When a person wants to give or take a property on rent, he or she often wonders whether he or she should enter into a lease agreement or a tenancy/rent agreement.Below, we discuss the key distinctions between a tenancy agreement and a lease agreement to assist you in making a choice:
| Tenancy/Rent Agreement | Lease Agreement
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| An informal contract.
Does not require to be notarially attested under the Prevention of Frauds Ordinance (“PFO”).
No stamp duty payable.
Registration is not required. |
A formal document.
Must be notarially attested as required under the PFO.
Must be duly stamped.
Must be registered at the relevant Land Registry to confer priority to the lease.
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| The tenant has only a personal right against the landlord and does not obtain an interest in the nature of a proprietary right in the property.
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A lease creates a real/proprietary right which is a right in the property which may be asserted against the whole world.
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| The essential quality of a tenancy is that the landlord retains control over the rented property.
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A valid lease is recognized as a pro tanto alienation (that is an alienation to the extent of leasehold rights in respect of the property) by the lessor during the period of the lease, subject to the terms and conditions contained therein.
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| Tenancy agreements are usually considered as monthly tenancies, whereby the tenant pays rent to the landlord on a monthly basis and not for any longer period.
Hence, the landlord has the right to evict the tenant at any time after giving one month’s notice to the tenant irrespective of the terms and conditions set out in the tenancy agreement.
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A lease may be executed for any period of time except where the lessee is a foreigner (here, the maximum is 99 years). |
| Tenancies are usually in respect of residential premises and generally for short periods.
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| Tenancies are not assignable.
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A lease may be assigned. |
| The provisions of the Rent Act can be availed of, where applicable. | The lessor may institute action in court for the recovery of possession of the property under the recently enacted Recovery of Possession of Premises Given on Lease Act No.1 of 2023. |
Considering the key distinctions between a tenancy agreement and a lease agreement, it is best for the parties to opt for a formal lease agreement as opposed to a tenancy agreement.
Manjula Ellepola
Partner
Rakhitha Dolapihilla
Senior Associate