Commercial Lease Agreement – A brick in your Business Dream

Everyone who wants to put mark in the world by its business, embark their businesses by putting lot of hard work and dedication. Numerous factors are involved while setting up business or for their growth Selecting suitable place of business is one such factor.

It is a significant to choose the place of business where it is to be built up. Buying premises for business isn’t simple or financially sound, that too at the initial phase of the business. So the majority of the individuals want to set up their business initially on rented premise. It is appropriate to note down here that taking premises on rent so as to spare the hefty investment in property is just the one side of the coin and there is another side of coin that requires legal and specialized attention while taking premise on rent .

This calls for execution of commercial lease deed and both Lessor (landlord) and Lessee (tenant) has to secure their own advantage.

Further, to keep things clear it is essential to realize what are the clauses which can be embedded in a Commercial Lease Deed, what are the purposes of exchanges and conversations and what are the focuses to be considered at the hour of conversation.

(i). Terms of Business Lease Parties: Both the parties to the Agreement ought to be distinguished and their details should be explicitly noticed and mentioned in the Business Lease Deed like Name, Father’s Name, location of the Parties and so on.

(ii). Address of Property & its Description: The location of the concerned property is required to be unmistakably referenced. Assume a party takes just first floor of the structure then it should be indicated appropriately. Furthermore in an exchange where enormous stakes are included, further detailed description of property as per the concerned title documents (i.e. sale deed or conveyance deed etc) may be provided along with some technical details if desired.

(iii). Rent / Lease Rent: The rent of the concerned property is to be obviously referenced and special consideration should be given whether the rent is inclusive of other charges like common maintenance charges, power charges, month to month support, sewerage charges and so on or not and the details related to due date for the installment of lease rent ought to likewise be referenced plainly so as to maintain harmonious relation and reduce the chances of dispute at later stage.

(iv). Commencement of Commercial Land Lease Agreement & Term: The beginning date of the rent agreement turns out to be significant so as to figure the lease sum for the primary month. Further the Term of the Lease Deed also play crucial role in considering the fact that whether it would be mandatory with respect to the gatherings to get the rent deed enrolled or not as per the arrangements of the Registration Act, 1908.

(v). Security Deposit: In the event, where the Lessee is mandated to deposit the security deposit then details thereof to be captured specifically. Also the details like when same would be refunded and under what circumstances the Lessor shall be entitled to adjust the same from the legitimate dues or damages occurred by the Lessee to be mentioned in the contract.

(vi). Maintenance & Expenses: The detail of month to month support charges and the duty of bearing such costs ought to be plainly shown and who will bear different costs like power charge, water charge, stopping expense, house taxes and so on and in the event that the Lessee is required to hold up under such costs then the subtleties thereof ought to be notice appropriately.

(vii). Lock-in Period, Renewal & escalation in Rent on Renewal: There must be some work which the Lessor had carried out on the request of the Lessee, so in order to recovery such expenses, the Lessor shall sought some fix period up to which the Lessee shall not be entitled to terminate or vacate the leased Premises, such period shall be called and referred as Lessee Lock in Period. Further the Parties are required to likewise specify plainly whether after the expiry of the underlying Term of the Lease Contract, such Lease Contract shall be reestablished or not and if reestablished then on what footing and under what conditions, considering augmentation in rental amount for lease Deed.

(viii). Duties of Landlord: There might be obligations with respect to the Lessor which he/she is required to perform during the residency of the rent contract which should to be appropriately mentioned for the rent contract.

(x). Duties of Tenant: There might be obligations with respect to the Tenant which he/she is required to perform during the residency of the rent deed which should be appropriately referenced in the rent deed.

(xi). Sub-Let: Whether the Lessee shall be qualified for sub-let the concerned property or not should be mentioned unmistakably. Assume on the off chance that the appropriate response is no, at that point the Lessor should explicitly make reference to in the lease deed that lessee will not be qualified for sub-let the concerned property.

(xii). Termination Event: The occasions on the happening of which the lease deed might be ended is to be specified explicitly. Further the notification, time frame condition for ending the rent deed ought to be indicated.

(xiii). Additional Key Points: At the outset focus should also to begiven for below points in detail :

       a. Power back Up/Generator Set Provision

       b. Electricity Load

       c. Parking

       d. Maintenance of Property

       e. Storage Space

       f. Any other applicable point

(xiv). Additional Miscellaneous clauses:

a. Registration of deed and expenses incurred: In the event that the duration of Lease deed (business and private both) is above one year than registration of lease deed is compulsorily required according to Registration Act, 1908, regularly in the business rent deed registration of enrollment is gigantic so it is important for the lessor and tenant to conclude that in what way expenses would be conceived.

b. Service of Documents: The address of the parties where all official communication to be served should be mentioned in the agreement. In case of any communication, the documents could be couriered/ posted at the address provided above.

c. Additional charges for fully furnished: If any extra charge for utilization of the furnishings and apparatuses connected in completely outfitted premises is used than it is to be expressed in the agreement alongside the duration of charge to be paid is on month to month/quarterly/half yearly/every year.

d. Repairs and Expenses: Any costs caused towards fix and support to borne by the Lessee. In the event that any auxiliary changes to conveyed upon in the premises will not be managed without the assent of the Lessor. Further, the Parties will examine the proportion wherein the costs will be conveyed among themselves.

e. Copies of Rent Agreement: To ensure originality and to avoid temperament with the deed, one can state the number of original copies signed by the parties.

f. Title: Ordinarily business Lease deed include high stake in the form of for Lessee, so being a judicious Lessee, it is exceptionally fundamental for him to cross check the title report of the property taking on rent. Legitimate due perseverance of property, advance on property, and case status of the property and so forth should be checked property and guarantees and portrayal in this regard likewise should be executed from lessor side by resident.

g. Rent Free Period: At some point in the business lease transaction, the lessor or the lessee needs to roll out appropriate improvements in the property structure so as to make it fit for utilization of lessee. Further conducting appropriate changes in the structure of the property may require some time, so this period is called Rent Free Period. As lessee isn’t required to pay any thought as a rent during this period.

h. Expenses Incurred during Rent Free Period: Agreement should specifically mention that who will be responsible to bear the expenses incurred during the rent free period.

i. Sale of Property: Sooner or later in the business lease transaction, the lessor might enter into a sale deed with the third party consequent to which the Lessee right under the lease deed may be affected. So this clause needs to be captured to secure the interest of the lessee in case of sale or mortgage of property by the lessor during the term of the Lease Deed.

j. Damages and indemnity: In case any damage is incurred by one of the Party due to the fault of the other, then the other party shall indemnify the parties who have suffered loss.

k. Not to create charge or lien: The Lessee shall not give the leased out premises as guarantee or create any charge or lien on the premises leased out without the permission of the Lessor.

l. Jurisdiction: In case any dispute arises, the area of jurisdiction where any legal petition can be filed should also be mentioned in the agreement.

m. Arbitration Clause: If the Parties mutually agree to resolve any dispute out of the Court, then this clause will help them to resolve the matter through arbitration.

As we all know that there can’t be “One Size Fits All” kind of Agreement for securing all kind of Information and above clauses is only illustrative list not exhaustive and the same would also depend upon how a particular clause is being crafted considering the nature of transaction. Majorly above clauses creates a significant impact on the agreement and makes it more qualitative.


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