A commercial property rental agreement (also called a commercial lease agreement or commercial rental agreement) is more than a simple piece of paper—it is the legal framework that protects the rights and obligations of both landlord and tenant while defining how a commercial space will be used, paid for, and maintained.
This article is worth reading because it:
- Fills the gaps left by existing templates (no‑cost download, Tamil version, step‑by‑step drafting checklist).
- Explains every essential clause in plain language, so even a first‑time tenant can understand the terms and conditions.
- Shows how to comply with Indian stamp duty, registration, and other legal requirements that many free templates ignore.
Table of Contents
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A commercial property rental agreement is a legally binding contract between a landlord and a tenant that sets out the rent amount, lease term, use of the premise, maintenance responsibilities, and termination procedures for a commercial space. The agreement must be signed on non‑judicial stamp paper, registered with the local sub‑registrar, and may require stamp duty payment based on the lease value.
What Is a Commercial Property Rental Agreement?
A commercial property rental agreement (or commercial lease agreement) is a legally binding contract that governs the relationship between a landlord and a tenant for the lease of commercial premises. Unlike a residential lease, the document focuses on business purposes, operating costs, and commercial activities permitted on the premise.
Key differences from a residential lease:
| Feature | Commercial Rental Agreement | Residential Lease |
|---|---|---|
| Purpose | Business use, trade, office, retail, industrial | Living, dwelling |
| Rent Calculation | Often based on floor area, market rates, service charges | Fixed monthly rent |
| Maintenance | Tenant may bear structural repairs; landlord handles common areas | Landlord usually responsible for major repairs |
| Stamp Duty | Calculated on lease value; varies by state | Lower rates, often flat fee |
| Registration | Mandatory for leases > ₹1 lakh (or as per state law) | Optional in many states |
Understanding these distinctions helps both parties protect their rights and avoid costly disputes.
Key Components of a Commercial Lease Agreement
Below is a checklist of essential terms that must appear in any commercial lease agreement. Each clause is explained in plain language and includes the basic text terms required for SEO compliance.
1. Parties & Definitions
- Landlord (or lessor) – the owner of the commercial property.
- Tenant – the business or individual who will occupy the premise.
- Premise – the exact commercial space being leased, described by address, floor area, and layout.
Legal advice: Always verify the landlord’s title and ensure the landlord and tenant are correctly identified to avoid future legal liability.
2. Lease Term & Commencement
- Lease term – the duration of the lease, e.g., “3 years starting 1 January 2025.”
- Option to renew – optional clause allowing the tenant to extend the lease for a further period at a pre‑agreed rent.
3. Rent & Payment Terms
- Rent amount – the monthly or quarterly rent payable, expressed in INR.
- Rent payment – due date, mode (cheque, NEFT, RTGS), and penalty for late payment.
- Security deposit – usually 2–3 months’ rent, held by the landlord and refundable at end of the lease after deductions for damages.
4. Use of the Premise (Permitted Activities)
- Use the property – specifies the business space purpose (e.g., “retail of garments”).
- Prohibited activities – any use that violates local laws and regulations (e.g., manufacturing of hazardous chemicals).
5. Maintenance & Repairs
- Maintenance responsibilities – who pays for maintenance and repairs of structural elements, HVAC, and common areas.
- Operating costs – may include service charges, electricity, water, and property tax.
6. Subletting & Assignment
- Sublet – whether the tenant may sublet the premise to a third party.
- Assignment – transfer of the lease to another entity, usually requiring written consent of the landlord.
7. Insurance & Indemnity
- Insurance – the tenant must maintain commercial property insurance covering fire, theft, and public liability.
- Indemnity – the tenant indemnifies the landlord against claims arising from the tenant’s use of the premise.
8. Stamp Duty & Registration
- Stamp duty – payable on the lease value; rates differ by state (e.g., 5 % in Maharashtra, 1 % in Delhi).
- Registration – mandatory for leases exceeding the prescribed value; the agreement must be executed on non‑judicial stamp paper and submitted to the Sub‑Registrar.
9. Termination & Early Exit
- Terminate – conditions under which either party may terminate the lease (e.g., breach, non‑payment).
- Notice period – usually 3–6 months written notice before end of the lease.
- Break the lease – early termination clause with penalty (e.g., 2 months’ rent).
10. Dispute Resolution
- Arbitration – parties may agree to resolve disputes through arbitration under the Arbitration and Conciliation Act, 1996.
- Mediation – optional step before litigation.
How to Draft a Commercial Rental Agreement – Step‑by‑Step
- Gather Information – Collect the landlord’s name, tenant’s business details, property address, floor area, and intended use of the premise.
- Choose the Correct Stamp Paper – In India, most commercial leases are executed on non‑judicial stamp paper of appropriate value (e.g., ₹5,000 for a lease up to ₹5 lakh).
- Insert the Parties Clause – Clearly state “This agreement is made between [Landlord Name], the lessor, and [Tenant Name], the lessee.”
- Define the Premise – Include a plan diagram or description of the commercial space.
- Set the Lease Term – Write the start and end dates, and any renewal options.
- Specify Rent & Security Deposit – State the rent amount, payment schedule, and security deposit details.
- Add Use & Restriction Clauses – Define permissible commercial activities and any prohibited uses.
- Detail Maintenance & Service Charges – Allocate responsibilities for maintenance, repairs, and operating costs.
- Include Subletting, Assignment, and Insurance Clauses – Clarify whether the tenant may sublet or assign the lease, and the required insurance coverage.
- Insert Stamp Duty & Registration Requirements – Mention the applicable stamp duty rate and that the agreement will be registered.
- Draft Termination & Notice Provisions – Provide clear notice period and penalties for early exit.
- Add Dispute‑Resolution Clause – Choose arbitration or mediation as the preferred method.
- Signature Block – Both landlord and tenant sign, along with two witnesses.
Legal advice: It is advisable to have a qualified lawyer review the draft before execution to ensure compliance with the tenancy law of the relevant state.
Sample Rental Agreement for Commercial Property (Template)
Below is a rental agreement template for commercial property that you can copy, edit, and print on stamp paper.
NOTE: This is a sample only. Replace bracketed text with your specific details and obtain legal advice before signing.
COMMERCIAL RENTAL AGREEMENT
This Agreement is made on this ___ day of __________, 2025, between:
- [Landlord Name], residing at [Address], hereinafter referred to as the “Landlord.”
- [Tenant Name], a company incorporated under the Companies Act, 2013, having its registered office at [Address], hereinafter referred to as the “Tenant.”
WHEREAS the Landlord is the absolute owner of the commercial premises situated at [Full Address], measuring [Floor Area] sq. ft. (the “Premise”).
NOW, THEREFORE, the parties agree as follows:
Lease Term – The lease shall commence on [Start Date] and shall continue for a period of [Number] years, expiring on [End Date], unless terminated earlier as per Clause 9.
Rent – The Tenant shall pay a monthly rent of ₹ [Amount] payable on or before the 5th day of each month by NEFT/RTGS to the Landlord’s account [Account Details].
Security Deposit – The Tenant shall deposit ₹ [Amount] (equivalent to [X] months’ rent) as security, refundable at the end of the lease after adjusting any dues or damages.
Use of Premise – The Premise shall be used solely for [Specify Business Activity]. Any change in use requires prior written consent of the Landlord.
Maintenance & Repairs – The Tenant shall be responsible for maintenance and repairs of the interior, HVAC, and electrical fittings. The Landlord shall maintain the structural integrity and common areas.
Service Charges & Taxes – The Tenant shall pay all service charges, water, electricity, and property tax applicable to the Premise.
Subletting & Assignment – The Tenant shall not sublet or assign the lease without the Landlord’s written consent.
Insurance – The Tenant shall obtain commercial property insurance covering fire, theft, and public liability, naming the Landlord as an additional insured.
Termination – Either party may terminate the lease by giving six (6) months’ written notice. Early termination by the Tenant shall attract a penalty of two (2) months’ rent.
Stamp Duty & Registration – The parties shall pay stamp duty as per the prevailing rates of [State] and register this Agreement with the Sub‑Registrar within 30 days of execution.
Dispute Resolution – All disputes shall be referred to arbitration under the Arbitration and Conciliation Act, 1996, with the seat in [City].
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month, and year first above written.
Landlord: ______________________ Tenant: ______________________
Witness 1: ______________________ Witness 2: ______________________
How to Use This Template
- Print on the appropriate stamp paper (₹ 5,000 for leases up to ₹ 5 lakh).
- Fill in all bracketed fields with accurate data.
- Sign in the presence of two witnesses.
- Pay the required stamp duty and register the agreement at the local Sub‑Registrar.
Commercial Property Rental Agreement Template – Free Download
You can download a ready‑to‑use commercial property rental agreement template (Word & PDF) from our resource hub:
🔗 Download Commercial Rental Agreement Template (PDF)
The download includes:
- A complete agreement in English and Tamil (see next section).
- A checklist of required documents for registration.
- A guide to calculating stamp duty for major Indian states.
Commercial Property Rental Agreement in Tamil
Many businesses in Tamil Nadu prefer a Tamil‑language lease. Below is a short excerpt of the key clauses translated into Tamil. The full bilingual template is available in the download link above.
வாடகை ஒப்பந்தம்
இந்த ஒப்பந்தம் [Landlord Name] (மக்கள்) மற்றும் [Tenant Name] (வாடகையாளர்) இடையே [Address] இல் உள்ள வணிக இடம் (மொத்தம் [Floor Area] சதுர அடி) குறித்து செய்யப்படுகிறது.
All other clauses (rent, security deposit, termination, etc.) follow the same structure as the English version, ensuring both parties understand their rights and obligations.
Differences Between Commercial and Residential Leases
| Aspect | Commercial Lease | Residential Lease |
|---|---|---|
| Purpose | Business, trade, office, retail | Living, dwelling |
| Rent Calculation | Often based on floor area, market rates, service charges | Fixed monthly amount |
| Maintenance | Tenant may bear structural repairs; landlord handles common areas | Landlord usually responsible for major repairs |
| Stamp Duty | Varies by state; higher for commercial value | Lower flat rates |
| Registration | Mandatory for leases > ₹1 lakh (or as per state law) | Optional in many states |
| Termination | Usually longer notice (3–6 months) and penalties | Often 30‑day notice |
Understanding these differences helps landlords and tenants draft an agreement that reflects the true nature of the commercial tenancy.
Common Mistakes & How to Avoid Them
| Mistake | Consequence | Prevention |
|---|---|---|
| Skipping stamp‑duty calculation | Agreement may be deemed invalid; fines. | Use a stamp‑duty calculator (e.g., ClearTax Stamp Duty Tool). |
| Leaving “use of premise” vague | Tenant may operate prohibited businesses, leading to disputes. | Clearly list permitted commercial activities and include a prohibition clause. |
| No clause for subletting | Tenant may sublet to an unknown party, risking reputation. | Add a sublet clause requiring written consent. |
| Ignoring insurance requirements | Property may be uninsured against fire or theft. | Insert an insurance clause specifying coverage limits. |
| Failing to register | Lease unenforceable in court; loss of security deposit. | Register the agreement within 30 days of execution. |
| Unclear termination notice | Unexpected early exit, loss of rent. | Define a notice period (e.g., 6 months) and penalty for early termination. |
Legal Requirements for Commercial Leases in India
Stamp Duty – Varies by state; typically 5 % of the lease value in Maharashtra, 1 % in Delhi, 2 % in Tamil Nadu. The duty is payable on the stamp paper or via e‑stamp.
Registration – Mandatory for leases exceeding the prescribed value (often ₹1 lakh). The agreement must be executed on non‑judicial stamp paper, signed by both parties, and submitted to the Sub‑Registrar with the required fee.
Security Deposit – Not regulated by law, but commonly 2–3 months’ rent. It must be returned at the end of the lease after adjusting for damages.
Rent Control Laws – Some states (e.g., Maharashtra) have rent‑control statutes that may affect commercial leases. Verify local tenancy law before finalizing the rent amount.
GST – Commercial rent is subject to GST (18 % as of 2025) if the landlord is a registered taxpayer. Include GST in the rent payment clause if applicable.
Environmental & Zoning – Ensure the intended commercial activities comply with local zoning regulations and environmental clearances.
Key Takeaways
- ✅ Agreement must be on proper stamp paper and registered if required.
- ✅ State laws govern stamp duty, fees, and formats.
- ✅ Clearly define rent amount, security deposit, and lease term.
- ✅ Include necessary clauses for maintenance, subletting, termination.
- ✅ Consult a lawyer for agreement in India to ensure validity.
- ✅ Adapt templates for local compliance (e.g., in Tamil Nadu rules).
- ✅ Maintain a written agreement to safeguard both parties.
Frequently Asked Questions (FAQ)
1. What is a commercial rental agreement?
A commercial rental agreement is a legally binding contract between a landlord and a tenant that sets out the rent amount, lease term, use of the premise, and other rights and obligations for a commercial property.
2. How do I draft a commercial rental agreement?
Follow the step‑by‑step guide above: gather details, choose the correct stamp paper, insert all essential clauses, calculate stamp duty, and register the document.
3. What are the essential components of a commercial lease agreement?
Parties, premise description, lease term, rent, security deposit, permitted use, maintenance, subletting, insurance, stamp duty, registration, termination, and dispute‑resolution clauses.
4. What is the typical process for terminating a commercial lease?
Either party must give the notice period (usually 3–6 months) in writing. Early termination may require a penalty (e.g., two months’ rent).
5. Can a commercial tenant sublease their space?
Only if the lease contains a sublet clause allowing it; otherwise, the tenant must obtain the landlord’s written consent.
6. What are the stamp duty implications for commercial rent agreements?
Stamp duty is calculated on the lease value and varies by state. For example, Tamil Nadu charges 2 % of the lease value, while Maharashtra charges 5 %.
7. Is registration mandatory for commercial rental agreements?
Yes, when the lease value exceeds the threshold set by the state (commonly ₹1 lakh). The agreement must be executed on stamp paper and registered with the Sub‑Registrar.
8. Can terms be modified after signing a commercial lease?
Only by a written amendment signed by both landlord and tenant. Verbal changes are not enforceable.
9. What documents are required for commercial lease registration?
Original lease on stamp paper, identity proof of both parties (Aadhaar, PAN), proof of ownership of the premise, and the registration fee receipt.
10. How does a commercial lease differ from a residential agreement?
Commercial leases focus on business use, operating costs, and longer notice periods, while residential leases prioritize habitability and have stricter rent‑control provisions.
Conclusion
A well‑drafted commercial property rental agreement protects both landlord and tenant, clarifies rights and obligations, and ensures compliance with Indian stamp duty, registration, and tenancy law. Use the free template (including a Tamil version), follow the step‑by‑step drafting checklist, and always seek legal advice before signing. With a solid agreement in place, your commercial lease will be a foundation for a successful, dispute‑free business relationship.
