned Registrar, at his discretion, by levying a penalty of up to ten times the registration fee, provided such non-presentation of the instrument within first four months of execution was due to genuine reasons or unavoidable circumstances.
What would happen if a lease agreement which requires registration is not registered:
If a lease agreement which requires mandatory registration is not registered by the parties, it cannot be received as evidence of any of the agreed terms and conditions affecting the leased property contained therein, whatsoever, except for certain limited purposes