Specimen Lease Deed explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Commercial vs Residential Lease — Key Differences
Commercial/industrial leases differ significantly from residential leases: (a) longer terms (5-30 years vs 11 months-3 years), (b) higher deposits (6-12 months' rent), (c) fit-out provisions (tenant's right to modify premises for business use), (d) CAM charges (Common Area Maintenance — significant in commercial properties), (e) compliance obligations (fire safety, factory licenses, pollution control), (f) assignment/sub-lease provisions (more common in commercial), (g) no Rent Control protection in most states (Rent Control Acts typically cover residential tenancies).
Specimen Lease Deed — Commercial Property
DEED OF LEASE — COMMERCIAL PREMISES
Between AND
1. Demised Premises: .
2. Term: [5/9/15] years from to , with option to renew for [2] further terms of [5] years each.
3. Rent: Rs. per month (Rs. per sq. ft. per month × sq. ft.). GST at 18% applicable on rent — payable by the Lessee. TDS at 10% under Section 194-I deducted by the Lessee.
4. Escalation: [15]% increase every [3] years. Alternatively: linked to CPI or market rate review.
5. Security Deposit: Rs. (equivalent to [6-12] months' rent) — interest-free, refundable on vacating.
6. CAM Charges: Rs. per sq. ft. per month — covering: security, housekeeping, common area electricity, lift maintenance, DG backup, water supply. Escalation: [10]% annually or actual cost basis.
7. Fit-Out: The Lessee may carry out interior fit-out at their own cost — subject to: (a) Lessor's prior written approval for structural changes, (b) compliance with building regulations, (c) obtaining necessary municipal/fire approvals. On termination: the Lessee shall restore the premises to original condition — or forfeit the fit-out to the Lessor (as mutually agreed).
8. Permitted Use: . The Lessee shall NOT use for any illegal, hazardous, or prohibited purpose. The Lessee shall obtain all necessary licenses (shops & establishments, fire NOC, factory license for industrial use).
9. Lock-In: [3] years — neither party shall terminate during the lock-in period except by mutual consent or for material breach.
10. Termination: After lock-in: [6] months' written notice by either party. Immediate termination for: non-payment (3 consecutive months), illegal use, insolvency, material breach.
11. Insurance: Lessor: structure insurance. Lessee: contents insurance, public liability insurance, and fit-out insurance.
12. Compliance: The Lessee shall comply with all applicable laws: (a) fire safety regulations, (b) environmental/pollution norms, (c) labour laws (for factories), (d) municipal bye-laws, (e) GST registration for the premises.
13. Assignment/Sub-Lease: Not permitted without Lessor's prior written consent — which shall not be unreasonably withheld for reputable assignees.
Registration and Stamp Duty
Commercial leases exceeding 1 year: MANDATORY registration. Stamp duty: typically higher than residential — based on total rent + premium + CAM charges for the entire term. Some states: stamp duty on the AVERAGE annual rent × term years. GST on rent: 18% (commercial property is not exempt from GST unlike residential — residential rent was exempted only for individuals not registered under GST).
Disclaimer: This article is for informational purposes only and does not constitute legal or professional advice. While every effort has been made to ensure accuracy based on the latest laws and amendments, readers should consult a qualified professional before acting on any information provided. For expert assistance, contact us.
Key Facts About Specimen Lease Deed
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What is CAM and how is it structured in commercial leases?
CAM (Common Area Maintenance) covers shared building services: (1) SECURITY — guards, CCTV, access control, (2) HOUSEKEEPING — common areas cleaning, waste management, (3) ELECTRICITY — common area lighting, lifts, AC in lobbies, (4) DG BACKUP — diesel generator for power backup, (5) WATER — common water supply and treatment, (6) MAINTENANCE — lifts, fire systems, structural maintenance. Typically: Rs. 8-25 per sq. ft. per month (varies by grade of building). Escalation: 10% annually or ACTUAL COST basis (open-book — landlord shares cost breakup). CAM is SEPARATE from rent — always specify both amounts clearly.
Is GST applicable on commercial rent?
YES — 18% GST applies on rent of COMMERCIAL property (office, retail, warehouse, industrial). The landlord charges GST on the rent invoice — the tenant pays rent + 18% GST. The tenant can claim INPUT TAX CREDIT on the GST paid (if registered under GST and the premises are used for business). For RESIDENTIAL property: rent is exempt from GST when the property is rented TO an individual for personal use (Notification 04/2022).
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Specimen Lease Deed: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.