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Sale, lease or let
17/10/2006 The Star ARTICLES OF LAW by BHAG SINGH

A BOARD or banner with the words “for sale” or “to lease/let” or, sometimes, a combination of both, can sometimes be seen affixed to a building or positioned on a vacant piece of land.

What is the difference between “let” and “lease”?

The Oxford Advanced Learners Dictionary defines “lease” as a legal agreement that allows a person to use a building, a piece of equipment or some land for a period of time, usually for rent. “Let” means to allow somebody to use a house or room, etc, in return for regular payments. The meanings given take us no further.

What these words mean, or do not mean, depends on the person who put up the notice. Such a person may be the owner of the property or the owner’s representative or an estate agent whose job is to act as an intermediary who brings together a buyer and a seller or a landlord and a tenant.

An intention to lease or let suggests that the owner wishes to allow an interested person to have enjoyment, possession and use of the property for a limited period on the basis of periodic payments. But a sale suggests a complete and outright parting with the property on the payment of an agreed sum.

Letting and leasing is a subject that comes generally under the topic of Landlord and Tenant. With regard to statutory regulation, the provisions are to be found in the National Land Code [Act 56/1965].

Leases and tenancies are dealt with in Chapter I Part 15 of the Code. The word “lease” is defined as referring to a letting which exceeds three years. “Tenancy” is said to be a letting of three (3) years or less.

A tenancy is exempt from registration. On the other hand, leases are required under the Code to be registered. The manner in which this is done is somewhat similar to situations where a land transfer is effected.

Thus, a tenancy exists as a purely contractual relationship whereas a lease goes further – apart from being a contract between the parties, the registration that is required (if effected) will put third parties on notice.

The effect of such registration is that it constitutes a notice to any intended buyer of the property as a legitimate encumbrance. Therefore if the lease is registered, a subsequent buyer is bound to honour the lease.

The occupier in such a situation would be protected, in the sense that such occupier will be entitled to continue occupation for the earlier agreed period as well as to continue to pay the earlier agreed rental.

The National Land Code provides that the maximum term for a lease can be 99 years if it relates to the whole of the alienated land or 30 years if it relates to part of the land only.

It could imply the property is available both for short-term and long-term letting.

As stated earlier, the word “sale” suggests that what is intended is an outright disposal of the property for a one-time payment contemporaneous with which it would be handed over to the acquirer.

This does not necessarily imply that, once paid for, the property will belong to the acquirer absolutely. In the case of land, the buyer must be alert to what he is buying; the quality of the interest is critical. Is the land a freehold or a grant in perpetuity – which would be the same as freehold – or is the buyer buying land which is in the nature of a lease?

If it is lease land, then is it a 99-year lease or for some other period?

If a buyer purchases from another person to whom the land has being alienated as a lease, it becomes very relevant to know when the lease was granted and what the remainder of the term is.

If a person has bought a property from a developer and it is a 99-year lease which started in 1950, then it will come an end in 2049. Therefore the buyer of such a property would only be entitled to occupy the property until 2049 when the lease expires.

On such expiry, the land will usually revert to the state together with whatever is built on it. However, the state can renew the lease. At that time, socio-economic factors will play their role. Even though the lease may be renewed, it may not necessarily be for the same term as the original lease and the premium payable could be substantial.

If the property is for sale, it does not always mean the same thing. Much depends on the nature of the interest being sold; this will have to be clearly understood and appreciated.

In these circumstances, the sale of a property with 10 years of the lease period remaining and a lease of the property for a 10-year period may not be very different in the end.

 

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