Let us say you to use a property on lease. You set up your store on this leased-out property and run your business successfully. One fine day, the landlord demands you to move out all of a sudden. What can you do in that situation? How can you prove to him that what he is doing is outside of the law?
That is why having a lease deed is a crucial aspect while renting a property. The lease deed protects the tenants from events like those mentioned above by clearly stating the lease's rules and regulations. For example, in the above case, if the landlord asks you to vacate the property abruptly without a valid cause, you can refer to the lease deed to prove your rights as a tenant.
In this article let us get into the details of what is lease deed, a lease deed draft, a lease deed registration, and a lease deed sample.
What Is The Meaning Of A Lease Deed?
Lease deeds, also known as are official agreements mutually agreed upon by the landlord and tenant regarding their right while leasing out a property. The lease deed should cover essential aspects such as the lease term, rent amount, permitted usage of the property, and any specific conditions or restrictions agreed upon by both parties.
This comprehensive document protects both you and the landlord, ensuring a fair and transparent landlord-tenant relationship throughout the lease period.
Note: If you are wondering how is lease deed different from lease/rent agreement and leave & license agreement, scroll to the end of this blog.
What Is The Importance Of a Lease Deed?
Lease deeds are of great importance for both landlords and tenants as they serve several crucial purposes, ensuring a smooth and legally binding landlord-tenant relationship. Here are the key importance of lease deeds:
Legal Protection: Lease deeds provide legal protection to both parties by clearly defining the terms and conditions of the lease. This helps avoid disputes and misunderstandings, as all parties are aware of their rights and obligations.
Clarity of Terms: A well-drafted lease deed outlines the specifics of the lease, including the lease term, rent amount, due dates, security deposits, rules for property usage, and maintenance responsibilities. This clarity helps prevent conflicts that may arise due to misunderstandings or differing interpretations.
Binding Agreement: Once signed by both parties, the lease deed becomes a legally binding contract. It ensures that all parties involved are committed to adhering to the agreed-upon terms throughout the lease period.
Establishes Tenant's Rights: For tenants, a lease deed establishes their right to occupy and use the property for the specified lease term. It safeguards them from sudden evictions or arbitrary changes in lease conditions.
Security for Landlords: For landlords, a lease deed provides security by guaranteeing a fixed income for the specified lease term. It allows them to enforce rent collection and protect their property from misuse.
In case of any breach of the lease terms or disagreements, a properly drafted lease deed provides a basis for legal recourse. It helps resolve conflicts and protects the rights of both parties.
At PropReturns , we assist our clients through the entire leasing process, right from finding the property to paperwork. Making commercial property renting a piece of cake.
Additional read: Commercial Leasing in India: 7 Things to Know
Lease Deed Format
Formatting a lease deed is similar to a rental agreement. You need to enter details like:
- Date
- Name of the Landlord and tenant
- Location
- Lease term
- Rules and regulations etc.,
Here is a lease deed format for your reference. You can download this format and edit it according to your needs.
Lease Deed Agreement Drafting
Drafting a lease deed agreement in India involves several important steps to ensure that all essential aspects of the lease are adequately covered. Here is a step-by-step procedure to create a lease deed agreement in India:
Step 1: Gather Information Collect all necessary information related to the lease, including the names and contact details of both parties, property details (address, size, and description), lease term, rent amount, security deposit, and any specific terms or conditions agreed upon.
Step 2: Begin with the Introduction Start the lease deed with an introductory paragraph stating the date of the agreement and the names and addresses of the landlord and tenant. Provide a detailed description of the property being leased, including its address, size, boundaries, and any additional features or amenities.
Step 3: Define the Lease Term Clearly state the lease term, including the start date and end date. If the lease is renewable, mention the conditions for renewal. Mention the rent amount to be paid by the tenant, along with the due date for payment.
Step 4: Outline Usage and Restrictions Clearly outline the permitted use of the property and any specific restrictions or conditions related to its usage. For example, mention whether subletting is allowed or prohibited. Define the responsibilities of both parties concerning property maintenance, repairs, and the handling of any damages caused during the lease term.
Step 5: Sign and Execute Once both parties are satisfied with the terms, sign the lease deed in the presence of witnesses. Each party should keep a copy of the signed agreement for their records.
Lease Deed Registration
The lease deed registration can be done at the registrar's office of your locality. Several states provide the option to register the deed online also.
Online process:
- Check if the state government allows the online lease registration process.
- Visit the official website and create a profile by giving your details.
- Enter the details of the lease such as the name of the landlord and tenants, location of the property, lease term, etc.,
- Upload proof of address such as an Aadhaar card, bank passbook, passport, etc. as your address proof.
- Once done, you can pay the stamp duty and registration charges online using net banking, debit/credit card, or UPI.
- Although these steps can be done online, you need to visit the sub-registrar’s office personally to officially verify the documents submitted.
- Pick out a day to visit sub-registrar;s office, bring all the documents you have uploaded and verify them.
Finally, after the verification process is complete, the registrar will make your lease deed official.
Offline Process:
- Visit the registrar's office in your area with two witnesses for registration.
- Print the lease agreement on stamp paper and sign it to make it officially binding.
- Have official documents such as an Aadhar card, Driving license, electricity bill, passport-size photographs, etc.,
- Pay the applicable stamp duty and pay the registration fees. The registration fees are generally a percentage of the property's annual rent or its market value, depending on the state's regulations.
- The Sub-Registrar's Office will verify the lease deed and accompanying documents to officially register the lease deed and provide a unique registration number.
- The lease deed will be retained by the sub-registrar's Office, and the parties will receive a certified copy as proof of registration.
What Is The Difference Between A Lease Deed And A Lease Agreement?
Lease Deed and Lease Agreement are legal documents used in property leasing.
A Lease Deed is a formal, registered document requiring stamp duty payment, used for long-term leases (typically 10 years and more). It must be signed by both parties in the presence of witnesses and registered with the Sub-Registrar's Office to be legally valid.
Lease Agreements are commonly used for short-term leases. They are often executed on plain paper and have lower stamp duty. Lease Agreements are suitable for leases of 11 months or less.
Both documents outline the terms and conditions of the lease, including rent, lease term, property details, and usage guidelines. Choosing between a Lease Deed and a Lease Agreement depends on the lease duration and specific legal requirements in each state.
Lease Deed vs. Leave and License Agreement
Lease Deed and Leave and License Agreement are distinct legal documents used in property transactions. A Lease Deed is a formal contract used for long-term leases (typically 10 years and more), typically exceeding one year. It establishes a lessor-lessee relationship, granting the lessee transferable interest in the property for the lease term. Registration of the Lease Deed is usually required for validity.
On the other hand, a Leave and License Agreement is used for short-term arrangements (5 years or so), often up to 11 months. It creates a licensor-licensee relationship, allowing the licensee to use the property for a specific period, while the licensor retains ownership. Leave and License Agreements are generally not required to be registered.
The key difference lies in the lease term and the transferability of interest. Lease Deeds are for longer periods with transferable rights, while Leave and License Agreements are for short durations without transfer of interest. Choosing the appropriate document depends on the intended lease duration and the specific legal requirements in the relevant state. Legal advice is recommended to ensure compliance and protection for both parties involved.
Additional read: All you need to know about Leave and License agreement
What Is The Difference Between A Lease Deed And A Sale Deed?
Let us have a look at the differences from the table below.
| Aspect | Lease Deed | Sale Deed |
|---|---|---|
| Nature of Agreement | Lease Deed is a lease agreement | Sale Deed is a transfer of ownership |
| Parties Involved | Lessor and Lessee | Seller and Buyer |
| Purpose | Provides the temporary right to use property | Transfers permanent ownership of property |
| Duration | Typically long-term (exceeding 1 year) | Executed immediately |
| Registration | Optional | Mandatory |
| Stamp Duty | Calculated based on lease term | Calculated based on property value |
| Possession | Lessee has possession during the lease period | Buyer has the possession after the sale is complete |
Conclusion
Having well-drafted and legally valid deeds facilitates transparent and harmonious property transactions, fostering trust and confidence between lessors and lessees. With the help of this article, you can create a well-drafted lease deed that will safeguard your rights as a tenant or a landlord.
Looking to find a leased property for your business? We have a whole list of wonderful properties to choose from here.
