This article is written by Pranav Khosla, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Introduction

Lease is an agreement between lessor and lessee for using a certain property for a specific period of time and in return, the lessee guarantees the lessor to pay a certain amount called lease amount. Generally, it is understood that lease is generally for a longer period of time and rent deed is for a shorter period of time. The concept of lease is totally different from leave and license and rent deed. In leave and license agreement, the owner leaves the property with various facilities and on the other hand, lease involves only the handover of property without any facility to the lessee by lessor for a certain period of time. It is more important to have a lease deed rather than having a verbal commitment because if in future any dispute arises, then such agreement shall help in avoiding many misunderstandings between the parties. 

In this article, I will inculcate all the clauses which are desirable for a perfect lease deed. 

Important clauses to include

• Title: A title, which describes the ingredients of the agreement must be mentioned in a lease deed, so that, even if a third person wants to understand the agreement, then they should be able to easily understand the nature of the agreement. 
• Background: A background clause should include the background of the agreed terms, or in a way we can say that it should consist of the preliminary understanding of the parties in this clause. 
• Definitions: An agreement, whether lease deed or any other commercial agreement, always have a set of technical terms, which is not so easy to be understood, so this clause should explain every technical term mentioned in the agreement, so that all the parties should not face any difficulty in understanding the language of the Agreement. 
• Effective Date: An effective date, is the date when the agreement is being executed. For example, Pranav and Kannav signed an agreement on 1st of January, now the effective date can also be different from the signing date of the agreement. The effective date can also be 10th of January. 
• Representations and Warranties: Generally called as reps and warranties, it helps in binding both the parties on what they have represented during the negotiation part. It also helps in avoiding any conflicts on the verbal representations made by any of the parties to the agreement. On the other hand, warranties help in securing the interest of both the parties. 

Example for Representation – Supposedly, A has a business of steel products, and B wants to buy those products. Now, B wanted to buy these products directly from a manufacturer. Now A, comes forward and represents that he manufactures the products which B desires to purchase. Now, B agrees to purchase those goods from A, totally based on the fact or we can say based upon representation that A is the manufacturer of those products. Suddenly, A got to know that A is not a manufacturer of those products and he is indulging in trading those goods. Now in that case, B can sue him in the court because A has represented that he is a manufacturer of steel products, but he is indulging in trading of those products. In such circumstances, Representations and Warranties clauses help both the parties to secure their interest. 

• Indemnification Clause: The Indemnification clause is very important for a good contract, because this clause helps in indemnifying the other party from any loss caused or suffered due to the second party. 
• Consideration Clause: It Is to be understood that a consideration clause is a bit different from payments clause. The consideration clause covers the total consideration which will be received by the party. Consideration clause will include only the amount of payment to receive by the Lessor. Most important, it will specify the amount of Tax Deducted at Source by the Lessee. TDS is a component which is mandatory under Income Tax Law for any rent income or lease income. It varies from transaction to transaction. 
• Stamp Duty: On every commercial agreement, specifically the lease deed agreements, a stamp duty is to be paid by the parties. The stamp duty varies in different states. This clause will specify the amount of the stamp duty, and will help in explaining the liability of the parties to pay the stamp duty effectively. 
• Registration: Every State has different laws, in such circumstances it is recommended that both the parties should get themselves registered in the nearest police station and get the Lease Deed Registered as well. 
• Payments Clause: A payments clause, covers the schedule of the payments and as well as the mode of the payment. Generally, most of the agreements have either consideration clause or payments clause, but it is better to mention both the clauses separately in the agreement. 
• Duration Clause: The term of the agreement/lease deed should be mentioned in the agreement specifically. 
• Maintenance Charges: Every residential property is part of a society. Every society has their charges for maintenance of the common property of the society. In a lease deed of residential property, this maintenance clause should be mentioned to avoid any conflict in future. 
• Payments towards Authorities: In a lease deed, this clause is utmost important. When a lessee takes a residential property on lease from lessor, then in that case, he uses various services related to that property such as Electricity, Water, Electronic Vehicle Charging Station Charges etc., such liability of charges should be defined in the lease deed. 
• Details of Broker (If Involved): The details of broker should be mentioned in the lease deed, so that If any dispute arises, there should be a neutral person which should be able to guide the Court regarding the transaction.
• Dispute Resolution: If any dispute arises, between parties, then this clause will help in using the alternative dispute resolution by using consultation, mediation and arbitration or combination of them. It is the most part of a lease deed or any agreement or so, because an agreement or lease deed is being made to avoid disputes, and in adverse circumstances, it will help the parties to resolve their conflict easily. 
• Sub-Lease: Generally, the sub lease is prohibited if we rely on precedents. It is better to express the willingness or unwillingness of the Lessor to sublet the property. 
• Damages: There should be a specific clause for damages, it can be understood in a way that the damages can be to either of the parties or to the party. Both of them should be expressly specified in the lease deed. 
• Breach, Consequences of Breach and Remedies: This clause will help in specifying, what amounts to breach, circumstances such as default in payments or alteration to property. It also covers what will be the consequences of such breach and what remedies will be available to the parties in the agreement. 
• Entire Agreement: Generally, lawyers ignore this clause while drafting the lease deed, but such clause is required to clear the intentions of the parties and it states that the contract captures the entire understanding between the parties and that no evidence of there being any other terms in the transaction will be accepted. 
• Notices: Such clause will include the addresses of all the parties, so that if any communication or notice is to be sent to any of the parties, then the notice shall be sent to the mentioned address, for a steady communication. 
• Force Majeure: It includes the situations which are outside the control of parties and are unforeseeable, and under which the parties cannot be compelled to perform under the contract. 
• Signature Line: It should be signed by both the parties. If any party has the signing authority through Power of Attorney or any board resolution, then it must be specifically mentioned in the title as well as the Signature column that the particular party is holding POA or appointed through a board resolution. For board resolution, the details of the resolution passed such as Date of Resolution, Resolution Number should be mentioned. The copy of any such resolution must be attached with the lease deed. 

Conclusion

Lease deed is a document which needs to be drafted very carefully because if anything is missed, then it could lead to a conflict in future or it may cause damages to the parties of the Agreement. 

For saving the interest of the parties, it is recommended that parties should get the lease deed notarized from the nearest appointed notary, because if in future if any dispute arises, and somehow the matter moves to the Court, then no such court shall entertain any agreement which is not notarized. 

It depends on the parties that they want to give their property on lease or rent deed or leave and license agreement. For Example, if a person wants to give a residential property to someone on rent, in that case they need to enter into a Leave & License Agreement. Generally, lease deeds are used for commercial properties.

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