Nature of a Lease & a Tenancy
A lease agreement is a contract in which the owner (lessor) grants possession of a property to another party (lessee) for a fixed period in exchange for rent. It creates a legal interest in the property for the lessee.
In contrast, a tenancy agreement is generally used for short-term or periodic arrangements, allowing the tenant to occupy the premises without creating any legal interest in the property.
Governing Law
A lease agreement is governed by the Transfer of Property Act, 1882, and the Registration Act, 1908, particularly when the lease term exceeds one year.
In contrast, tenancy agreements fall under the jurisdiction of provincial rent laws such as the Punjab Rented Premises Act, 2009, the Sindh Rented Premises Ordinance, 1979, and similar statutes in other provinces.
Duration
A lease agreement typically has a fixed term that can range from several years to decades, depending on the nature of the arrangement.
A tenancy agreement, on the other hand, is usually short-term or periodic, often renewed on a monthly or yearly basis.
Registration Requirement
A lease agreement exceeding one year must be registered with the sub-registrar under the Registration Act, 1908, to be legally enforceable.
Tenancy agreements, depending on the province, may also require registration with the local Rent Controller to ensure compliance with rent regulations.
Rights & Interest in Property
A lease agreement grants the lessee a legal right to occupy and use the property, meaning the lessor cannot unilaterally terminate the lease before its expiry unless a breach occurs.
In contrast, a tenancy agreement provides only a contractual right to possession, with the landlord retaining greater control over termination and adjustments.
Termination & Eviction
A lease agreement remains in force until the agreed term expires, and early termination usually requires mutual consent or a breach of contract.
In the case of tenancy agreements, landlords can terminate the tenancy with reasonable notice as prescribed by rent laws, usually ranging from one to three months.
Rent Control & Disputes
Lease agreements are generally not subject to strict rent control laws, as they are often used for commercial or industrial purposes, and disputes are resolved in civil courts.
Tenancy agreements, however, are heavily regulated by provincial rent laws, with disputes over rent increases, eviction, or non-payment being handled by Rent Controllers or Tribunals.
Use of Property
Lease agreements are commonly used for commercial, industrial, or long-term residential purposes where stability and predictability are required.
Tenancy agreements are primarily intended for residential purposes, offering flexibility to both tenants and landlords.
Security Deposit
A lease agreement often requires a substantial security deposit, sometimes equivalent to six to twelve months’ rent, to secure long-term financial commitments.
In contrast, tenancy agreements typically involve a smaller security deposit, usually ranging from one to three months’ rent.
Stamp Duty & Legal Formalities
Lease agreements attract higher stamp duty under the Stamp Act, 1899, and must be properly executed, often requiring notarization.
Tenancy agreements involve fewer legal formalities, though registration with the Rent Controller may be necessary in certain provinces.