22/06/2023, 16:32 Commercial Leave & License Agreement – ProCounsel

Commercial Leave & License Agreement

Post Last updated on – June 16, 2023

Important Points
1. Introduction
2. Important Terms and Conditions
3. Stamp Duty and Registration Fees
4. Registration Process

Introduction
A Commercial Rent/Leave and License Agreement is a contract between a
property owner and a tenant for the use of the commercial property on a license
basis, like a shop, office, godown, hotel, etc. The property owner is called a
Licensor and the person who is taking a property on a license basis is called a
Licensee. This agreement contains the terms and conditions which the licensee
should follow to use the commercial property for a specific period of time and for
a specified commercial purpose, for example conducting business like a retail
shop, office, parlor, or hotel, etc. The agreement includes details such as the
rental amount, security deposit, maintenance and repair responsibilities,
restrictions on use, termination clauses, dispute resolution procedures, and much
more. The agreement should be in writing, signed by both parties and comply
with local laws and regulations in Pune.

Important Terms and Conditions

The terms and conditions in a Commercial Rent/Leave and License Agreement
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Licensee and establishing clear expectations for both parties. Some of the most
important terms and conditions include:

1. License Fees: The license frees or the rental amount is the amount that the
licensee must pay to the licensor for the use of the commercial property. This
fee should be clearly mentioned in the agreement to avoid any confusion or
disputes in the future. Also, it is advisable to mention the consequences in
case of non-payment or non-regular payment of this amount.
2. Security deposit: The security deposit is an amount of money paid by the
licensee to the licensor as a form of security. This deposit is typically
refundable at the end of the license period, provided the licensee has fulfilled
their obligations under the agreement. Like, no damages happened to the
commercial premises, no pending rental amount, no pending electricity bill or
gas bills, etc.
3. Maintenance and repair responsibilities: The leave and license agreement
should clearly mention the responsibilities of each party when it comes to the
maintenance and repair clause. This can include details such as who is
responsible for fixing damages caused by normal wear and tear, and who
must pay for any necessary repairs, modification charges, and restoration
charges.
4. Restrictions on use: The agreement should specify any restrictions on the use
of the property, such as restrictions on hours of operation or limitations on
the type of business that can be conducted on the property, e.g. retail shop,
hotel, office, etc.
5. Lock-in period clause: The lock-in period clause is a provision that can be
included in commercial Rent/leave and license agreements which requires the
licensee to continue to occupy the property for a minimum specified period of
time, regardless of whether they would like to terminate the agreement or
not. The purpose of this clause is to provide the landlord (licensor) with
stability and security in the rental income, as well as to protect their
investment in the property. The lock-in period can range from several months
to several years and can be included as part of the agreement
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tenant may not terminate the agreement or vacate the property without
incurring significant financial penalties, such as paying a significant portion of
the remaining rent due. It is important to understand the implications of the
lock-in period clause before entering into a commercial rent/leave and
license agreement. If a lock-in period is included, it is important to consider
the future plans and needs of the business, such as the likelihood of
expanding or downsizing, to ensure that the lock-in period will not become a
hindrance in the future.
6. Termination clause: The agreement should include provisions for terminating
the agreement early, such as in the case of a breach of contract by either
party. This can include details such as the notice period required for
termination and the consequences of early termination.
7. Dispute resolution procedures: In the event of a dispute between the parties,
the agreement should outline the steps that will be taken to resolve the
dispute. This may include mediation, arbitration, or other forms of
alternative dispute resolution.

It is also important to add terms and conditions for the impact of unforeseen
events such as pandemic or natural disasters.

A pandemic or natural disaster clause can be included in a commercial leave and

license agreement to address the impact of unforeseen events, such as a
pandemic, earthquake, or flood. The purpose of this clause is to provide clarity
and protection to both the licensor and the licensee in the event of a major
disruption to the business or the property.

A pandemic or natural disaster clause may include provisions such as:

1. Force majeure: A force majeure clause may be included, which allows for the
suspension or termination of the leave and license agreement in the event of
an unforeseeable event beyond the control of either party, such as a
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2. License fees abatement: In the event that the property is unusable due to a
pandemic or natural disaster, a license fees abatement clause may be
included, which allows the licensee to temporarily suspend the payment of
license fees until the property becomes usable again.
3. Termination or renegotiation: In the event of a prolonged disruption to the
business or property, a clause may be included that allows for the
termination or renegotiation of the leave and license agreement, with
provisions for notice periods and any financial penalties.

A pandemic or natural disaster clause can help provide a framework for

addressing unforeseen events and protecting both parties interests. It is
important to carefully consider the language and scope of the clause when
negotiating a commercial leave and license agreement, as the specifics of the
clause can have a significant impact on the parties’ obligations and rights in the
event of a disruption.

These terms and conditions are essential for ensuring a smooth and successful
relationship between the licensor and licensee and help to prevent
misunderstandings and disputes from arising. By including these details in the
agreement, both parties can be confident in their rights and responsibilities and
can work together to achieve their goals.

Stamp Duty and Registration Fees

Stamp duty is a tax that is levied on certain legal documents, including
commercial leave and license agreements, and is payable to the government.
The amount of stamp duty payable can vary depending on the license fees, the
duration of the agreement, and the location of the property.

In the case of a commercial leave and license agreement, the stamp duty
payable can be calculated based on a percentage of the total license fees and a
refundable deposit of the agreement. The exact percentage of stamp duty
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payable is 0.25% on the total duration of licensee fees and approximately 10%
per year on the refundable deposit.

Registration Process
Parties can register their commercial leave and license agreement online without
visiting the registration office. However, if they choose to do so, they will have to
use the format provided by the government, which allows very little scope for
customization or the inclusion of custom terms and conditions.

If parties want to include a lot of custom terms and conditions in their agreement
and register it with the government, they will need to visit the registration office
to do so. This may involve additional time and effort, but it can ensure that the
agreement reflects the specific needs and requirements of the parties involved.

FAQ – Online Leave & License Agreement Registration

In: Registration and Stamp Duty

commercial leave and license, leave and license, registration fees, stamp duty

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