Legality of Sublease Agreement in India

Isha Sharma
May 6, 2023
4 min read

Written by Isha Sharma, Law student

Introduction

An agreement of sublease is a transfer of the lease to a third party by the lessee of the property, completely or partly for the short run, as compared to the period for which the lessee possesses it initially. It is a fresh agreement between the sub-lessee and the lessee. Here the fundamental lessee becomes the sublessor.

When a tenant subleases an estate, the primary tenant is nevertheless accountable for the liabilities specified in the contract, for instance, the payment of rental charges every month. Thus, the privity of the contract does not exist in the sublease contracting parties.

Sub Leasing in India

The landlord of the property subject could prevent a leaseholder from subleasing the property. However, in India, subleasing with the assent of the owner of the property is legal. When the agreement permits such sublease, the tenant can sublease part of the property to a third party. If a tenant who is a party to the lease agreement re-rents an area, a fragment or the complete property to another, it is denoted as subletting or subleasing. The payment of rent must be by the subtenant, who shall obey the terms of the lease. Nevertheless, the main tenant continues to be liable for the lease. The contract must be framed and written.

It is important to inform and take permission from the owner of the property before subleasing.

Provisions Under Indian Laws

The Transfer of Property Act of 1882 enables a lessee to lease the estate to a third party. Section 108(B) (j) under this Act stipulates that the lessee may sub-lease completely or partly the property, and such interest may again be transferred by the transferee. Nevertheless, the lessee, only by the rationale of transfer, does not conclude to be free from the liabilities that come with the contract.

Determination of a Sub-Lease Deed

Upon the occurrence of specific events listed in Section 111 of the Act, a determination may be made. Under the Act, the Lessor or the Sub-Lessor, as applicable, may decide the lease by the following:

When the period of a sublease expires, i.e. by evaporation of the time limited thereby.
If the initial lessor's (or the sublessor's) interest in the property expires as a result of the occurrence of any event;

Express surrender:

For example, if the sublessor and sublessee mutually consent to relinquish the sublessee's interest so under the sublease.

Implied surrender:

For example, if the sub-lessee agrees to a new real estate lease from the sub-lessor to begin during the duration of the current lease, the old agreement will be deemed to have been decided.

Forfeiture by lessor:

If the lessee violates an express situation of the lease that allows the lessor to re-enter upon violation;

If the lessee renounces his status as such by creating a title in a third party or asserting title in himself;

If the lessee is declared bankrupt and the lease allows the lessor to re-enter upon the occurrence of such an event, and in any of these cases, the lessor or his transferee notifies the lessee in writing of his specific intent to do.

Consequently, if the sub-lessor determines the lease and seeks re-entry on the grounds of forfeiture, the subsequent conditions must be satisfied:

The sub-lease must contain conditions;
The condition must be expressed;
The express condition must state that if the sub-lessee violates the condition, the sub-lessor may re-enter; and
The sub-lessee violates the express condition. Further, it is settled law that in case terms of a lease deed do not confer any right to the lessor for re-entry (in case of violation of any of the terms of the deed), in such a situation, the lessor may be entitled to claim compensation for the loss suffered by him, if at all, for the breach of the agreement.

In addition to the aforementioned, the Act additionally specifies how the sub-surrender lessor of the primary lease will affect the sub-lessee: If the sublease that the sub-lessor previously granted remains in large part with the identical conditions and terms as those of the principal lease, any surrender (explicit or implied) by the sub-lessor would not affect the sub-lease. According to established legal precedent, the original lessor and the sublessee would have a direct relationship in this situation.

Nonetheless, unless it was obtained through the sub-deceit, lessee's the sublease will be void if the original lease is forfeited.

Conclusion

The agreement made between the parties for leasing or subleasing the property governs rights and obligations. Additionally, a lease may be decided as per Section 111 of the Act's guidelines. In the event of leases for limited terms, the lease is decided only by the passage of the time set by the deed of lease, and the lessee cannot be removed before that, absent any infringement of any specific terms of the lease that gives the sublessor the right to re-enter the premises.

Reference

Stadler, Lewis B. "Landlord-Tenant-Lessor's Rejection of Sublease Agreement, Pursuant to a Consent Clause, Must be Judged under a Reasonable Commercial Standard." Cumb. L. Rev. 9 (1978): 309.