Can the lessee transfer his interest i.e. leasehold interest to a third party?
Yes. Lessee can transfer his interest to a third party: The lessee may transfer his interest in the leasehold property whether for consideration or otherwise; this transfer could be absolute. It could also be by sub-lease/under-lease. This transfer could also be done by the lessee mortgaging his leasehold interest as and, by way of, security. This is because, just as the sole owner of the property could mortgage his ownership rights, similarly, the law recognizes the lessee’s interest as being a subject matter of mortgage. The Transfer of Property Act, however, prescribes three exceptions to the lessee’s right of transfer of his leasehold interest . These are;
- In the case of a tenant whose right of occupancy is non-transferable,
- In the case of a farmer who has defaulted in the payment of land revenue and
- When the subject matter of the lease is under the management of the Court of Wards.
The transfer of a leasehold interest is known as the assignment of the leasehold interest.
On assignment, what happens to the lessee’s obligations?
The lessee, by transferring the whole or part of his interest, does not absolve himself from his contractual liabilities to the lessor. Even notice to the lessor of the transfer does not affect the lessee’s liability. The original lessee continues to be liable to the Lessor. The liability of the lessee ceases when the lessor releases the lessee.
IN CASE OF ANY QUERY OR ASSISTANCE, LEAVE A REPLY BELOW