Legal Guide

What are the different types of the Lease in Property Law?

by Bhavya Choudhary · 4 min read

Types of the lease in property law

Introduction

  • There are different kinds of leases used for different property transactions. These economic transfers are made for assets from one party to another. These can be used for any field, whether commercial, non-commercial, or personal.
  • This is made so that one individual can use another’s the property for a specified duration as stated in the contract for the exchange of money. There are different types of leases in property law as per the Transfer of Property Act 1882.
  • A lease is any property owned by an individual who can lease it at their will by entering into a contract. This property is usually immovable and can be charged accordingly.
  • The process is carried out through a promise of payment in return. The person can sign different types of a lease in property law and use the benefits.

What is the Meaning of a Lease?

  • A lease is a contractual agreement between two parties where the person who wants to lease their immovable property can use the transfer and transaction printed on a document which is then signed by both parties.
  • The property ownership is then enjoyed by the other party for a specified duration, as mentioned in the contract that is signed before it. There are different types of leases in property law that are used for different purposes by commercial or non-commercial sectors.
  • It comes under Section 105 of the Transfer of Property Act 1882. The transferer is known as the lesser, and the transferee is known as the lessee.
  • The transferor accepts the transfer of some exchange against the property leased. The price is often termed as “premium,” and the money given is “rent.”
  • This can also be exchanged for crop shares, stocks, or any other valuables. The amount can be given in full or in instalments as needed by the transferor. They can opt for the other types of lease in property law to fit their requirements. 

Who are Lessor and Lessee?

  • In the contractual lease agreement, the individual who transfers the property is called the Lessor. The person who is the transferee is called the Lessee.
  • They form a mutual contract and sign it after evaluating the terms and conditions involving the property lease. 
  • The person can also choose to use the property to earn profits and share it with the owner.
  • Therefore, a Lease is a formal and contractual relationship between two parties known as the lessor and lessee.
  • The components in the contract of the lease should be acceptable by the Indian Contract Act 1872.
  • The clauses added to the different types of leases in property law should be competent to the Indian Contract Act in every way as per the legal instructions.

Different types of the lease in Property Law

The rights of different properties are transferred through different types of lease in property law. 

It is important to know which lease is used for what kind of asset. The types of the lease in property law are as follows:

  • Financial lease: This kind of lease is not reversed and is permanent. In this type, the property rights are transferred for a long time after property document verification. The lessee bears the burden of any charges or liability or property after the transaction is complete. These are mostly done for long durations, and thus the parties may consider taking legal consultancy services. 

Example: A person may have asked a friend or relative or any other individual to look after their farm, grow crops, and maintain the land for a longer period. It is then called a financial lease.

  • Operating lease: This type of lease in property law is contractual for a short period after the document verification, and the lessee bears no burden to maintain or manage the property in any way. The entire management is done by the Lessor. In this type of lease in property law, services are rendered for a shorter period within the law provisions and regulations. 
  • Sales and leaseback leasing: In this type of lease in property law, the Lessee is selling the property to the Lessor for an agreement in advance that states are leasing back the assets for a fixed duration. It is also called a Bipartite lease. 
  • Direct lease: This type of lease in property law is Tripartite and can be used commercially or non-commercially. 

It includes parts and equipment suppliers, Lessor, and Lessee. They form a mutual contractual agreement where additional clauses can be implemented according to the requirements.

  • Single investor lease: The lessor has to clear and arrange cash for financing their asset through debt or equity. This type of lease in property law means the lessee is not accountable for any defaults by the lessor. The lender takes action against the Lessor only who has defaulted on any payment.
  • Leveraged lease: In this type of lease in property law, three parties are involved who form the contractual agreement and act accordingly. 

They are Lessor, Lessee, and the lenders. 

Here, the Lessor has to arrange for the equity, and the lender or the financier finances the debt as per rules and regulations in these types of the lease in property law. 

  • Domestic lease: The type of lease in property law that is made within the country is called a domestic lease. It is not outside our country’s area or bounds and can function only within it.
  • International lease: Any lease accommodation outside our country is known as an international lease. 

Two Types of the International lease are available:

  1. Cross-border lease and
  2. Import lease.

When the equipment seller or provider lives in a different country, it is called an import lease.

If the Lessor and lessee are in different countries, then it is a cross-border lease.

Conclusion

These are the differences between the types of lease in property law, which are used differently in certain circumstances. The agreement made for a lease is like any other contract made under the regulations of the Contract Act. One must take Legal consultancy services to get the lease agreement drafted.

Making a lease for different purposes might be easier if legal consultancy services are taken because the primary goal is to make it prompt and error-free.

Bhavya Choudhary

Written by

Bhavya Choudhary

Get Expert Legal Advice For

Property Matters

Enter a valid phone number

Related Articles

Hi there 👋!

How can I help you?

whatsapp