11 MONTH LEASE DEED MUST BE
REGISTERED
The common practice of lease deeds (including rental agreements) between property owners and tenants for 11 months to avoid registering the deed is not the right thing to do. The high court of Karnataka has held that deeds where the term of the lease stated does not exceed one year alaso have to be registered.
The common practice of lease deeds (including rental agreements) between property owners and tenants for 11 months to avoid registering the deed is not the right thing to do. The high court of Karnataka has held that deeds where the term of the lease stated does not exceed one year alaso have to be registered.
In a particular case, the
court held that such unregistered deeds cannot be received as evidence of any
dispute between the tenant and property owner, unregistered deeds will only
serve collateral purpose in courts and not as evidence.
Abdul Rasheed, a tailor
and tenant of Srinivas, a retired district judge, approached the HC against a
lower court order that refused to accept as evidence four unregistered lease
deeds. Justice HG Ramesh probed the question “Whether a lease deed, where the term of lease stated
therein does not exceed one year, requires to be registered under the
Registration Act, 1908”.
In a significant order
that comes as a surprise to common perception of this aspect of law, the
courtheld, “In law, the lease deeds of the afore to be registered and
therefore, such unregistered lease deeds cannot be received as evidence of any
transaction affecting the property.”
Rasheed in his petition
claimed that under the Act, if the term of the lease was less than one year,
there was no need for registration.
Section 107 of the Act
says, “ A lease of immovable 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.” However, the HC order stressed the second paragraph of the section
107 which says, “All other leases of immovable property may be made either by a
registered instrument or by oral agreement accompanied by delivery of
possession.” Section 49 of the Act says that documents that need to be
registered but are not cannot “be received as evidence of any transaction affecting
such property.” The court held that the second paragraph of section makes it
mandatory for lease deeds less than one year to be registered if they are not
just oral. Therefore under section 49, they become inadmissible in court if not
registered.
However, the court gave
liberty to Rasheed to approach the trial court with the same documents
specifically stating that they are for ‘collateral purpose’ only. Therefore
unregistered lease agreements can be used only as collaborative evidence in
court. The order renders most rental agreements invalid as evidence in court
ifa dispute arises between the lessor and lessee.
“Usually in disputes
about rents, the rent receipts are produced as evidence. It is mostly
residential properties that are registered for 11 months. Commercial properties
usually have a longer lease agreement. The order is an eye-opener. In court,
property owners do not produce the lease agreements as they are unregistered.
If it is impounded by the court, they will end up paying 11 times the
stamp duty. This order may lead to a fresh struggle between house owners and tenants.”
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