Ask a Lawyer: Why Does the Registration of Lease Agreements Matter?

 
It is important to note that while the registration of leases is not a legal prerequisite for the recognition of a legal contract between a lessor and lessee, an unregistered lease may be valid between the parties but will offer no protection against third parties to the agreement.

The Land Registration Act, 2012, in S.36(2) essentially confirms that nothing shall be construed as preventing any unregistered instrument (lease) from operating as a contract. There is also legal precedent to support this position.

If the law does not demand the registration of leases, why should a lease be registered? A formal lease document is important for several reasons

Strengthening the Formal, Written Record Provides Legal Recognition of the Lease:
First, registering the written record of the agreement between the lessor and lessee provides irrefutable proof and evidence of the agreement. In the event of any dispute, it is easier to clarify the agreement and find a resolution.

Recognition and Protection of The Rights & Interests of Both Parties
Second, the formal registration of leases can help to protect the rights and interests of both the lessor and lessee. A registered lease confirms the agreement between the parties, and the rights and responsibilities of each party, as well as offering them protections they would otherwise be unable to claim. This can help ensure that both parties are treated fairly and their rights are respected, more so where third-party rights are entered against the property.

Protection Where Third-Party Rights Subsist
Third, registration of leases may not only facilitate transactions that may require collateral against property but also creates legal, evidentiary support proof of the agreement between the parties. The registration of a lease may also inform the parties to the agreement of any prior or superseding rights that may take precedence over the property. For example, the lease may include provisions that protect the landlord from liability if the tenant causes damage to the property or that protect the tenant from being evicted without cause. For the lessee, attempting to register the lease may expose an undeclared prior right over the property, for example, a charge or a preregistered encumbrance on the property.

Professionalism
Finally, the registration of leases can help in establishing or asserting good governance measures in the conduct of business affairs that may be necessary, especially in corporate setups. This can be beneficial for both parties, as it can help to ensure that the agreement is conducted in a smooth and orderly manner.

A simple illustration of the importance of registering lease agreements is that a registered lease creates an encumbrance on the property, the effect of which is that the lessee cannot, for example, sub-let, charge or part with possession of the land leased or any part thereof without the written consent of the lessor.

Likewise, the lessor cannot interfere with the lessee’s rights created under the registered lease. For example, the lessor cannot arbitrarily transfer ownership of the property to a third party where the encumbrance subsists.

To register a lease, the parties submit the relevant documents in the prescribed form identifying the parties to the agreement, the specific property that is the subject of the lease including information such as the tenure, size, location and any other pertinent details of the property, the duration or tenure for lease, the specified lease amount agreed upon and any other information as prescribed.

Upon registration, the lease becomes a matter of public record entered against the title deed of the property. Registering a lease helps to ensure that the lessors ownership rights are recognized and that the lessee’s rights to occupy the property are enforceable.