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Key Points For Commercial Lease Deed

As compare to residential lease deed, draft a commercial lease deed involves lot of discussion and negotiation on various crucial points. Normally commercial lease deed, rent amount is big and lot of points relating to business and its operations may be discussed. In absence of these commercial points, lease deed may not be perfect and pose complications later on.<br>

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Key Points For Commercial Lease Deed

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  1. Key Points For Commercial Lease Deed

  2. As compare to residential lease deed, draft a commercial lease deed involves lot of discussion and negotiation on various crucial points. Normally commercial lease deed, rent amount is big and lot of points relating to business and its operations may be discussed. In absence of these commercial points, lease deed may not be perfect and pose complications later on. In addition to the points discussed in our previous article ‘how to draft a residential lease deed’ there are certain additional points which are very important for commercial lease transaction.

  3. It may be noted that most of the points may be same in both the transaction commercial lease deed / transaction and residential lease deed due to very nature of lease however in commercial lease deed we may see a detailed mention of each points and segregation properly in order to avoid confusion at a later stage. Some of the additional key points are as under: a. Title: Normally in commercial lease transaction high stakes are involved as compared to residential lease transaction

  4. so being a prudent lessee, the lessee should carry out the complete due-diligence about the title of the concerned property and should ask for the photocopy of the title documents and other relevant papers. The lessee must ensure and confirm from the landlord that he is having the full right as absolute owner and is legally competent to lease the concerned property in favor of the lessee. b. Rent Free Period & Expenses Incurred: Generally in commercial lease transaction, the lessor or lessee may be required to make some changes in the concerned property which may be a part of the negotiation.

  5. The purpose may be to make the property fit and in line with long term vision of the lessee to enable him to run its business smoothly and effectively. In industry parlance this period is known as Rent Free Period or Fit Out Period and during this period, no rent is charged in respect of the property. This Rent Free Period may be one to three months or even longer depending upon the stake involved in the concerned property. Therefore one should clear mention the Rent Free Period and date of starting of rent. Lease Deed should also provide who will bear the expenses so incurred during the rent free period.

  6. d. Additional Key Points: Some of the points as mentioned below may be discussed in detail a. Power back Up / Generator Set Provisionb. Electricity Loadc. Parkingd. Maintenance of Propertye. Storage Spacef. Any other relevant point e. Service Tax and TDS: In case of commercial lease deed the rent payable is generally subject to the service tax and TDS. Further the service tax might be chargeable to the lessee in addition

  7. to the rent subject to the applicable law and the lessee might be required to deduct the amount of TDS from the rent at the time of making payment of rent to the landlord. f. Sale of property: It may happen that the landlord sell or assign his right in the concerned property to other person during the tenure of the lease deed then parties should mention clearly, especially in case of Commercial lease deeds which involved very high stake and lots of changes might be carried out by the lessee as required for the smooth and efficient running of its business, that such sale or assignment shall be subject to leasehold right of the lessee and the landlord should also inform such purchaser of the leasehold right of the lessee.

  8. g. Registration and Cost thereof: In case the period of lease deed (commercial and/or residential) is more than 11 months then such lease deed is required to be registered as per the provisions contained under the Registration Act, 1908. Unlike residential lease deed, the cost of registration of commercial lease deed is normally very high so the parties to the lease deed should clearly mention that in what manner such cost shall be bear and whether the cost thereof shall be borne by both the parties equally or otherwise. For more information on lease agreement, please visit this website.

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