Can a tenant claim ownership of a commercial property?

In India, rent control laws in specific states govern tenant rights. Owners of commercial properties are usually concerned about scenarios where tenants could claim ownership of the property. The Limitation Act 1963 mentions a tenant’s right to ownership through adverse possession. 

From a legal point of view, a commercial property tenant is seen as a tenant without any legal provisions to claim property ownership. Landlords must ensure there are registered and stamped lease agreements with proper durations, clauses for renewal, the entire chain of renewals and the clause for vacating the premises upon expiry. If there are legal documents in place, commercial property owners need not fear tenants taking ownership of the property. 

What is adverse possession?

The adverse possession law is mentioned under the Limitation Law. According to this provision, if no appeal comes for revising any limitation over a specific period, which is 12 years, the title circumstances will remain unchanged. In case the owner does not submit any property claims for 12 years, and the tenant occupies the property during this time, the tenant is entitled to the ownership rights. 

Exceptions to this rule

There are exceptions to this in case the owner is not mentally unwell, is a minor, or is serving in the Indian Armed Forces. Although not legal, the system may tilt towards these principles, given that the owner neglected the property for 12 years. This situation may occur if one has a lack of information or knowledge which may be recognised under the law. 

In 2019, the Supreme Court rules that by perfection of title on extinguishment of the owner’s title, a person cannot be remediless. In case he has been dispossessed by the owner after having lost the right by adverse possession, he can be evicted by the plaintiff by taking the plea of adverse possession. Similarly, any other person who might have dispossessed the plaintiff having perfected title by way of adverse possession can also be evicted until and unless such other person has perfected title against such a plaintiff by adverse possession. Similarly, under other Articles, in case of infringement of any of his rights, a plaintiff who has perfected the title by adverse possession can sue and maintain a suit.

How does adverse possession work?

Continuity in adverse possession implies uninterrupted or continuous use for 12 years by the tenant. The tenant must be occupying the property himself. The occupier should prove sole ownership for the last 12 years.

On the other hand, open possession implies that the possession is impossible without informing the owner. A tenant is required to furnish relevant documents before the court, including the possession date, knowledge of public, the nature of the same and the duration. 

In India, tenancy through lease agreement is not taken under the law of adverse possession. However, in certain scenarios where the owner has defaulted on some agreement clauses or in case the lease has expired, tenants have taken advantage of the same by filing ownership claims under the adverse possession law. 

In case of a contract breach, the owner may act within 12 years. The owner should consider vacating the premises to avoid adverse possession. If the agreement expires and the tenant pays rent to the property owner, he cannot apply for ownership under this law. 

Can a tenant claim ownership after staying in the property for 10 years?

A tenant has the right to claim ownership over a commercial property in case the property owner fails to assert his rights for 12 years. However, one should get a property lease agreement registered and have adequate clauses and terms that will help prevent disputes in future.

Can a tenant claim ownership after staying in the property for 12 years?

According to the Limitation Act, 1963, the period for limitation for possession of an immovable property is 12 years in case of private property and 30 years in the case of public property, respectively.

What does the law say?

Legally speaking, tenants in commercial properties are required to vacate the same if directed by landowners. This is applicable as per a Supreme Court ruling. The Bench of Justices B N Agrawal and G S Singhvi directed that Section 14 (1) (e) of the Act of 1958 violates the equality doctrine in Article 14 of the Indian Constitution, also specifying that there should be no discrimination between commercial and residential properties. Therefore, landlords are allowed to evict tenants if they need the premises for self-occupation or any family member or even when they are the property owners. They can also claim occupation in case they have no other suitable option. 

According to the bench, no tangible distinctions were made between commercial and residential premises in New Delhi till 1947. The 1995 Act does not differentiate between these two categories in case of eviction of tenants on the grounds of landlords requiring their premises for occupation or bona fide usage. 

There are no other legal provisions where tenants have the right to get ownership of commercial properties. Property owners must not let the tenant occupy the property without a legal contract, while ensuring there is proper written and registered agreement, stamp duty payment and renewal. It is essential to have records of payment of rent, utility bills and maintenance charges. These documents serve as a proof that the company or individual is a tenant.

Things property owners must know

• There have been most disputes under the Rent Control Act of 1948. However, modifications have been made in states, such as Maharashtra, Delhi, and Karnataka.
• The Draft Model Tenancy Act 2015 mentions that landlords have the right to evict tenants on the grounds of contract breach, default in rent payments, sub-letting the premises or any portion of the same without consent, misuse of property or allowing illegal activities.
• Commercial property owners may periodically increase the rent. They must address maintenance and repair requests within a reasonable duration. However, tenants can take care of minor repairs. 
• A rent increase clause in the agreement helps keep tenants from holding onto properties.
• Landlords have the right to evict tenants if they need the property for their own self-occupation. 
• They are entitled to repossession, albeit temporarily, for those alterations, renovations, repairs and other jobs which need an empty building.

Can a landlord force a tenant to leave a commercial property?

A commercial property owner has the right to evict the tenant in the following scenarios: 

• If the tenant has not paid the rent on time.
• In case the tenant has not adhered to the clauses given in the lease agreement.
• In case the landlord requires the property for self-use with prior notice.
• If the tenant is misusing the premises or using it for unlawful activities.

Main clauses of commercial lease agreement

The lease agreement is a legal document signed between the tenant and the commercial property owner, which lays down the terms and condition for the tenancy. The property owner must ensure to renew the agreement timely to avoid any unfavourable situations. 

Some essential clauses that one should include in a commercial rent agreement include the following:

• Rent escalation: This specifies the percentage annual increase in the rent amount. 
• Sublease clause: This clause covers the provision that allows a tenant to sublease an unused part of the property. Typically, they are not permitted to sublease without the owner’s written consent.
• Exclusive rights: This clause enables the tenant to become an exclusive service provider of a given property. Exclusive rights are usually applicable in case of shopping plazas and other commercial spaces.
• Additional costs: This clause should clearly specify who should pay additional costs, such as property tax, building insurance, and maintenance fees, etc., during the tenancy period.
• Delivery conditions: When renting a commercial space, the property owner must specify the condition of a property to the rent agreement. Tenants may seek a property for various purposes, such as fully furnished or bare shell spaces. 

Can a tenant claim compensation from a landlord?

Tenants can claim compensation from landlords in several scenarios, including breach of rent agreements or unfair rent practices. A tenant can claim compensation if the property becomes inhabitable owing to the landlord’s negligence. 

However, one must submit proofs, such as rental agreement, communication records, and photographs to support the claim. The process of claiming compensation may depend on the specific circumstances and local laws governing landlord-tenant relationships. 

Housing.com News Viewpoint

In case you own a commercial property, you need not be concerned about tenants claiming ownership of the property. However, to ensure this, it is essential to maintain proper records of the property and complete the legal formalities. In case of a dispute, it is important to seek the assistance of a legal professional.

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