Section 65A of TPA : Section 65A: Mortgagor?S Power To Lease

Explanation using Example

Imagine John has taken a loan from a bank and mortgaged his commercial property as security for the loan. According to Section 65A of the Transfer of Property Act, 1882, John, while still in possession of his mortgaged property, decides to lease out a portion of the property to Sarah for her new coffee shop.

John ensures that the lease agreement with Sarah is for a period of two years, which is within the three-year limit for buildings as specified in the Act. He also makes sure that the rent is the best he can reasonably obtain in the current market, without taking any premium or advance payment, and without including an option for Sarah to renew the lease. The lease is set to commence within six months of signing the agreement.

The bank, as the mortgagee, is bound by this lease even though they hold a mortgage over the property, as long as John's lease to Sarah meets all the conditions laid out in Section 65A. If John wanted to make a lease that did not comply with these conditions, he would need to get the bank's consent or ensure that the mortgage deed allowed for different terms.