Office lease agreement terms explained

Leave and licence vs lease

Many short commercial agreements are written as an 11-month leave and licence to keep registration simple. For longer stays, a registered lease of three to nine years is common, with rent escalation built in. A registered lease gives both sides more legal certainty. In Uttar Pradesh, agreements longer than 11 months must be registered.

Key terms and what to ask for

Lock-in and notice period

The lock-in is the most important number in the agreement. If you leave during the lock-in, you usually owe rent for the rest of it. Ask for a lock-in that applies only to you, not to the landlord, so the landlord can't ask you to leave early. After the lock-in ends, you should be able to leave with your notice period.

Escalation

Check whether the escalation applies to rent only or also to maintenance, and whether it starts from the date you sign or from the date you start paying rent. Compounding 5% every year over five years adds about 28% to your rent, so the difference between 5% and 7% is significant over a long lease.

Security deposit and refund

Make sure the agreement states that the deposit is refunded within a fixed time, such as 30 days, after you hand over the office, with deductions only for unpaid dues and damage beyond normal wear and tear. A joint inspection and photos at handover protect you from disputes.

GST, TDS, stamp duty and registration

• GST at 18% applies to commercial rent when the landlord is registered. Registered tenants can usually claim input tax credit.
• Tenants who are required to deduct tax at source (TDS) on rent must deduct it at the applicable rate and issue certificates to the landlord.
• Stamp duty in Uttar Pradesh is based on the average annual rent and the lease length; registration fees are extra.
• Agree in writing who pays stamp duty and registration. The tenant often pays, but this can be negotiated.

Other clauses to read carefully

• Permitted use: make sure your business activity is allowed.
• Fit-out and changes: what you can change, and whether you must restore the office when you leave.
• Sub-letting: whether you can share the space with a group company.
• Repairs: who fixes what, especially air conditioning and electrical systems.
• Insurance: who insures the building and who insures your contents.
• Signage: where you can put your company name.
• Renewal: your right to renew, and how the new rent will be set.

Exit and handover

Read the exit clause as carefully as the entry terms. It should explain how to give notice, what condition the office must be in when you leave, and whether you must remove your interiors or can leave them in place. If you built partitions or cabling in a bare shell office, agree upfront whether you must restore the floor, because that work can cost a lot. Set a fixed date for the joint inspection and the deposit refund.

Disputes and jurisdiction

Most agreements name the courts in Gautam Buddh Nagar or Delhi as the place where disputes are heard, and many include an arbitration clause. Check which applies and make sure the process is reasonable for both sides. A clear notice address and email for each party also helps avoid arguments about whether notice was properly given.

Red flags in a draft agreement

• A lock-in that binds only you and not the landlord
• Escalation above 7% a year with no cap
• Maintenance charges that the landlord can raise without limit or notice
• No fixed timeline for returning the security deposit
• Vague descriptions of the area, parking slots or included furniture
• A landlord who is not the registered owner and can't show their right to lease the space

Before you sign

Ask for the landlord's ownership papers and the building's occupancy certificate. Check that the area in the agreement matches what you were shown, and that every promise made during negotiation (parking, rent-free period, furniture) is written into the agreement or an annexure.