A Guide to Recovering Possession of Leased Premises in Sri Lanka

The Recovery of Possession of Premises Given on Lease Act No. 1 of 2023 (“the Act”) is a law which streamlines the procedure for lessors to recover premises given on lease.

 

What is classified as a ‘lease agreement’ under the Act?

Under and in terms of the Act, a lease agreement is defined as an agreement:

  1. Executed in terms of either,
    1. (i)The Prevention of Frauds Ordinance (Chapter 70), or
    2. An instrument of lease executed under the provisions of the Registration of Title Act No. 21 of 1998, and
  2. For which stamp duty has been duly paid.

 

In what circumstances can a lessor use the procedure set out in the Act?

A lessor can avail itself of the procedure set out in the Act, where under a lease agreement,

  1. The possession of the premises is given to the lessee, and
  2. The lessee refuses, fails or neglects to leave the premises,
    1. At the expiration, or
    2. Earlier termination, due to a breach by the lessee of any term or condition of the lease.

 

What is the recovery procedure under the Act?

The process starts when the lessor files a case with supporting documents. If the court is satisfied, it may issue a preliminary order (known as a ‘decree nisi’), which is then sent to the lessee. To challenge it, the lessee must get court permission and pay a security deposit. If not, the order becomes final, and the lessor can request enforcement to regain possession of the property.

 

What is the appropriate court for initiating action under the Act?

A lessor must institute action against the lessee in the relevant District Court having jurisdiction over the matter.

A District Court is deemed to have jurisdiction over the matter if either:

  1. The leased premises is located within its territorial limits,
  2. The lessee resides within its jurisdiction,
  3. The cause of action originates within its jurisdiction, or
  4. The lease agreement being enforced falls within its jurisdiction

 

What remedies can a lessor seek under the framework provided in the Act?

An aggrieved lessor can seek a multitude of remedies / reliefs the Act, they include:

  • Arrears of lease rent,
  • Service charges, if any, until the lessor is restored vacant possession, however, there must be express provision under the lease agreement for such service charges,
  • Liquidated damages, if any, from the expiry of the lease or effective date of termination of the lease until the date of restoration of the premises, however the liquidated damages cannot be more than twice the agreed lease rental,
  • Interest on arrears of lease rental, service charges and liquidated damages at the rate of legal interest, or
  • Any other costs and other relief awarded by Court.

 

How do you institute an action under the Act?

A court action will commence by filing a plaint in the form provided under and in terms of Civil Procedure Code.

Along with such plaint, the lessor must also file:

  1. An affidavit of the lessor, to the effect that the premises given on lease is lawfully due to the lessor, and
  2. A draft decree nisi in the form set out in the Act.

Upon institution of the proceedings, the Court shall permit the Lessor to support the same within 7 days from the institution of action for the issuance of a decree nisi.

 

When will a decree nisi be entered by the court?

Aa decree nisi will be entered by the Court if it is satisfied that:

  1. The lease agreement is duly executed and stamped as required by the law,
  2. The lease agreement is not open to suspicion by reason of any interpolation, erasure or alteration made after signing the agreement, and
  3. The content of the Affidavit is satisfactory to prove the case on the part of the lessor.

 

How will a decree nisi be served on the lessee?

The Registrar of the relevant court will serve a decree nisi on the lessee by registered post at the premises in question or at the address given by the lessee in the lease agreement for service of notices, within 3 days of entering into the decree nisi.

 

How can a lessee contest / challenge the decree nisi?

In order for a lessee to appear in the action and contest / challenge the decree nisi, they must:

  1. First obtain leave from the court by submitting a petition supported by an affidavit, that directly addresses the lessor’s claims and clearly outlines the defense and supporting facts, and
  2. Thereafter, if so ordered by the court, deposit the security, within two weeks of the date of order.

 

When is a decree nisi made absolute?

Court will declare the decree nisi as absolute without notice to the lessee, if the lessee fails to:

  1. Apply for leave to appear and show cause,
  2. Disclose a prima faciedefence, or
  3. Provide the necessary security.

A lessee cannot appeal against a decree nisi that has been made absolute due to the lessee’s failure to make an application for leave to appear and show cause unless the lessee can establish that he was prevented from appearing due to accident, misfortune, or an act of God, or that the decree nisi was never served.

 

What is the appeal process?

A person may appeal to the High Court of Civil Appeals from the District Court, if such person is dissatisfied by the following Court orders:

  1. A refusal of an application made by the lessee, on grounds that the lessee has not disclosed a sustainable defence,
  2. An order made subsequent to the failure to furnish security,
  3. An order dismissing an application to have the decree absolute set aside or
  4. A final order for discharging the decree nisior making the decree nisi

 

What happens once a decree nisi becomes absolute?

Once the decree Nisi becomes absolute, the lessor is entitled to enforce the same through execution of writ, issued to the Fiscal, within 14 days of the order making the decree absolute.

 

Does the Act apply if the lease agreement / instrument of lease predates the Act?

Yes, the Act applies to all lease agreements, including those executed prior to its commencement and those that expired or were terminated prior to commencement of the Act. If there are pending actions (under prior law) at the commencement of this Act, action under this Act could still be instituted.

 

Key Takeaway

In essence, the Act introduces a streamlined and structured process for lessors to recover possession of leased premises, offering clarity, efficiency, and legal certainty in possession related disputes.

 

Our team was led by

Sheneli Somanayake – Associate.