What is a Lease Deed?

A lease deed is a written contract between a landlord (lessor) and tenant (lessee), which states
that the landlord would receive a periodic payment in exchange of allowing the tenant to use and
occupy the property. The lease deed also defines the terms and conditions that govern the
relationship between a landlord and a tenant during the period of lease.

A lease deed is generally required when the property is leased for a long period of time, ranging
between 1-5 years or even longer. In such cases, a lease deed plays an important role to govern
the relationship between the landlord and tenant and lays down the provisions legally binding
over them.

A lease deed must be drafted by a good documentation lawyer in India who can understand the
requirements of both the sides and draft an unbiased deed that protects the interest of both the
landlord and tenant. Consulting a documentation lawyer becomes more important when the lease
deed is required for a commercial property like office, factory or shop.

Key Contents of a Lease Deed in India

Lease deed should be drafted in a proper format. Firstly, it shall include the day, date and place
where the deed will be executed. Then it should mention the details of the parties to the deed i.e.,
the lessor and the lessee. Next, This Deed contains all the details of the property that is to be
leased, the amount of rent or premium to be paid periodically, rights of the lessee to enjoy the
property, liabilities, and duties of the lessor, and the time period for which the property is to be
leased. This deed may contain any other clause as decided by both the parties to this deed. Its
must contain the following recitals:

1. Name, Date, and Place- The lease deed shall contain the date and the day on which it is
executed along with the place where it will be executed. The deed shall also contain the
name, age, father’s name, occupation and place of residence of both the parties to the
deed i.e., lessor and the lessee.
2. Details of the property- This Deed shall contain the details and description of the
property that will be put on the lease. The details of the property should include the area
of the property, its exact location, registration details, description of structures standing
on the property and any other relevant details.
3. Time period- A property is given on lease for a specific time period only. This deed shall
mention the time period for which the rights of the property are transferred to the lessee
and the date on which the lease will expire.
4. Consideration or Rent- A lessee is required to pay a certain sum of money periodically
as consideration or rent to the lessor. This deed includes the amount of rent, the date on
 which the rent is to be paid, the mode of payment, increase in rent and the process for the
delay in payment. It may also contain the amount of security deposit if it is to be paid.
5. Utility and Maintenance charges and land taxes- A lease deed shall specify that will
party will be responsible to pay the utility charges of the leased property such as water
charges, electricity bills, telephone, and internet bills. Also, it should be specified that
which party will be liable to pay the maintenance charges of the property, to repair any
damage who will pay the land taxes or other such charges as levied by the government.
6. Rights and duties of the lessor and the lessee- A lease deed shall mention the rights and
liabilities of both the parties, their interests, benefits, claims, and duties. It shall also
mention the reasonable hours during which the lessor is allowed to inspect the leased
property.
7. Termination of Lease-It is pertinent to mention the date on which the lease agreement or
deed will come to an end. The lessee shall hold no rights after the lease deed is
terminated. A lease can be terminated on the date of expiry as mentioned in the deed or
on the grounds of a breach, failure to pay rent or any other ground of termination. The
deed shall also include the process for the handover of possession of the leased property
after the expiration of the lease.
8. Sub-letting the leased property- It must include the clause of sub-letting the property
i.e., whether the further letting of the property on lease is permissible or not. If
permissible, it should be further leased only on the approval of the lessor and not
otherwise.
9. Payment of legal charges- The payment of stamp duty, registration charges, and any
other government charge shall be borne by the parties to the deed. It shall be mentioned
in the deed whether the charges are to be born by either of the parties or by both parties.
10. Jurisdiction- This Deed shall mention the Court within whose jurisdiction the property
lies or the parties live and the laws which it will be subjected to in case of any conflict.
11. Indemnity – It is important to include an indemnity clause in the lease deed that will
cover any possible loss or damage to the parties.
12. Renewal- This Deed may contain the clause of renewal of the lease after a specific
period. In the case of renewal, it should be specified whether there would be any
alteration of the consideration or rent.

Stages of a Lease Deed

The entire transaction executing the Lease Deed can be broken down into the following stages:

1. Negotiation Stage: This is the very first stage of the transaction and it comes into effect
right after the Lessee has identified a property suitable for his use. The parties involved
shall need to discuss the various commercial aspects of the deal such as duration of the
lease, consideration, mode of payment etc. The focus at this stage is more on the
commercial aspects rather than the legal aspects.
 2. Preliminary Documentation Stage: Once the commercial aspects of the transaction
have been agreed upon, the parties involved can get into an Agreement to Lease or
preferably a Memorandum of Understanding recording the commercial aspects of the
deal and the broad duties and obligations of the respective parties. This creation of an
Agreement to Lease or Memorandum of Understanding is to place on record the intention
of the parties and thus allow the next stage of the process.
3. Title Investigation or Due Diligence Stage: The focus of this stage is to verify the
Lessor’s title to the property and the Lessor’s ability to demise the property by way of the
lease in favour of the Lessee. This typically involves a thorough reading of the title
deeds, verification with the Government records by way of a Title Search at the
respective office and finally the issuance of Public Notices inviting objections. The
issuance of Public Notice is not mandatory and can be avoided based on the situation. At
this stage, it is also necessary to see what permission are mandatory and the steps
required to obtain the same.
4. Drafting and Payment of Stamp Duty Stage: The lease can be demised by way of an
Agreement to Lease however the preferred mode is a Lease Deed as it is not contingent
upon a future instrument. Once the document has been drafted taking into consideration
the various terms of the transaction and the draft approved by the parties; the payment of
stamp duty can be undertaken on the Lease Deed. Since Stamp Duty is a State subject, let
us consider an example of Maharashtra; an Agreement of Lease needs to be stamped as
per Article 25 of Schedule I whereas a Lease Deed can be stamped as per Article 36 of
Schedule I of Maharashtra Stamp Act (Schedule I of The Maharashtra Stamp Act, 1958).
5. Execution and Registration Stage: This stage involves the payment of premium by the
Lessee to the Lessor. The parties can simultaneously exchange the consideration amount,
take possession of the property and execute the Lease Deed. Though not mandatory, it is
accepted practice for two people to record their signature as witnesses to the execution of
the Lease Deed. Once the instrument has been executed it can be put up for registration at
the Office of the applicable Sub-Registrar of Assurances having suitable jurisdiction over
the property.
6. Post Registration Stage: Once the registration of Lease Deed is done and the property is
in possession of the Lessee, it is advisable that the various governmental and semi-
governmental bodies having jurisdiction over the property be notified in writing about the
change of holder. This would ensure a smooth transition and make the process of making
applications and acquiring Licenses relatively easy.

It is important to note that as per Section 107 of the Transfer of Property Act, 1882 and Section
19 (1) (d) of the India Registration Act, 1908 it is mandatory to register the lease of an
immovable property for a term exceeding one year or system of yearly payment of rent.  (The
Transfer of Property Act, 1982) (The Registration Act, 1908). A lease deed that needs to be
mandatorily registered is void if not registered (Usha Ranjan Ray Burman vs Sova Das, AIR
1990 Cal I)