A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument.
All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.
Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each instrument shall be executed by both the lessor and the lessee:
Provided that the State Government may, from time to time, by notification in the Official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.
Legal Commentary & Landmark Judgments: Section 107
Section 107 of the Transfer of Property Act, 1882 regulates how leases are made, mandating registered instruments for leases exceeding one year or reserving yearly rent.
An unregistered lease deed for a term exceeding one year is inadmissible to prove the tenancy duration under Section 49 of the Registration Act.
Tenants who execute 3-year or 5-year commercial leases on notarized stamp paper without registration have no protection against early eviction. Under Section 107 read with Section 106, an unregistered multi-year lease converts in law into a precarious month-to-month tenancy that the landlord can terminate at any time on 15 days' notice.