Liability of Landlords and Tenants

Leases or rent agreements are agreements whereby the right to use an immovable property is granted to a third party for a predetermined period in exchange for a predetermined specified value, which is either to be paid periodically or on particular occasions by the transferee to the transferor. Following the signing of a lease, a tenancy is established, with the transferor or lessor acting as the landlord and the transferee or lessee as the tenant.

How liability of Landlords and Tenants Occur?

There are several rights and duties associated with a lease. The relationship of landlord and tenant comes into existence after sign of a contract between the two respective parties. The rights and duties of landlord and tenants are essentially governed by the terms of the contract and the provisions regarding the same in the Transfer of Property Act.

Liabilities of the Landlord

The following are the liabilities of the landlord −

  • Duty to give possession − Because a lease is an agreement to transfer the right to possess a property, the landlord has a duty to give the tenant possession of the property so that he can use it.

  • Duty to disclose the defects − If there is any latent substantial defect in the property, the landlord must disclose it to the tenant. Depending on the conditions, the handover of the possession may be actual or constructive.

  • Agreement for peaceful enjoyment − Absence of interruption or opposition is referred to as quiet enjoyment. Since a lease is a transfer of the right to enjoy a property, the landlord has an implied duty to make sure the tenant can exercise this right in peace.

  • Duty to repair − The owner is required to perform all required repairs to the property. The renter may do the same and deduct the cost of repairs from the rent or seek reimbursement from the property owner if the owner neglects to make the required repairs.

  • The owner is obligated to make certain payments, and they must be made on time. Even if the payment was not made by the landlord, it is still recoverable from the tenant or against the property.

Liabilities Of Tenant

The following are the liabilities of tenant −

  • The renter may not utilise the rental property for any other purpose than the one for which it was rented.

  • Nothing on the property may be permanently removed, with the exception of agricultural uses, without the landlord's permission.

  • When the lease expires, it is the tenant's responsibility to return the property to the landlord in possession.

  • The tenant is required to reveal any important information that raises the value of the property. For instance, if the tenant discovers a gold mine on the leased property, he is required to inform the landlord because this materially raises the property's value.

  • The tenant is only permitted to use the property in the manner that a prudent person would use their own. He must refrain from taking any action that will permanently harm the property or cause it harm. The renter is permitted to do modest repairs and upkeep to the property, but he is not permitted to make any significant changes.

  • Without the landlord's approval, the tenant is not allowed to erect any long-term structures on the leased property. The landlord has the right to remove any permanent constructions made by the tenant without causing any damage to the leased property.

  • The tenant is required to return possession to the landlord at the term's expiration or early termination of the lease. After the lease term has ended, it is the tenant's responsibility to give the landlord their possession back.

  • The court may order the tenant to pay damages as well as mesne profits (earnings of an estate received by the tenant in wrongful possession and which are recoverable by the landlord upon an action) to the landlord if the tenant maintains the occupation after the term has expired.


A lease agreement is created when the right to use or possess a piece of property is transferred. The individual to whom the lease is made is referred to as the tenant, and the person who leases the property is referred to as the landlord. Numerous obligations are associated with the titles of landlord and tenant on the parts of both parties. The rights and obligations are adhered to by both parties to safeguard each other's interests in the absence of any local ordinances, traditions, or written agreements to the contrary.

Frequently Asked Questions

Q1. Is rent included in liabilities?

Ans. In normal circumstance, the answer is “yes”, rent is generally included in liabilities on a company's balance sheet. Liabilities for most households will include money owed in taxes, bills that must be paid, rent or mortgage payments, money owed for loan interest and principal, and so forth.

Q2. Is lease an asset or liability?

Ans. On the balance sheet, the lessor lists the lease as a leased asset, and the income and cash flow statements list each lease payment as income. Due to their interest as a possible owner of the asset and their needed payment, the lessee records the lease as both an asset and a liability on the balance sheet.

Q3. What is long-term lease liabilities?

Ans. A long-term liability is the present value of a lease payment that lasts longer than one year. Deferred tax liabilities are viewed as long-term liabilities when they normally stretch to subsequent tax years.

Q4. What are the 2 types of leases?

Ans. The two types of lease are - operating leases and capital leases both have unique effects on a company's taxes and accounting.

Updated on: 06-Apr-2023


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