By Saurabh Garg, founder·8 min read·Published 2026-08-20

Short answer: On 13 August 2026 the Supreme Court held that an agreement to sell between a landlord and a sitting tenant does not by itself end the tenancy. The tenancy ends only where the terms of the agreement or the conduct of the parties show an express or implied surrender under Section 111 of the Transfer of Property Act. The case is Nazim Shaikh Hasan v. Nasir Mushtaq Shaikh and Ors, SLP (C) No. 17699 of 2026, 2026 INSC 853, over a shop in Kondhwa Khurd, Pune.

You Agree to Sell the Flat to Your Tenant. The Supreme Court Says He Is Still Your Tenant

On 13 August 2026 the Supreme Court held that an agreement to sell between a landlord and a sitting tenant does not by itself end the tenancy. The tenancy ends only where the terms of the agreement or the conduct of the parties show an express or implied surrender under Section 111 of the Transfer of Property Act 1882. The case is Nazim Shaikh Hasan v. Nasir Mushtaq Shaikh and Ors, Special Leave Petition (Civil) No. 17699 of 2026, reported at 2026 INSC 853. The Bench was Justice Prashant Kumar Mishra and Justice N.V. Anjaria, and the judgment was written by Justice Mishra.

A 200 square foot shop in Pune

The premises is a ground floor shop of 200 square feet, House No. 3031, S.No. 51, Mitha Nagar, in front of the Vishwakarma Building, Kondhwa Khurd, Pune. The landlord was Jainbi Mushtaq Shaikh. The tenant paid rent of Rs 1,500 a month.

While the tenancy was running, the landlord agreed to sell the shop to the tenant. The agreement to sell is dated 21 September 2004. The price was Rs 1,90,000. The tenant paid Rs 40,000 in cash on the day and promised the balance of Rs 1,50,000 within three months, to come from a bank loan. Clause 4 of the agreement said that if the loan was not sanctioned within that period, the agreement stood cancelled, the seller would refund the Rs 40,000, and the tenant would hand the shop back in its previous condition.

The loan did not come through. The sale did not complete. In 2010 the landlord filed a suit for possession in the Small Causes Court on rent default, change of use and bona fide need. The tenant's defence was that the agreement to sell had ended the landlord and tenant relationship, and that he had paid Rs 90,000 of the price and was ready to pay the rest.

The Small Causes Court decreed possession on 19 September 2015. The First Appellate Court dismissed the tenant's appeal on 24 November 2023. The Bombay High Court dismissed his civil revision application on 1 April 2026. The Supreme Court has now dismissed the special leave petition.

The four propositions the Court set out

Paragraph 20 of the judgment distils the law into four lines.

The mere execution of an agreement to sell between a landlord and tenant does not end the subsisting tenancy on its own.

The lease is determined only when the terms of the agreement, or conduct of the parties that cannot sit alongside the tenancy continuing, show an express surrender under Section 111(e) or an implied surrender under Section 111(f) of the Transfer of Property Act.

A tenant staying on in possession after signing an agreement to sell is not part performance under Section 53A of that Act, unless the possession can be traced to the agreement rather than to the tenancy that came before it.

An agreement to sell, not being a registered deed of conveyance, confers no title or interest in the property.

Applying those, the Court found nothing in the Pune agreement that pointed to surrender. Clause 4, the one that sent the shop back in its previous condition if the loan failed, cut the other way. It assumed the tenant's possession was tenancy possession all along, and it planned for a return to the position before the agreement.

The Court distinguished R. Kanthimathi v. Beatrice Xavier, which the tenant had relied on. In that case the agreement recorded that the property had already been surrendered into the buyer's possession, and Rs 20,000 of a Rs 25,000 price had been paid. Different wording, different arithmetic, different result.

The registration point that decides a lot of these disputes

Section 17 of the Registration Act 1908 was amended with effect from 24 September 2001 by the insertion of sub-section (1A). A document containing a contract to transfer immovable property for consideration, relied on for the purposes of Section 53A of the Transfer of Property Act, has to be registered. If it is not registered, it has no effect for Section 53A.

The Pune agreement was executed on 21 September 2004, after that amendment, and it was unregistered. On that ground alone the tenant's Section 53A defence failed, whatever the facts. The Court also noted that the tenant had never filed a suit for specific performance, which told against his case that the relationship had changed.

What this decides for an owner living abroad

Selling the flat to the tenant who is already in it is one of the cleaner exits available to an owner who lives in Dubai, London or the Bay Area. No listing, no viewings, no broker walking strangers through a tenanted flat, and a buyer who already knows the building. It is also the exit where the paperwork most often runs on trust and a one page agreement.

This judgment sets out what that one page does and does not do. Signing it does not end the tenancy, so rent stays payable and the rent control remedies stay available to the landlord. It does not transfer title. If it is unregistered, it gives the tenant no Section 53A shield.

The mirror image is worth naming, because it is the risk an absent owner carries. If the agreement is drafted to say the tenant stops paying rent from a given date, or that possession is from now on held under the agreement, that language can read as surrender. At that point the sale has to complete, because the tenancy that would otherwise fall back into place has gone. A clause added to make an informal deal feel binding can remove the protection the owner had.

Two practical readings follow. Say in the agreement what happens if the sale fails, the way Clause 4 did in Pune. And keep collecting and recording the rent while the sale is pending, because a rent record is the evidence that the tenancy continued.

We set out the eviction route in how to evict a tenant in India as an NRI, the day to day in managing tenants from abroad, the sale sequence in the NRI guide to selling property in India, and the remote version in selling without visiting India.

This is a report on what the Supreme Court held on 13 August 2026. It is not advice on a sale or a tenancy you are in.

FAQ

Does an agreement to sell to my tenant end the tenancy? On this ruling, no, not by itself. The tenancy ends only where the terms of the agreement or the conduct of the parties show an express or implied surrender under Section 111(e) or 111(f) of the Transfer of Property Act.

Which case decided this? Nazim Shaikh Hasan v. Nasir Mushtaq Shaikh and Ors, Special Leave Petition (Civil) No. 17699 of 2026, 2026 INSC 853, decided on 13 August 2026 by Justice Prashant Kumar Mishra and Justice N.V. Anjaria.

Can a tenant use an unregistered agreement to sell to stay in possession? Not for the purposes of Section 53A of the Transfer of Property Act where the agreement was executed on or after 24 September 2001. Section 17(1A) of the Registration Act 1908 requires such a document to be registered, and an unregistered one has no effect for Section 53A.

Does an agreement to sell transfer ownership of the flat? No. The Court restated that an agreement to sell, not being a registered deed of conveyance, confers no title or interest in the property. Ownership passes on a registered sale deed.

What made the Pune agreement fail to end the tenancy? Its own Clause 4. That clause said that if the tenant's bank loan was not sanctioned within three months, the agreement stood cancelled, the seller would refund the Rs 40,000 paid, and the tenant would hand the shop back in its previous condition. The Court read that as the parties themselves assuming the possession was tenancy possession, and planning for a return to the earlier position if the sale failed.

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Sources

Information on this page is as on 2026-08-20. Rules, rates, deadlines and government portals change without notice, so verify against the official source before you act. This page is for information only. It is not tax or legal advice, and it is not a substitute for a qualified adviser who knows your position.