A lease agreement is the single most consequential document you’ll sign as a tenant. Here are the ten clauses that determine whether it protects you — or quietly works against you.
Most commercial tenants in India sign their lease agreement after negotiating the headline number — the monthly rent — and skim past everything else. That’s exactly how businesses end up trapped in a 5-year lock-in with no escape clause, or hit with a restoration bill running into lakhs because nobody read the fine print on “original condition.”
Over 20 years of advising tenants across Ahmedabad, I’ve reviewed thousands of lease agreements. The disputes I see almost always trace back to one of the same ten clauses being either missing, vague, or not understood at signing. Here they are, in the order I’d want a first-time tenant to review them.
The 10 Clauses You Cannot Skip
- Lock-in Period
The minimum period during which neither party can terminate the lease is typically 24-36 months for Grade A commercial space in India. This clause should specify the exact duration and the precise financial consequence of breaking it early (forfeiture of deposit, remaining rent liability, or both).
Tip: Match the lock-in to your business’s actual visibility horizon — not the landlord’s preference.
- Security Deposit & Refund Terms
Usually 3-6 months’ rent, held as security against damage or unpaid dues. The agreement must specify the exact refund timeline after vacating (commonly 30-60 days) and the precise process for deductions — vague language like “within a reasonable period” gives the landlord room to delay indefinitely.
Tip: Insist on a specific number of days for the refund, with interest payable beyond that date.
- Rent Escalation Clause
The agreed periodic increase in base rent — standard in India is 5% annually or 15% every 3 years. This compounds significantly over a long lease: a ₹1 lakh monthly rent at 5% annual escalation becomes ₹1.28 lakh by year five.
Tip: For tenures beyond 5 years, cap escalation against CPI inflation or negotiate a flat percentage ceiling.
- CAM (Common Area Maintenance) Charges
A charge separate from rent that covers building upkeep — lobby, elevators, parking, and landscaping. In Grade A buildings this typically adds ₹8-25 per sq. ft. per month and can escalate independently of the base rent if not capped in the agreement.
Tip: Request the right to audit the CAM statement annually — many tenants never exercise this right because it isn’t explicitly granted.
- Exit Clause & Termination Notice
Specifies the notice period required to vacate after the lock-in ends — usually 3-6 months — and critically, the restoration obligation: whether you must return the space “as-is,” “broom-clean,” or fully restored to original shell condition. The last option can cost ₹300-700 per sq. ft. in removal and restoration work.
Tip: Negotiate “broom-clean” handover rather than full restoration wherever possible — this single change can save lakhs.
- Maintenance & Repair Responsibility
Defines who is responsible for structural repairs (typically the landlord) versus interior fixtures, HVAC servicing, and day-to-day upkeep (typically the tenant). Disputes frequently arise over ambiguous boundaries — for instance, whether a central air-conditioning failure is “structural” or “fixture.”
Tip: Get specific examples written into the agreement rather than relying on general terms like “structural” and “non-structural.”
- Stamp Duty & Registration
Under the Registration Act, 1908, lease agreements exceeding 11 months must be registered with the Sub-Registrar’s office to be legally enforceable. Stamp duty in Gujarat runs 1-2% of the total lease value (annual rent × tenure). The agreement should state explicitly who bears this cost.
Tip: An unregistered lease beyond 11 months may not hold up in a tenancy dispute — never accept “we’ll handle it informally” from a landlord.
- GST on Rent
Commercial lease rent attracts 18% GST. If your business is GST-registered, this is recoverable via Input Tax Credit (ITC) — but only if the landlord issues a proper monthly GST-compliant invoice. The agreement should mandate this invoicing explicitly.
Tip: Confirm the landlord’s GST registration status before signing — you cannot claim ITC on rent paid to an unregistered landlord.
- Sub-letting & Assignment Rights
Determines whether you can sub-lease unused space to another business, or assign the lease entirely if your business changes structure (merger, restructuring). Most standard agreements prohibit this by default unless explicitly negotiated — a serious constraint if your space needs to shrink.
Tip: Even if you don’t need this flexibility today, negotiating limited sub-letting rights upfront costs nothing and preserves future optionality.
- Dispute Resolution & Jurisdiction
Specifies how disagreements are resolved — arbitration versus civil court — and in which city’s jurisdiction. For a tenant based outside the property’s city, an unfavourable jurisdiction clause can make even a legitimate dispute prohibitively expensive to pursue.
Tip: Push for arbitration in the city where your registered business operates, not automatically the landlord’s home jurisdiction.
Red Flags That Should Stop You From Signing
Walk Away If You See These
- The agreement references verbal promises (“as discussed”) instead of writing them into specific clauses
- No mention of a refund timeline for the security deposit
- Restoration obligation says “original condition” with no definition of what that means
- CAM charges have no stated rate or cap — just “as applicable”
- The landlord resists registration for a lease exceeding 11 months
- No GST invoice commitment despite charging GST on rent
“The lease agreement is the only thing that matters once a dispute arises. Every verbal assurance the landlord gave you during negotiation is legally irrelevant if it isn’t written into the document you both signed.”
— Chetan Dattani, Founder, RentalHelpline
How RentalHelpline Protects Tenants on Every Deal
Reviewing a lease agreement clause-by-clause before signing isn’t optional diligence — it’s the difference between a lease that serves your business and one that quietly works against it for years. Whether you’re finalising office space, an industrial unit, or considering a pre-leased property purchase, RentalHelpline reviews every one of these ten clauses on your behalf before you sign — not after a dispute arises.
Before You Sign Anything, Talk to Chetan
A 15-minute review can catch the clause that costs you lakhs later.
Frequently Asked Questions
Q: Is a commercial lease agreement legally required to be registered in India?
A: Yes, under the Registration Act, 1908, any lease agreement for a period exceeding 11 months must be registered with the Sub-Registrar’s office to be legally enforceable. Many landlords structure agreements as 11-month leave-and-licence arrangements specifically to avoid mandatory registration, though this is increasingly scrutinised for longer-term commercial occupancies.
Q: What happens if I break the lock-in period in a commercial lease?
A: Breaking a lock-in period typically results in forfeiture of the security deposit and, in many agreements, an obligation to pay the rent for the remaining lock-in period or until a replacement tenant is found, whichever is earlier. The exact consequence depends entirely on how the lock-in clause is drafted, which is why negotiating this clause before signing is critical.
Q: Who pays the stamp duty on a commercial lease in Gujarat?
A: Stamp duty payment is negotiable between landlord and tenant and should be explicitly stated in the lease agreement. Common practice in Ahmedabad is a 50/50 split, though this varies by negotiation. Stamp duty in Gujarat is typically 1-2% of the total lease value (annual rent multiplied by lease tenure).
Q: Can a landlord increase rent beyond what is stated in the escalation clause?
A: No. A registered lease agreement is a binding contract, and the landlord cannot unilaterally increase rent beyond the escalation rate specified in the agreement during the lease tenure. This is precisely why the escalation clause must be reviewed carefully and capped explicitly before signing.
Q: What is the difference between a lease agreement and a leave and licence agreement?
A: A lease agreement creates a transferable interest in the property for the tenant and is governed by the Transfer of Property Act, offering stronger tenancy rights. A leave and licence agreement grants only permission to occupy and use the premises without creating any interest in the property, making it easier for the landlord to terminate. Many commercial landlords in India prefer leave-and-licence structures for shorter tenures.
About Chetan Dattani
Founder of RentalHelpline and Ahmedabad’s most experienced commercial leasing advisor, with 20+ years and 700+ transactions advising businesses on lease negotiation and documentation across Gujarat. RERA registered.
