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Commercial Lease Agreement

Free commercial lease for offices, shops and warehouses in India: lock-in, escalation, CAM charges, fit-out period, deposit refund and registration.

A commercial lease sets the terms on which a business rents an office, shop, warehouse or other non-residential space. You need one for any business premises, and it usually must be registered if its term exceeds one year.

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What to watch when you use this

  • A lease from year to year, for a term exceeding one year or reserving a yearly rent must be registered under the Registration Act, 1908. An unregistered lease that required registration cannot generally be relied on to prove its terms, which can cost a tenant its lock-in and renewal rights.
  • Stamp duty on a lease is set by each State and is often calculated on the average annual rent, deposit, premium and term. It can be significant for multi-year leases, so agree who pays.
  • Define CAM (common area maintenance) charges precisely, with an annual statement and a right to inspect. Open-ended maintenance charges are the most common source of commercial rent disputes.
  • GST on commercial rent, including whether the tenant must pay it under reverse charge, depends on the registration status of both parties. Confirm with your accountant before fixing the rent clause.
  • Check that the landlord can lawfully lease the premises for your intended use: title, occupation certificate, permitted use under local building rules and any mortgagee's consent.

Stamping and registration. Stamp duty is a State subject, and an unstamped or insufficiently stamped instrument is generally inadmissible in evidence under Section 35 of the Indian Stamp Act, 1899 until the duty and penalty are paid. Registration requirements are separate and depend on the instrument and the State. Confirm both for your State before executing this document.

Template
COMMERCIAL LEASE AGREEMENT

This Lease Agreement is made on [DATE] at [CITY] between:

[LESSOR NAME], [son/daughter of [PARENT NAME] / a company / firm], residing at / having its registered office at [ADDRESS], PAN [PAN] ("Lessor"); and
[LESSEE NAME], a [company / LLP / firm], having its registered office at [ADDRESS], PAN [PAN], GSTIN [GSTIN] ("Lessee").

1. PREMISES
The Lessor leases to the Lessee the premises described in Schedule 1, with a carpet area of approximately [AREA] square feet, together with [NUMBER] car parking spaces and the right to use the common areas and facilities of the building ("Premises").

2. TERM AND LOCK-IN
2.1 The lease is for [NUMBER] years starting on [COMMENCEMENT DATE] ("Term").
2.2 Neither party may terminate this lease during the first [NUMBER] months of the Term ("Lock-in Period"), except under clauses 13 and 15. If the Lessee vacates during the Lock-in Period for any other reason, it will pay rent for the unexpired part of the Lock-in Period.
2.3 After the Lock-in Period, the Lessee may terminate by giving [NUMBER] months' written notice. The Lessor may terminate only under clause 13.
2.4 The Lessee may renew for a further [NUMBER] years by written notice at least [NUMBER] months before the Term ends, with rent escalated as in clause 3.3.

3. RENT
3.1 Rent is ₹[AMOUNT] per month, being ₹[RATE] per square foot of carpet area, payable in advance by the [DAY] day of each month.
3.2 No rent is payable for a fit-out period of [NUMBER] days from handover of possession. Rent starts on [RENT COMMENCEMENT DATE].
3.3 Rent will increase by [PERCENTAGE]% [every year / every three years] on the original or last escalated rent. No other increase will apply during the Term.
3.4 GST on rent will be paid as required by law. The Lessee will deduct tax at source as required by law.

4. SECURITY DEPOSIT
4.1 The Lessee will pay an interest-free refundable security deposit of ₹[AMOUNT], equal to [NUMBER] months' rent, on signing.
4.2 The Lessor will refund the deposit when the Lessee hands over vacant possession, less only documented amounts due under this lease. If it is not refunded then, the Lessee may remain in occupation without paying rent until refund, and the deposit will carry interest at [RATE]% per annum.

5. MAINTENANCE AND CAM CHARGES
5.1 The Lessee will pay common area maintenance charges of ₹[RATE] per square foot per month, covering only the items listed in Schedule 2.
5.2 CAM charges may be revised once a year based on actual cost, with a statement of the previous year's expenditure, by no more than [PERCENTAGE]%. The Lessee may inspect the supporting records.

6. TAXES AND OUTGOINGS
Property tax and other levies on the Premises are payable by the Lessor. Electricity and water are payable by the Lessee as per separate meters.

7. USE AND LICENCES
7.1 The Premises will be used only as [PERMITTED USE, FOR EXAMPLE OFFICE / RETAIL STORE / WAREHOUSE].
7.2 The Lessor confirms that the Premises have an occupation certificate and may lawfully be used for the permitted use, and will provide the documents and no-objection letters the Lessee reasonably needs for its licences and registrations.

8. FIT-OUTS AND ALTERATIONS
8.1 The Lessee may carry out non-structural fit-outs under plans approved by the Lessor, which approval will not be unreasonably withheld or delayed beyond [NUMBER] days.
8.2 At the end of the lease, the Lessee may remove its movable fit-outs and will restore the Premises to their original condition, fair wear and tear excepted.

9. REPAIRS
The Lessor will carry out structural repairs and repairs to the building's common systems, such as lifts, fire-fighting and plumbing risers. The Lessee will carry out internal day-to-day repairs to the Premises. If the Lessor does not carry out a necessary repair within [NUMBER] days of written notice, the Lessee may do so and set off the reasonable documented cost against rent.

10. INSURANCE AND SIGNAGE
The Lessor will insure the building; the Lessee will insure its fit-outs and contents. The Lessee may display signage at the Premises as permitted by local rules.

11. ASSIGNMENT AND SUB-LETTING
The Lessee will not assign the lease or sub-let the Premises without the Lessor's written consent, which will not be unreasonably withheld. The Lessee may, without consent but with written notice, permit its group companies to share the Premises.

12. LESSOR'S COVENANTS
12.1 The Lessor confirms that it has clear title to the Premises and the right to lease them, and that the Premises are not subject to any dispute or encumbrance that affects this lease, except as disclosed in Schedule 1.
12.2 The Lessee, paying rent and performing its obligations, will have peaceful possession of the Premises without interruption by the Lessor or anyone claiming through the Lessor.
12.3 If the Lessor sells or mortgages the Premises, it will ensure the buyer or lender is bound by this lease.

13. DEFAULT
If either party commits a material breach, including non-payment of rent for [NUMBER] months, not remedied within [NUMBER] days of written notice, the other party may terminate this lease by written notice.

14. HANDOVER
On expiry or termination, the Lessee will hand over vacant possession against simultaneous refund of the deposit, after a joint inspection recorded in a signed handover note.

15. FORCE MAJEURE
If the Premises become wholly or partly unusable due to fire, flood, earthquake, structural failure not caused by the Lessee, or government order, rent and CAM charges will abate proportionately. If the Premises remain unusable for more than [NUMBER] days, either party may terminate this lease without penalty, even during the Lock-in Period.

16. REGISTRATION AND STAMP DUTY
This lease will be registered with the Sub-Registrar of Assurances at [LOCATION] within the time allowed by law. Stamp duty and registration charges will be borne by [the Lessee / the parties equally]. 

17. DISPUTES AND GOVERNING LAW
This lease is governed by the laws of India. Disputes will be referred to a sole arbitrator appointed by mutual agreement under the Arbitration and Conciliation Act, 1996, with the seat at [CITY].

IN WITNESS WHEREOF the parties have signed this lease on the date first written above.

_______________________        _______________________
[LESSOR NAME]                  For [LESSEE NAME]
Lessor                         Authorised Signatory

Witnesses:
1. Name: [NAME]  Address: [ADDRESS]  Signature: ____________
2. Name: [NAME]  Address: [ADDRESS]  Signature: ____________

SCHEDULE 1: DESCRIPTION OF PREMISES
[Unit, floor, building, survey or plot number, address, carpet area, boundaries, parking and any disclosed mortgage.]

SCHEDULE 2: ITEMS COVERED BY CAM CHARGES
[For example: common area cleaning, security, lift maintenance, common area electricity. State that capital replacement costs are excluded.]

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This free template is provided by ClauseAudit as general information, not legal advice, and using it does not create an advocate-client relationship. Replace every [BRACKETED] placeholder. Stamp duty and registration requirements vary by State and are your responsibility. Have the final document reviewed by a qualified advocate before use.

When to use this template

  • You are renting an office, shop, showroom, clinic, restaurant or warehouse for your business.
  • You are a landlord letting commercial space to a company or firm for several years.
  • You want lock-in, escalation and CAM charges spelt out before investing in fit-outs.
  • Your current arrangement is an unregistered 11-month agreement and you want security of tenure.

How to fill it in

  1. Enter both parties' details and describe the Premises fully in Schedule 1, including any mortgage on the property.
  2. Agree the term, lock-in, rent, rent-free fit-out period, escalation rate and deposit, and fill them in.
  3. List exactly what CAM charges cover in Schedule 2, and set the annual cap on increases.
  4. Ask the landlord for title documents, the occupation certificate and any mortgagee consent, and verify them before signing.
  5. Calculate stamp duty under your State's stamp law, which often depends on rent, deposit and term, and pay it by e-stamping or stamp paper.
  6. Both parties sign and present the lease for registration with the Sub-Registrar within the time allowed, with two witnesses and identity proof.
  7. Keep the registered original safely, and give the landlord's no-objection letter to the authorities when applying for trade licences.

Key clauses explained

Lock-in and exit (clause 2)
Landlords want certainty of income; tenants want flexibility. A lock-in binding both sides, with notice-based exit after it, balances the two.
Fixed escalation (clause 3.3)
A stated escalation rate and frequency, with no other increases, lets the tenant budget for the full term and avoids renegotiation.
CAM charges and audit (clause 5)
Listing what CAM covers, capping annual increases and allowing inspection stops maintenance charges becoming a second, uncontrolled rent.
Deposit refund against handover (clause 4.2)
Making refund simultaneous with handover, with consequences for delay, prevents the landlord holding a large deposit after the tenant leaves.
Title and quiet possession (clause 12)
A tenant spending heavily on fit-outs needs assurance that the landlord owns the premises and that a buyer or bank will respect the lease.
Registration (clause 16)
An unregistered lease that requires registration cannot generally be used to prove its terms, which undermines the tenant's lock-in, renewal and deposit rights.

Frequently asked questions

Is registration of a commercial lease mandatory?

Under the Registration Act, 1908, leases from year to year, for a term exceeding one year or reserving a yearly rent must be registered. Most multi-year commercial leases therefore need registration. An unregistered lease that required registration generally cannot be relied on to prove its terms, though it may be used for limited collateral purposes. Some States have additional local requirements.

How is stamp duty calculated on a commercial lease?

Each State sets its own method, often a percentage of the average annual rent, with deposits, premiums and the length of the term also counted in some States. For long leases, stamp duty and registration fees can be substantial. Check your State's current schedule and agree in the lease who pays. Sharing equally is common.

What is a typical rent escalation for commercial property?

Market practice varies by city and property type. Common structures include about 5% every year or about 15% every three years. There is no statutory limit for most commercial leases. What matters is that the rate and frequency are fixed in the lease, so neither side can demand a different increase during the term.

Can the landlord terminate a commercial lease before the term ends?

Only if the lease allows it, or the tenant commits a breach that the lease treats as a ground for termination, or the law of your State permits it. This template allows the landlord to terminate only for an unremedied material breach. Even then, possession should be recovered through legal process, not by locking the tenant out.

Is GST payable on commercial rent?

Renting commercial property is generally a taxable supply under GST. Whether the landlord charges GST, or the tenant pays it under reverse charge, depends on the GST registration status of each party, and the rules have changed in recent years. Ask your accountant to confirm the position before agreeing whether rent is inclusive or exclusive of GST.

What happens to fit-outs when the lease ends?

That depends on the lease. This template lets the tenant remove movable fit-outs and requires it to restore the premises to their original condition, fair wear and tear excepted. Anything fixed that is left behind is not paid for unless the lease says so. If you are investing heavily, negotiate a longer lock-in on the landlord or compensation for unamortised fit-out costs if the landlord ends the lease early.

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This free template is general information about Indian law as at 2026-10-10, not legal advice, and using it does not create an advocate–client relationship. Replace every bracketed placeholder and have the final document reviewed by a qualified advocate before use.