Explain the rights and obligations of lessor and lessee.

Section 108 of the Transfer of Property Act, 1882 sets out the rights and obligations of both the lessor and the lessee with meticulous detail. Before examining these individually, a prefatory point must be kept in mind: the section itself opens with the saving clause "in the absence of a contract or local usage to the contrary." This means that every rule under this section is a default rule — the parties are entirely free to modify or exclude them by agreement. Where the parties have laid down their own terms, Section 108 steps aside.

The Obligations of the Lessor

Duty of Disclosure — Clause (a). The first obligation is rooted in the principle of good faith. The lessor is bound to disclose to the lessee any material defect in the property with reference to its intended use — but only where the lessor is aware of it and the lessee is not, and where ordinary care would not have revealed it. The law thus distinguishes between patent defects, which are visible upon inspection, and latent defects, which lie hidden beneath the surface. For the former, the lessee is expected to use his own eyes. It is only latent defects that fall upon the lessor to reveal. Importantly, this duty extends only to defects affecting the use and enjoyment of the property; there is no corresponding statutory duty to disclose defects in title.

Duty to Deliver Possession — Clause (b). The transfer of a right to enjoy the property would be meaningless without the delivery of actual possession. Accordingly, the lessor is bound, on the lessee's request, to put him in possession of the leased property. This obligation arises only upon the lessee's request and not automatically from the mere execution of the lease deed. If the lessor fails, the lessee may sue for possession, for damages, or to recover back any advance rent paid. Where possession of only a part of the leased premises is delivered, the lessee has the option either to repudiate the lease entirely or to retain that part upon paying rent proportionately. The burden of proving that possession was delivered lies upon the lessor.

Covenant for Quiet Enjoyment — Clause (c). This is perhaps the most important obligation that the law places on a lessor. He is deemed to covenant that if the lessee pays his rent and performs the contracts binding on him, the lessee shall hold the property during the time limited by the lease without interruption — from the lessor, his heirs, assigns, or anyone claiming through him. This covenant runs with the land, meaning it enures not only to the original lessee but to every person in whom the leasehold interest becomes vested. A lessor cannot derogate from his own grant; any interference with the lessee's quiet enjoyment by the lessor himself amounts to a breach. Where quiet enjoyment is disturbed, the lessee is entitled to damages equivalent to the present value of the prospective profit of which he is deprived.

The Rights of the Lessee

Right to Accretions — Clause (d). If during the continuance of the lease any addition is made to the property — whether by natural forces such as alluvial deposit, or otherwise — such accession is deemed part of the lease and the lessee is entitled to enjoy it. However, this right is one of enjoyment only; the lessee does not acquire ownership. Where a lessee encroaches on adjoining land and acquires title thereto by adverse possession, he is still bound to surrender it to the lessor at the expiry of the term.

Right to Avoid on Destruction — Clause (e). A lease is premised upon the property being available for use. Where any material part of the property is wholly destroyed or rendered substantially and permanently unfit for the purpose for which it was let — by fire, flood, tempest, violence of an army or mob, or other irresistible force — the lessee may avoid the lease at his option and it becomes void. Two conditions are essential: the destruction must be substantial and of a permanent character, and it must not have been caused by the lessee's own wrongful act or default. The option belongs exclusively to the lessee and the lease does not become void automatically upon destruction. The courts have held that destruction of a building on the leasehold land does not by itself destroy the tenancy right in the land.

Right to Repair and Deduct — Clause (f). The lessor is not, by default, bound to carry out repairs — that obligation arises only where he has agreed to do so. Where such an agreement exists and the lessor neglects to make repairs within a reasonable time after notice, the lessee may himself carry out the necessary repairs and either deduct the expenses with interest from the rent or recover them from the lessor. However, the lessee cannot terminate the tenancy on this ground alone. The duty to establish by evidence that the lessor was contractually bound to repair lies upon the lessee.

Right to Make Obligatory Payments — Clause (g). As the owner of the property, it is primarily the lessor's duty to pay government assessment, land revenue, and other dues recoverable against the property. Where the lessor neglects this and the amount, if unpaid, would be recoverable from the lessee or against the property, the lessee may make the payment himself and recover it from the lessor or deduct it with interest from the rent. The payment must be compulsory and not voluntary — the lessee must act under protest to maintain his right of reimbursement.

Right to Remove Fixtures — Clause (h). The general rule of property law is that anything attached to the earth becomes part of it. Section 108(h) carves out a significant exception in favour of the lessee: he may remove, at any time whilst he is in possession, all things which he himself has attached to the earth — provided he restores the property to the condition in which he received it. This right extends even after the determination of the lease, as long as possession continues. Once he parts with possession, however, the right is extinguished. Trees planted by a tenant pass to the landlord on the expiry of the lease; they cannot be removed as fixtures.

Right to Crops — Clause (i). Where a lease of uncertain duration is determined by means other than the lessee's own fault, the lessee or his legal representative is entitled to all crops planted or sown by him and growing on the land at the time the lease determines. He also has the right of free ingress and egress to gather and carry those crops. This clause is particularly significant in agricultural tenancies where the determination of the lease may coincide with a growing season.

Right to Assign — Clause (j). Since a lease creates an interest in property, that interest is both heritable and transferable. The lessee may transfer the whole or any part of his interest absolutely, by way of mortgage, or by sub-lease — and his transferee may transfer it again. Crucially, the lessee does not, by reason only of such transfer, cease to be subject to his contractual liabilities to the lessor. He remains answerable to the lessor unless and until the lessor accepts the assignee as his direct tenant. This principle was applied by the Supreme Court when it held that the original lessee's liability to the lessor continues even after assignment, unless the lessor recognises the assignee and treats him as the tenant. There are, however, exceptions — a tenant with an untransferable right of occupancy, the farmer of an estate in revenue default, and the lessee of a court-administered estate cannot assign their interests.

The Obligations of the Lessee

Duty to Disclose — Clause (k). Just as the lessor must disclose latent defects, the lessee is correspondingly bound to disclose to the lessor any fact known to him — unknown to the lessor — which materially increases the value of the interest the lessee is about to take. The classic illustration is the discovery of a gold mine or mineral deposit beneath the leased land. Failure to disclose does not amount to fraud, so the lessor cannot terminate the lease on that ground, but he may sue the lessee for damages.

Duty to Pay Rent — Clause (l). The lessee is bound to pay or tender the premium or rent at the proper time and place to the lessor or his authorised agent. The obligation begins from the moment possession is delivered, not from the date of signing the lease deed. In Surinder Singh Arora v Rajeev Dhingra, where the tenants failed to pay rent for a year in breach of a registered lease which contained a forfeiture clause for two months' consecutive default, the court directed delivery of possession to the lessor. Where a property is jointly leased to several persons, payment by one is sufficient for all.

Duty to Maintain — Clause (m). The lessee is bound to keep the property in as good condition as it was in when he was put in possession, and to restore it in that condition on the termination of the lease. Only changes caused by reasonable wear and tear or irresistible force are permitted. He must allow the lessor or his agents to enter at reasonable times to inspect the property and, where any defect is caused by the lessee's own act or default, he must make it good within three months of notice. The lessee is also liable for damages caused by his sub-tenant or agents.

Duty to Give Notice of Encroachment — Clause (n). If the lessee becomes aware of any proceeding to recover the property, or of any encroachment upon it, or any interference with the lessor's rights concerning the property, he is bound to inform the lessor with reasonable diligence. The principle underlying this duty is that the tenant holds possession on behalf of the owner's reversion — it is his obligation to protect what is ultimately the lessor's property.

Duty to Use Property Reasonably — Clause (o). The lessee must use the property as a person of ordinary prudence would use it were it his own. He must not use it for a purpose other than that for which it was leased, fell timber, pull down or damage buildings, work unopened mines, or commit any act destructive or permanently injurious to the property. Where premises let for one purpose are used for a materially different purpose — as where sugarcane juice premises are used for a readymade clothes shop — the lessee is in breach and liable to eviction.

Duty Not to Erect Permanent Structures — Clause (p). Without the lessor's consent, the lessee must not erect any permanent structure on the property — except for agricultural purposes, where such construction is permitted. What constitutes a "permanent structure" is a question of fact. The Supreme Court has given the words a realistic meaning: a structure that is intended to last till the end of the tenancy, and which cannot be removed without causing extensive damage to the remaining structure, qualifies as permanent. Consent need not be prior — it may be given after construction, and prolonged inaction by the lessor on learning of the structure may raise an inference of consent.

Duty to Restore Possession — Clause (q). This is the final and natural counterpart to the lessor's duty to deliver possession. On the determination of the lease, the lessee is bound to put the lessor back into possession of the property. The obligation is upon the original lessee, not upon any sub-lessee, since there is no privity of contract between the sub-lessee and the head lessor. Failure to restore possession makes the lessee liable to pay mesne profits — compensation for use and occupation beyond the permitted term — at the market rate, and the lessor may also claim damages for the cost of evicting a sub-tenant placed in possession by the lessee.