Commercial Lease Agreement

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This Commercial Lease Agreement can be used when a commercial property is being rented from a landlord to a tenant.

For commercial properties, this Lease Agreement will provide a quick and easy way to outline all of the terms of the agreement between the parties.

This Lease Agreement will create a legally binding contract between the parties, outlining the rights and responsibilities of both the landlord and the tenant.

This lease contains a number of variable terms, including:

  • whether the parties are renting part or all of a property
  • whether other items (such as fixtures) are being included with the lease
  • the duration of the lease
  • whether the tenant will have options to renew the lease
  • the amount of rent and the frequency of payments
  • whether a security deposit will be held
  • what the tenant can do with the property
  • how the agreement can be terminated

What exactly a commercial lease agreement?

A Commercial Lease Agreement is a rental agreement used to rent out a business property. 

Completing a Commercial Lease Agreement form gives the tenant the legal right to use the property to operate any kind of business in exchange for an agreed-upon rent payment.

Unlike a residential lease agreement, a commercial lease agreement assumes the property is being used for business purposes and not for residential living. 

The property being leased can be a simple office, an entire building, an independent retail store, a new restaurant, or even a large warehouse for industrial purposes like a manufacturing factory or self-storage facility. 

If the property being leased is part of a larger building, the landlord can address special concerns and duties about common areas such as parking spaces or lobby areas.

How can this document be used?

The completed document should be provided to all parties (including any guarantors, if applicable). Each party should be given the opportunity to read the agreement and may need some time to do this given the length of the document.

The Lease Deed would need to be printed on non-judicial stamp paper or e-stamp paper which is available in certain states. 

The value of the stamp paper would depend on the state in which it is executed as well as the duration of the lease and the lease rent. 

Each state in India has provisions in respect of the amount of stamp duty payable on the lease deed and the same would need to be determined based on the specific facts of the case. 

Information regarding the stamp duty payable can be found on the State government websites. 

After printing the document on stamp paper or e-stamp paper, as applicable, both parties should sign the lease deed and each party should keep a copy of the lease deed.

The lease deed would need to be registered if the period of lease is more than 11 months. For the purposes of registration, both the lessor and lessee have to go to the sub-registrar office.

Applicable law

The provisions of the Transfer of Property Act, 1882 are applicable to lease of commercial premises. Further, Goods and Services Tax may also be applicable on the lease under the Goods and Services Tax Act, 2016.

In terms of the Transfer of Property Act, 1882 read with the Registration Act, 1908 all leases for terms of more than 11 months are compulsorily registrable. However, leases for a duration of 11 months or less do not need to be registered with the Sub-registrar.

In some states in India, such as Maharashtra, a leave and license agreement is more commonly used for the lease of commercial premises.

This document will identify these elements

Landlord

The party who is renting out the commercial property for money

Tenant

The party who is operating a business and paying for the leased property,

Term

The number of years or months the physical space will be needed, 

Real Property

The entire property owned by the landlord (like the shopping mall where the store is located) which includes shared common areas such as walkways and parking lots that will be used by other tenants

Base Rent

The starting cost of leasing the space on a monthly or annual basis

Security Deposit

An amount of money given to the landlord to demonstrate the tenant’s good faith efforts to not break the lease early or irreparably damage the property

Property Use and Occupancy Details

Both parties can clearly describe what is and is not allowed in the rented space and common areas, such as smoking, after-hours noise, and dumping garbage, or whether certain business activities like food services can occur in an office building

Improvements

If the tenant plans on operating a restaurant or another business that requires improvements or construction in the demised premises, both parties should clarify who is responsible for paying and overseeing the construction project

This document is sometimes referred to by other names:

  • Business Lease
  • Industrial Lease
  • Office Space Agreement
  • Standard Commercial Lease

Who can use this commercial lease agreement?

A Commercial Lease Agreement can be used to cover many different kinds of rented spaces:

  • Accounting Firm
  • Business Office
  • Factory
  • Hotels or Guesthouses
  • Legal Office
  • Medical Clinic or Health Care Facility
  • Restaurant
  • Startup Company
  • Self-Storage Facility
  • Shopping Mall Store
  • Warehouse
  • Others