A (lessor) entered into a deed of lease with B (lessee). It was stipulated that the lease would be for 10 years. In the first instance with an option to B to renew the same as long as desired............. Decide referring to relevant provisions.....

Question: A (lessor) entered into a deed of lease with B (lessee). It was stipulated that the lease would be for 10 years. In the first instance with an option to B to renew the same as long as desired.

Before the expiry of the period of 10 years from the date of commencement of the lease. B wrote to A informing about his intention to renew the lease. A refused to comply with the request.

B filed a suit for specific performance of the covenant in the lease for renewal. A contended that the condition relating to renewal was hit by Section 14 of the Transfer of Property Act, 1882. Decide referring to relevant provisions and decided cases. [HPJS 2018]

Find the answer to the mains question of Property Law only on Legal Bites. [A (lessor) entered into a deed of lease with B (lessee). It was stipulated that the lease would be for 10 years. In the first instance with an option to B to renew the same as long as desired............. Decide referring to relevant provisions.....]

Answer

Section 14 in the Transfer of Property Act, 1882 lays down a provision regarding the rule against perpetuity. It states:

“No transfer of property can operate to create an interest which is to take effect after the lifetime of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.”

In the present case at hand, the dispute arose from a lease agreement between the lessor (A) and the lessee (B), where the original lease was for ten years, with an option for B to renew the lease as long as desired. B expressed the intention to renew the lease before the initial ten-year period expired, but A refused to comply with the request. B then filed a suit for specific performance of the covenant in the lease for renewal.

A's contention was that the condition relating to renewal was hit by Section 14 of the Transfer of Property Act, which deals with the rule against perpetuities and certain conditions that may be void.

The facts of the present case are similar to the case of R. Kempraj v. M/S. Barton Son & Co., 1970 AIR 1872, before the Hon’ble Supreme Court. While deciding the case, the Hon’ble Court made the following observations:

a) Section 14 is applicable only in cases where there is a transfer of property. In this particular case, the lease was initially for ten years, and the stipulation relating to renewal could not be regarded as transferring property or any rights therein.

b) The clauses containing the option to get the lease renewed on the expiry of each term of ten years were not creating an interest in property of the nature that would fall within the scope of Section 14.

c) The court cited the principle that even under English law, a covenant for perpetual renewal would be valid as long as the intention is clear, and it will not be open to objection on the ground of perpetuity.

d) The court also mentioned that the rule against perpetuity is not applicable to covenants for renewal that run with the land, and the Transfer of Property Act expressly states that such covenants do not create an interest in the land bound by the covenant.

In summary, the court held that the rule against perpetuity under Section 14 of the Transfer of Property Act did not apply to the clauses relating to the renewal of the lease in this case. Therefore, B's suit for specific performance of the covenant for renewal was upheld.