Sample Format of Lease Agreement India

01 Aug, 2023

A Lease Agreement is created between the Lessor & Lessee, which provides rights to the Lessee to use such property for a period of time owned by the Lessor. However, ownership rights are not given to the Lessee.

What do you mean by Lease?

A contract by which one party conveys its property to another party for a certain or specified period in return for a periodic payment can be land, machinery, vehicle, or a piece of equipment.

Here, it is important to note the meaning of “TRANSFER OF INTEREST”. If the document (Lease Agreement) creates an interest in the property entitling the transferee to enjoyment, then it is a LEASE; but if it only permits another to make use of the property without exclusive possession, then it is not a lease rather a LICENSE.

Download Lease Agreement Format

You can also download Lease Agreement Format in the PDF format.

Transfer of a Right to Enjoy the Property is called the Lease.”

What Are The Legal Elements Of Lease?

• LESSOR: A person who is the owner of the property
• LESSEE: A person to whom the right to enjoy the property is granted.
• SUBLESSEE: A person to whom the right to enjoy the property is being
• Granted by the Lessee.
• SUBJECT MATTER: the property to be leased
• LEASE AGREEMENT: A contract between the Lessor and Lessee.

What Are The Essentials To Remember?

• Does the Lease grant the ownership to the Lessee?

No, it just grants the right to enjoy the property.

• Can the Lessee surrender the lease before the expiration of the agreed term?

Yes, at any time, with mutual consent lessee can surrender the lease.

• Is the Lessee liable to pay the Taxes on leased property?

No, Lessee is not liable to pay the taxes.

• Is the notice required for the termination of the Agreement?

Yes, prior notice is required before termination of the agreement.

• Can the Lessee sue the outsiders in his own name?

Yes, the Lessee can sue the outsiders in his own name.

• Is the instrument (agreement) required to be registered?

Yes, an agreement creates a right required to be registered.

• Is the Lessee becomes the exclusive owner of the property?

Yes, once the agreement is registered, the Lessee becomes the exclusive owner of the leased property.

• Can the leased property be subleased?

Yes, the leased property can be subleased.

• Will the first lease agreement be revoked in case of sublease?

No, the first lease agreement shall be in force.

Download the Lease Agreement Format

You can also download Lease Agreement Format in PDF format.

Essential Points to Be Observed For Drafting of Lease Agreement

1. Definitions of words and expressions used in the agreement or in its schedule, ancillary agreement, if any. Such words like Business Day, Lessor, Lessee, collateral rights etc.
2. Time Period, the time from when the agreement shall commence and the termination period e till when it shall be valid.
3. The subject matter of the lease is the property to be leased. Parties must be cleared about the property like:
4. An area of the land, ownership of the Lessor in the land, an encumbrance on the land, if any (If the land is the subject matter) that has to be leased.
5. The capacity of the machinery, its life, installments, if any (If machinery/equipment is the subject matter).
6. Rent, an amount to be paid, must be specifically mentioned in the agreement in words as well in numbers and the time period or due date when the rent has to be paid, whether monthly or quarterly or as the case may be.
7. Maintenance Charges, if any to be paid by the Lessee to the Lessor for the maintenance of the leased property.
8. Possession of subject matter in good condition that all the machinery equipment, appliances, building and other fitting and fixtures shall be transferred by the Lessor to the Lessee in a good working condition, and all the machinery equipment, appliances, building and other fitting and fixtures shall be restored by the Lessee to the Lessor in a good working condition as they are in present subject to normal wear and tear and damage by force majeure.
9. Sublease that the Lessee shall not sublease, assign, or part with the demised premises in whole or part thereof to any person, or if he sublets the property to any other person, then prior permission of the Lessor is required.
10. Repairing of the leased property shall be responsible for day-to-day minor repairs and, if any structural or major repairs, who shall carry the same.
11. Structural or constructive change is the structural additions or alterations made by the Lessee in the premises with/without the prior written consent of the Lessors. If it does, then what would be the way of cost-bearing?
12. Installation of Air-conditioners in the space provided and other electrical gadgets at his own cost. The Lessee will be entitled to remove such air conditioners and other electrical gadgets and restore the changes made, if any, to the original state.
13. Right to visit in person the Lessor shall hold the right to visit the premises in person or any other person authorized by him for inspection to carry out repairs/construction, as and when required, by giving a 24-hour notice to the occupier.
14. Compliance with all the applicable Lessee shall comply with all the rules and regulations of the local authority applicable to the demised premises.
15. Payment of local taxes and cess levied on the property that the Lessor shall pay for all taxes/cesses levied on the premises by the local or government authorities in the way of property tax for the premises.
16. Renewal of Agreement in case of expiry of the agreement, how the same shall be renewed and for what period and the rent which has to be paid.
17. Arbitration in case of any dispute arises among the parties in respect to the agreement and clauses herein then how it shall be resolved or settled.
18. Registration of the agreement where the Lease Agreement will be in front of the registrar and how the charges towards stamp duty1 , court fee & lawyer/coordinator will be bared by the Lessor & Lessee.

Conclusion

Drafting a comprehensive lease agreement is of paramount importance to ensure a smooth and legally compliant landlord-tenant relationship. The sample format and essential points provided in this guide serve as a valuable resource for creating a well-structured lease agreement in India.

A lease agreement must clearly define the rights and responsibilities of both parties, the terms of the lease, and the conditions for subleasing, if allowed. Additionally, it should specify the rent amount, payment schedule, and maintenance obligations to avoid any misunderstandings or disputes in the future.