How to Review a Commercial Lease Deed in India

A commercial lease deed hands you the right to occupy a shop, office, warehouse, or industrial unit for a fixed period, in return for rent and a set of promises about how you will use and maintain the space. Most business owners read the rent number, glance at the term, and sign. The one thing people get wrong most often: they treat this as a document you sign and file away, when in India it is also a document you must, in most cases, take to a government office and register, and pay stamp duty on, before it counts as real evidence of anything. Skip that step and the lease is not void, but it becomes close to useless the day you actually need to enforce it. This guide (published by Adira, which makes contract and lease management software, so we have a commercial stake in you getting good at this, but the guide stands on its own) walks the lease clause by clause, then covers the registration and stamping steps that decide whether the document you signed actually protects you.

What this contract actually does

Section 105 of the Transfer of Property Act, 1882 defines a lease as "a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised... to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms." Source: Section 105, Transfer of Property Act, 1882 (Indian Kanoon). The word that matters is "transfer." A lease is not a service you buy, it is an interest in the property itself, handed to the tenant for the term. That is why it differs from a leave and licence agreement, which grants only permission to use space without transferring any interest, and why courts look at what a document actually does, not its title.

A commercial lease deed is also different from the 11-month residential rent agreement most people know, kept short deliberately to dodge compulsory registration. Commercial leases usually cannot dodge it the same way, since landlords want a real multi-year term to justify fit-out costs and rent-free periods, and that is exactly what triggers registration.

Clause by clause: what to check

Term and lock-in

The term clause states the start date, length, and any renewal option. Read it with the lock-in clause, which stops the tenant, and sometimes the landlord, from exiting before an agreed date. A lock-in binding only the tenant, while the landlord keeps a free exit right, is the most common structural imbalance in Indian commercial leases; our lock-in clause guide covers the full mechanics, including a Delhi High Court ruling upholding balance-rent recovery for early exit as a genuine pre-estimate of loss, not a penalty. Test: add the base term to the lock-in and any automatic renewal. If that exceeds 12 months, or the deed fixes a yearly rent anywhere, registration becomes compulsory whatever the document is called.

Rent, escalation and revision

Rent should be a fixed figure per month or per square foot, with the billing date stated. Most Indian commercial leases raise rent by a fixed percentage every one to three years rather than tying it to an index, commonly 15% every three years or 5% each year. Worked example: Rs 100 per sq ft at 15% every three years moves to Rs 115 from year four and Rs 132.25 from year seven. "Periodic market-linked revision" with no number is not workable at all; see our price escalation clause guide on how courts read such formulas for certainty.

Security deposit and refund

Commercial deposits run well above residential ones, commonly six to twelve months of rent depending on city and building grade, source: Sadhwani & Co, commercial lease checklist, last verified 4 September 2026. That is a large sum tied up for years, so check the refund timeline is a specific number of days, deductions are itemised against a condition report rather than left to landlord discretion, and whether interest accrues, since most leases are silent and courts will not imply it.

Maintenance and common area maintenance (CAM)

CAM covers shared costs, security, lighting, lift upkeep, housekeeping, billed per square foot on top of rent. Two things go wrong often: a flat estimate with no annual reconciliation against audited spend, and capital expenditure, a lift replacement, roof waterproofing, quietly bundled into "maintenance" so the tenant funds an upgrade that belongs to the landlord. A workable clause caps the year-on-year increase, commonly 10 to 15%, with an audit right.

Permitted use

This clause states exactly what business the tenant may run: retail, office, a specific manufacturing use, or "any lawful purpose." A narrow clause protects the landlord's building mix; a tenant should check it does not box in a later pivot, adding a kitchen counter inside a retail unit, say, without fresh consent each time.

Sub-letting and assignment

A commercial lease almost always restricts sub-letting or assignment without the landlord's prior written consent, sometimes qualified as "not unreasonably withheld." The landlord chose this tenant for its covenant strength and cannot be forced to accept a stranger instead. Our assignment clause guide covers what "unreasonably withheld" tends to mean in practice. Check whether a change of control, a share sale rather than an asset sale, counts as a deemed assignment, since most boilerplate leases stay silent on it.

Repairs

Section 108 sets default rules applying only "in the absence of a contract or local usage to the contrary," and almost every written lease displaces them, so read your actual clause rather than assume the statute covers you. In practice a lease allocates structural repairs, roof, foundation, external walls, to the landlord and day-to-day internal repairs to the tenant, stated clause by clause, not left as one vague "repairs" line.

Termination and notice

Section 106 sets a default, absent a contrary written term: a non-agricultural lease is deemed month to month, terminable on fifteen days' notice; year-to-year needs six months. Source: Section 106, Transfer of Property Act, 1882 (Indian Kanoon). A real lease deed almost always states its own notice period, commonly three to six months, and its own cause list, so check the deed itself; the statutory default only fills genuine silence.

Force majeure

This clause is the most misunderstood since 2020. In Ramanand and Others v Dr Girish Soni and Another, Delhi High Court, 21 May 2020 (RC. Rev. 447/2017; 2020 SCC OnLine Del 635), tenants of a Khan Market shop sought rent suspension during the Covid-19 lockdown. The court held a lease, once executed, is a completed transfer of property, not an executory contract, so Section 56 of the Contract Act (frustration) does not apply. Relief, if any, comes only from Section 108(B)(e), which voids a lease at the lessee's option only where a "material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let." A temporary lockdown does not meet that bar. Source: Ramanand v Dr Girish Soni (Indian Kanoon). Unless your clause expressly promises rent relief for a defined event short of total destruction, do not assume one exists.

Restoration on exit

Section 108(m) obliges the lessee to restore the property "in as good condition as it was in at the time when he was put in possession, subject only to... reasonable wear and tear or irresistible force," and Section 108(q) requires handing back possession on termination. A good lease converts this into a checkable duty: a defined restoration standard, a timeline, and what happens to the deposit if restoration is incomplete.

The critical India step: registration, stamping, and why e-signing does not finish the job

This is the part most people skip, and the part that matters most in a dispute. Section 17(1)(d) of the Registration Act, 1908 makes registration compulsory for "leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent." Source: Section 17, Registration Act, 1908 (Indian Kanoon). A three-year retail lease or a five-year warehouse lease falls inside this. Skipping registration does not void the lease, but Section 49 bars an unregistered document that should have been registered from being used as evidence, so an unregistered long lease is very hard to enforce the moment either side needs it in court. Full mechanics, and the narrow exceptions, are in when does a contract need registration.

Stamp duty is separate, fixed by each state, charged on the lease's economic value, usually average annual rent or total rent over the term, plus a share of any deposit. Two examples: Maharashtra generally starts lease stamp duty around 0.25% of total rent for shorter terms, on a tiered scale; Delhi charges roughly 2% of average annual rent for leases up to five years. Source: Beacon Filing, stamp duty and lease agreements, last verified 4 September 2026. Treat these as illustrative; schedules change by state and by year, so check your state's current one before budgeting a number.

On e-signing: the 2022 amendment removing property sale contracts from the IT Act's First Schedule never covered leases in the first place, item 5 was always limited to "sale or conveyance," a different transaction. So the IT Act does not bar e-signing a lease deed. The real block is downstream: registration for a compulsorily registrable lease still needs the parties, or an authorised representative, to appear physically before the Sub-Registrar with the document. That, not the signature method, is what forces most long commercial leases into wet ink. Full detail is in which documents cannot be signed electronically in India. A short lease, 11 months or less with no yearly rent, sits outside Section 17(1)(d) and can be executed end to end electronically.

Red flags

Normal	Red flag	Why it matters
Lock-in binds both parties for the same period	Lock-in binds only the tenant	Extracts a commitment without giving one back
Escalation stated as a specific percentage and date	"Market-linked revision," no formula	Not calculable; invites a dispute each cycle
Deposit refund in a stated number of days, deductions itemised	"Refund in due course," deductions at landlord's discretion	Turns the deposit into exit-time leverage
CAM reconciled annually, capped increase	Flat CAM estimate, no reconciliation or cap	Tenant cannot check the charge against real cost
Structural repairs on landlord, internal on tenant, stated separately	One vague "repairs" clause	The Section 108 default fills silence only, and is easy to misread
Registration and stamping named as steps, with owner and timeline	No mention of registration	Unregistered lease is barred as evidence under Section 49
Force majeure expressly names rent suspension events	Force majeure clause silent or copied from a supply contract	Ramanand v Girish Soni confirms courts will not imply relief
Restoration standard and deadline defined	"Restore to original condition," no standard stated	Leaves exit condition, and the deposit, open to argument
Change of control of tenant addressed	Silent on change of control	No contractual hook if the tenant company is quietly sold

Bad clause, better clause

Bad: "The Security Deposit shall be refunded by the Landlord to the Tenant upon vacation of the Premises, after deducting any amounts due, including but not limited to damages, unpaid dues, and restoration costs, as determined by the Landlord."

What is wrong: no refund timeline, and every deduction is "as determined by the Landlord," with no objective standard.

Better: "The Landlord shall refund the Security Deposit, less deductions permitted under this Clause, within 30 days of the Tenant handing over possession in the condition required under Clause [Restoration]. Deductions are limited to unpaid rent and CAM as of handover, and restoration costs for damage beyond reasonable wear and tear, each itemised with invoices or a joint condition report prepared at handover. A dispute over one deduction shall not delay refund of the undisputed balance."

What changed: a fixed deadline, deductions tied to proof instead of discretion, and a rule that one disputed item cannot hold the whole deposit hostage.

How it interacts with related clauses

Lock-in, escalation, and assignment each carry enough Indian mechanics to deserve their own guide: lock-in clauses, price escalation clauses, assignment clauses. Registration is covered fully in when does a contract need registration. If what you hold only grants permission to use space, not a transfer of interest, you likely have a leave and licence agreement instead, with different registration rules in states like Maharashtra; the label on the page does not settle which one it is. You can mark up a lock-in, escalation, or restoration clause directly in a lease draft, for free, using Weave, before you sign or send it back.

US and global contrast

US commercial leases run on similar economics, base rent, escalations or "bumps," a deposit, CAM, but the legal architecture is lighter. States run county recording systems mainly to establish priority against later buyers, not registration as a condition of proof, and an unrecorded lease is still generally enforceable between landlord and tenant. India's Section 49 bar is harder: an unregistered lease that should have been registered cannot even prove the deal between the original parties. US leases are also more often triple net, tenant pays taxes and insurance directly, where Indian leases usually bundle these into one CAM charge, and US courts apply a landlord's duty to mitigate after an early exit more consistently than Indian ones do.

The commercial lease review checklist

1. Term, renewal option, and lock-in stated, binding both parties equally?
2. Rent, escalation percentage, and the date it applies from, stated as numbers?
3. Deposit amount, refund timeline in days, and an objective deduction standard?
4. CAM reconciled annually against audited costs, with a capped increase?
5. Permitted use, sub-letting, assignment, and change-of-control terms all stated?
6. Repairs split by category, and notice period stated, not left to statutory defaults?
7. Restoration standard and deadline defined, tied to the deposit refund?
8. Registration and stamp duty named as steps, checked against your state's schedule?

FAQ

Does every commercial lease in India need to be registered? No. Registration is compulsory under Section 17(1)(d) for a lease running year to year, exceeding one year, or reserving a yearly rent. A lease of 11 months or less, with no yearly rent, sits outside this and is optional.

What happens if my lease was never registered? It is not void, but Section 49 bars it from being used as evidence of the transaction, making it very hard to enforce rent, possession, or termination rights if the other side contests them.

Can I e-sign a commercial lease deed? The signature method is not the block; leases were never covered by the First Schedule exclusion. Registration is the block: a compulsorily registrable lease still needs physical appearance before the Sub-Registrar, whatever method signed the document.

Does a force majeure event let a tenant stop paying rent? Only if the lease's own clause says so, or the premises are wholly destroyed or permanently unfit under Section 108(B)(e). Ramanand v Girish Soni confirms courts will not read a general lockdown into that narrow provision.

What is the difference between a commercial lease and a leave and licence agreement? A lease transfers an interest in the property; a licence only grants permission to use it. Courts look at what a document does, exclusive possession usually points to a lease, rather than its title.

This guide gets you to a working understanding of what a commercial lease deed covers, and the registration and stamping steps Indian law attaches to it. It does not tell you whether your specific lease is enforceable as drafted, or whether a lock-in or escalation figure you are negotiating is fair. That depends on the facts and your state's rules, and is not legal advice. Talk to a lawyer, and your local Sub-Registrar's office, before you sign, rely on, or dispute a commercial lease deed.