The Statutory Framework

Provision	What it governs
Transfer of Property Act, 1882 — Section 105	A lease is a transfer of a right to enjoy immovable property for a term, in consideration of rent or premium. It creates an interest in the property
Transfer of Property Act — Section 107	A lease from year to year, for a term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument
Transfer of Property Act — Section 106	In the absence of contract, a lease for manufacturing purposes is deemed year to year, terminable on six months’ notice; any other lease is deemed month to month, terminable on fifteen days’ notice. The notice must be in writing and the period runs from receipt
Transfer of Property Act — Section 108	Rights and liabilities of lessor and lessee in the absence of contract — the default position that applies to everything the agreement fails to address
Transfer of Property Act — Section 108(B)(e)	Where by irresistible force a material part of the property is destroyed or rendered substantially and permanently unfit for the purpose let, the lease is voidable at the lessee’s option. This is the provision invoked in force majeure disputes, and its threshold is high
Transfer of Property Act — Section 111	How a lease determines — efflux of time, specified event, surrender, forfeiture, or expiry of a notice to quit
Transfer of Property Act — Sections 114 and 114A	Relief against forfeiture for non-payment of rent, and relief on breach of an express condition after notice specifying the breach
Transfer of Property Act — Section 65A	A mortgagor in possession may grant leases only within stated limits, and the mortgage deed may exclude the power altogether. A lease of mortgaged premises granted outside those limits may not bind the mortgagee
Registration Act, 1908 — Section 17(1)(d)	Compulsory registration of leases from year to year, for a term exceeding one year, or reserving a yearly rent
Registration Act, 1908 — Section 49	An unregistered lease requiring registration does not affect the property and cannot be received as evidence of the transaction, save for the limited purposes in the proviso
Indian Easements Act, 1882 — Sections 52 and 60	A licence is permission to do something on the grantor’s property which creates no interest in it, and is generally revocable. The distinction from a lease turns on substance, principally exclusive possession, and not on the label the parties use
Indian Contract Act, 1872 — Section 74	Where a sum is named as payable on breach, the claimant recovers reasonable compensation not exceeding that sum. This governs what a landlord can actually recover on a lock-in breach
Indian Stamp Act, 1899 — Article 35, Schedule I	Stamp duty on a lease, computed by reference to the term and the average annual rent, with premium and non-refundable amounts brought into charge
Delhi Rent Control Act, 1958 — Section 3(c)	The Act does not apply to premises whose monthly rent exceeds ₹3,500, which places substantially all commercial tenancies in Delhi outside rent control and squarely within contract and the Transfer of Property Act
Income-tax Act — Section 194-I	Deduction of tax at source on rent for land or building above the prescribed annual threshold, which has been revised recently
GST law	Renting of commercial property is a taxable supply. Where the landlord is registered, tax is charged on the invoice; where the landlord is unregistered and the tenant registered, the reverse charge position introduced in late 2024 must be checked

Lease, Licence or Business Centre Agreement

The three are routinely confused, and the label on the document does not decide the question. A court looks at the substance of the arrangement, and the decisive indicator is whether the occupier has exclusive possession.

	Lease	Leave and licence	Business centre / managed office
Nature	Transfer of an interest in the property under Section 105 TPA	Permission only, creating no interest, under Section 52 of the Easements Act	A services contract with a right to occupy a designated seat or cabin
Possession	Exclusive possession with the tenant	Possession remains legally with the licensor	Possession and control remain with the operator
Registration	Compulsory above one year	Frequently kept below twelve months; registrability depends on the true nature of the arrangement, not the title	Ordinarily not a registrable interest, but the substance still governs
Transferability	Assignable and heritable unless restricted	Personal to the licensee and not transferable	Personal, and usually terminable on short notice
Binds a purchaser of the property	A registered lease binds a subsequent transferee	Generally does not	No
Suits it	Fit-out heavy premises, long occupation, branch offices, retail, warehousing, manufacturing	Short occupation, shared premises, arrangements where the licensor needs control	Early-stage teams, project offices, liaison offices, temporary expansion

The practical risk runs both ways. A landlord who documents an arrangement as a licence but grants exclusive possession for a long term may find a court treating it as a lease. A tenant who accepts a licence for premises into which it will sink substantial fit-out capital has taken a revocable right for an irrecoverable investment. We advise on which instrument the commercial reality actually requires — see also our leave and licence and lease drafting services.

The Eleven-Month Agreement: An Honest Assessment

Every client asks about this, and the standard advice — “just do eleven months, everybody does” — is given without reference to who benefits.

What it saves. Stamp duty on a lease rises with the term. An eleven-month document attracts a lower duty, no registration fee, and no appointment at the Sub-Registrar. For a modest tenancy with limited fit-out, the saving is real and the risk is small.

What it costs the tenant. The tenant has no registered interest. If the landlord sells the building, the purchaser is not bound in the way he would be by a registered lease. If the landlord disputes the term, the renewal option or the escalation formula, the tenant is holding a document that Section 49 prevents him from using to prove those terms. A tenant that has spent on interiors, servers, signage and licences against an address is exposed to precisely the period of security it did not buy — and the lock-in clause, meanwhile, binds the tenant perfectly well as a matter of contract, because the landlord is enforcing an obligation rather than proving a term.

What it costs the landlord. Less, but not nothing. Rolling renewals produce ambiguity about which document governs. Where possession has continued for years on a series of eleven-month papers with no fresh execution, the tenancy may be held to have become a month-to-month tenancy under Section 106, with the notice consequences that follow. And an arrangement which is a lease in substance is not converted into something else by being written for eleven months.

Where we advise registration regardless of duty. Where the tenant is making material fit-out investment; where the term including renewals exceeds three years; where the premises are mortgaged, and the tenant needs the mortgagee’s consent to be documented; where the tenant is a subsidiary of a foreign parent and the lease supports a regulatory registration or a place-of-business filing; where the rent is significant enough that a dispute would be litigated; and wherever the tenant’s business cannot survive a disputed exit.

Our position is not that eleven-month agreements are wrong. It is that the decision should be made by the party carrying the risk, with the trade-off stated, rather than adopted by default because it is what the broker’s template does.

The Commercial Terms That Actually Get Litigated

A commercial lease is a financial instrument. These are the clauses that decide what it is worth.

• Term, renewal and the mechanics of renewal. An option to renew “on mutually agreed terms” is not an option; it is an agreement to negotiate. Renewal must state the rent, or a formula for it, and the notice period for exercise
• Lock-in, and whose lock-in it is. Lock-ins are frequently drafted to bind only the tenant. A mutual lock-in is normal in institutional leases and should be asked for. Note that under Section 74 of the Contract Act a landlord claiming lock-in rent recovers reasonable compensation not exceeding the sum named, so a landlord who relets immediately does not automatically recover the whole period
• Rent commencement and the fit-out period. When does rent start — on handover, on completion of fit-out, or on a fixed date? A rent-free fit-out period should be defined by reference to handover in a specified condition, not to a calendar date that passes while the landlord is still completing base build
• Escalation. A fixed percentage at fixed intervals, compounding or not. State the base. Ambiguity about whether escalation applies to rent alone or to rent plus CAM is a standard source of dispute
• CAM and outgoings. Who pays common area maintenance, property tax, insurance, and what happens when they rise. CAM on an actuals basis without a cap is an open-ended liability, and the tenant should have audit rights
• Security deposit. Amount, whether interest bears on it, the events of forfeiture, the mechanics and timing of refund, and whether the tenant may set it off against final rent — landlords resist this, and it is precisely why tenants want it
• Maintenance split. Structural and capital repairs to the landlord, day-to-day to the tenant, with the boundary defined. Section 108 supplies defaults that suit neither party
• Assignment, subletting and change of control. A blanket prohibition on assignment will catch an intra-group reorganisation or a share sale. Corporate tenants should carve out group transfers and change of control
• Use, exclusivity and signage. The permitted use must match the approved land use. In retail, exclusivity and co-tenancy clauses have real value
• Force majeure. Drafted expressly, because the statutory position under Section 108(B)(e) requires the premises to be substantially and permanently unfit, and the courts declined to read the 2020 lockdown as satisfying it. If rent abatement on closure matters to the tenant, it must be a contractual term
• Termination and exit. Notice periods, cure periods, and what happens to fit-out — reinstatement obligations can be a very large unbudgeted cost at the end of a lease
• Lessor’s title and mortgagee consent. A warranty of title and authority to lease, and where the property is mortgaged, the mortgagee’s written consent — because under Section 65A a lease granted outside the permitted limits may not bind the mortgagee at all
• Dispute resolution. Arbitration seat and venue, or the courts of a named jurisdiction. Note that disputes governed by rent control legislation are not arbitrable, though most commercial tenancies in Delhi fall outside it

Security Deposits: The Most Litigated Line in the Document

In Delhi NCR commercial practice, deposits typically run from three to twelve months’ rent, and larger for retail and for fitted premises. The deposit is usually interest-free, which is a commercial concession rather than a legal necessity, and it can be negotiated.

The difficulty is never the amount. It is recovery. The landlord holds the money, the tenant has vacated, and the leverage has entirely reversed. What protects the tenant is drafting done at the start:

• A fixed number of days for refund, running from a defined event — handover of vacant possession, not from “settlement of accounts”
• An exhaustive, closed list of permitted deductions, with supporting documents required
• A defined reinstatement standard, agreed by a schedule of condition photographs taken at handover, so that “damage” is not assessed retrospectively against an undefined baseline
• Interest on delayed refund, at a rate that makes delay expensive
• A right of set-off against the final months’ rent, or an escrow, or a bank guarantee in place of a cash deposit for substantial leases
• Where the property is sold, an express obligation on the landlord to transfer the deposit and on the purchaser to acknowledge it

Before the Tenant Signs

• Lessor’s title and authority to lease — including the position where the lessor is a company, a trust, a partnership or a co-owner, and whether every co-owner has joined
• Mortgage position — whether the property is mortgaged, and written mortgagee consent, given Section 65A
• Occupancy certificate and permitted land use — a lease for a use the sanction does not permit exposes the tenant to sealing and closure, not the landlord
• Fire NOC, structural stability and lift certificates for the building
• Leasehold restrictions — where the property is an authority allotment, whether subletting or leasing requires the Authority’s permission, and whether it has been obtained
• CAM history — actual CAM charged over the last two or three years, not the figure quoted
• Prior tenant position — whether the outgoing tenant has vacated, and whether any dispute or claim survives
• Parking, signage and access rights — confirmed in writing and included in the demise, not agreed verbally with a facility manager

This is a shortened form of a property due diligence exercise, scaled to the value and length of the tenancy.

Stamp Duty, Registration and Tax

• Stamp duty on a lease is computed under Article 35 of Schedule I to the Stamp Act by reference to the term and the average annual rent, with any premium, non-refundable amount or advance rent brought into the computation. Duty rises in bands as the term lengthens, which is the arithmetic behind the eleven-month convention. Rates differ across Delhi, Uttar Pradesh and Haryana
• Registration fee is charged separately where the lease is registered
• Both parties attend the Sub-Registrar for a registered lease, with identification, photographs and witnesses, and the lease must be presented at the office for the sub-district in which the property is situated
• GST applies to renting of commercial property. Where the landlord is registered it is charged on the invoice; where the landlord is unregistered and the tenant registered, the reverse charge position introduced in late 2024 should be checked before the first payment
• TDS under Section 194-I applies to rent for land or building above the prescribed annual threshold, which was revised recently, with a different provision applying to individuals and HUFs not liable to audit
• Foreign-owned tenants should confirm that the lease supports the regulatory position — the registered office documentation for an Indian subsidiary, or the place-of-business filings for a branch, liaison or project office

Termination, Forfeiture and Getting Possession Back

The realistic position should be stated plainly to landlords: eviction through the courts is slow. That is an argument for drafting, not for optimism.

• A lease determines under Section 111 by efflux of time, by a specified event, by surrender, by forfeiture, or on expiry of a notice to quit
• Where there is no contractual provision, Section 106 supplies fifteen days’ notice for a month-to-month tenancy and six months for a lease for manufacturing purposes. Notice must be in writing and the period runs from receipt
• Forfeiture under Section 111(g) requires the lessor to give written notice of his intention to determine the lease
• Sections 114 and 114A give the court power to relieve against forfeiture — for non-payment of rent on payment of arrears with interest and costs, and for breach of an express condition where notice specifying the breach was given. A forfeiture clause is therefore not self-executing
• Self-help — changing locks, cutting power or water, removing goods — exposes the landlord to criminal complaint and to an injunction, and materially damages his position in the eviction proceedings
• What actually works is a well-drafted exit: defined events of default, short cure periods, a security deposit sized to the real risk, a bank guarantee for substantial tenancies, mutual break rights, and an agreed mechanism for handover and reinstatement

Delhi NCR: What Differs

Jurisdiction	Points to plan for
Delhi	Rent control is excluded above the ₹3,500 monthly threshold, so commercial tenancies run on contract and the Transfer of Property Act. Land use under the applicable master plan and the mixed-use and commercial street notifications determine whether an office or retail use is permissible at all, and premises operating outside permitted use face sealing. For DDA leasehold properties, the lease conditions on subletting must be checked
Noida and Greater Noida	Allotments are leasehold from the Authority and the lease deed frequently requires the Authority’s permission to sublet or lease, with charges payable. A tenancy granted without that permission puts the landlord’s own allotment at risk, and with it the tenant’s occupation
Gurugram	Licensed commercial developments where the occupancy certificate and fire NOC position must be verified for the specific tower and floor, not the project. CAM practice in Grade A buildings varies widely and is a substantial part of the real occupancy cost
Warehousing and industrial premises	Permitted activity under the allotment or lease, pollution control consents, factory licence, power sanction load, and fire compliance for the storage class actually intended

Common Mistakes

• Using an eleven-month template for a tenancy with substantial fit-out investment, and holding a document Section 49 prevents the tenant from using to prove its terms
• Signing a lock-in that binds only the tenant
• An option to renew “on mutually agreed terms”, which is unenforceable as an option
• Rent commencing on a fixed calendar date while handover in fit-out condition slips
• CAM on actuals with no cap, no audit right and no historical data
• Not obtaining the mortgagee’s written consent where the premises are mortgaged, when Section 65A may leave the lease not binding on the mortgagee
• Not verifying the occupancy certificate and permitted land use, when the consequences of unauthorised use fall on the occupier
• Leasing an authority allotment without the Authority’s subletting permission
• A blanket assignment prohibition that catches intra-group reorganisation and change of control
• No reinstatement standard and no schedule of condition, so that dilapidations are assessed at exit against an undefined baseline
• Security deposit refundable on “settlement of accounts” rather than within a fixed number of days of handover
• No express force majeure clause, leaving the tenant to Section 108(B)(e), which requires the premises to be substantially and permanently unfit
• Calling a lease a licence in the hope of avoiding registration, where exclusive possession is granted for a long term
• Terminating by conduct — locks, power, water — rather than by notice, and losing the eviction on that ground
• Not checking the GST reverse charge position where the landlord is unregistered and the tenant registered
• Allowing possession to continue for years on rolling unregistered papers, so that the tenancy becomes month to month under Section 106

How Delhi Legal Company Assists

• Drafting and negotiation — commercial leases, leave and licence agreements, business centre agreements, warehousing and industrial leases, retail and mall leases, for landlords and for tenants
• Instrument selection — lease, licence or services agreement, decided on the commercial substance rather than on the template in circulation
• Pre-signing verification — lessor’s title and authority, mortgage position and mortgagee consent, occupancy certificate, permitted land use, fire and structural compliance, authority permissions and CAM history
• Term sheet and heads of terms — settling the commercial position before the long-form document, which is where negotiation is cheapest
• Stamp duty and registration — computation under Article 35, e-stamping, presentation and attendance before the Sub-Registrar, and certified copies
• Tax and regulatory — GST position including the reverse charge analysis, TDS under Section 194-I, and the lease documentation required for a foreign company’s Indian subsidiary, branch, liaison or project office
• Security — deposit structuring, bank guarantees, escrow arrangements and set-off mechanics
• Renewal, variation and surrender — renewal deeds, supplementary agreements, rent revision, and documented surrender with reinstatement and deposit settlement
• Exit and dispute — notices under Sections 106 and 111, forfeiture, arrears recovery, deposit recovery, dilapidations claims, injunctions against self-help, arbitration and eviction proceedings
• Portfolio work — standard form leases and licence templates for landlords with multiple properties, and lease abstracts and covenant registers for corporate occupiers with multiple sites

Frequently Asked Questions

1. Does a commercial lease have to be registered?

A. Yes, where it is from year to year, for a term exceeding one year, or reserves a yearly rent. Section 107 of the Transfer of Property Act requires a registered instrument and Section 17(1)(d) of the Registration Act makes it compulsorily registrable. Below that threshold, registration is optional.

2. Why does everyone use an eleven-month agreement?

A. Because eleven months sits below the registration threshold, so the parties avoid the higher stamp duty applicable to longer terms, the registration fee and the appointment. It is a legitimate arrangement for a short, low-investment tenancy. It is a poor arrangement where the tenant is spending materially on fit-out or depends on the premises for business continuity.

3. What actually goes wrong with an unregistered lease?

A. Section 49 prevents it from being received as evidence of the transaction. The proviso allows limited use — for specific performance, part performance, or a collateral transaction — but the terms of the lease itself, meaning the rent, term, lock-in, escalation and renewal, are not collateral. The tenant is holding a document that cannot prove what he is relying on.

4. Is a lock-in period enforceable?

A. Generally yes, as a contractual obligation. But under Section 74 of the Contract Act the landlord recovers reasonable compensation not exceeding the sum named, so a landlord who relets the premises immediately does not automatically recover the entire lock-in rent. Tenants should also ask for the lock-in to be mutual.

5. What is the difference between a lease and a leave and licence?

A. A lease transfers an interest in the property under Section 105 of the Transfer of Property Act. A licence, under Section 52 of the Easements Act, is permission to do something on the grantor’s property and creates no interest. The decisive practical test is exclusive possession, and a court will look at the substance of the arrangement rather than the title on the document.

6. Can I call it a licence to avoid registration?

A. Not if the substance is a lease. Where exclusive possession is granted for a long term at a rent, the label does not control the characterisation, and a landlord who has relied on the label may find he has granted a lease with none of the protections a lease should have contained.

7. Does rent control apply to my commercial premises in Delhi?

A. Almost certainly not. Under Section 3(c) of the Delhi Rent Control Act, 1958 the Act does not apply to premises whose monthly rent exceeds ₹3,500, which excludes substantially all commercial tenancies. The relationship is therefore governed by the contract and by the Transfer of Property Act, which makes the drafting far more important.

8. How much notice is required to end a commercial tenancy?

A. Whatever the agreement provides. Where it is silent, Section 106 supplies fifteen days for a month-to-month tenancy and six months for a lease for manufacturing purposes. The notice must be in writing and the period runs from receipt, not from despatch.

9. My landlord has locked the premises over rent arrears. Is that lawful?

A. No. A landlord’s remedy is notice, forfeiture where the lease permits it, and proceedings. Locking out a tenant, cutting power or water, or removing goods exposes the landlord to criminal complaint and to an injunction, and damages his position in the eviction case. If this has happened, act quickly — the position is much easier to restore in the first days.

10. Is a forfeiture clause self-executing?

A. No. Forfeiture under Section 111(g) requires written notice of the lessor’s intention to determine the lease, and Sections 114 and 114A give the court power to relieve against forfeiture, for non-payment of rent on payment of arrears with interest and costs, and for breach of an express condition where notice specifying the breach was given.

11. Can I get rent waived if I cannot use the premises?

A. Only if the lease says so. Section 108(B)(e) makes the lease voidable at the tenant’s option where a material part is destroyed or rendered substantially and permanently unfit by irresistible force, and that is a high threshold — the courts declined to read the 2020 lockdown as meeting it. If abatement on closure matters, it must be an express contractual term negotiated at the outset.

12. How much security deposit is normal?

A. Three to twelve months’ rent in Delhi NCR commercial practice, higher for retail and for fitted premises, and usually interest-free — though that is a commercial position rather than a legal requirement and is negotiable. What matters more than the amount is the refund mechanism.

13. How do I make sure I get the deposit back?

A. Fix a number of days for refund running from handover of vacant possession, not from “settlement of accounts”. Close the list of permitted deductions and require supporting documents. Agree a schedule of condition with photographs at handover so reinstatement is measured against a defined baseline. Provide for interest on delay. And for substantial leases, negotiate a set-off against final rent, an escrow, or a bank guarantee in place of cash.

14. The building is mortgaged. Does that affect my lease?

A. It can. Under Section 65A a mortgagor in possession may grant leases only within stated limits, and the mortgage deed may exclude the power entirely. A lease granted outside those limits may not bind the mortgagee, which matters if the lender enforces. Obtain the mortgagee’s written consent before signing.

15. What should I verify about the premises before signing?

A. The lessor’s title and authority to lease, the mortgage position and mortgagee consent, the occupancy certificate for the specific tower and floor, permitted land use for your intended activity, fire and structural compliance, any Authority permission required for subletting a leasehold allotment, actual CAM over the past two or three years, and whether the outgoing tenant has vacated cleanly.

16. Who pays for what maintenance?

A. Whatever the lease provides. Ordinarily structural and capital repairs sit with the landlord and day-to-day maintenance with the tenant, but the boundary must be defined in the document. Where the lease is silent, Section 108 supplies defaults that usually suit neither party.

17. Can my landlord increase CAM charges without limit?

A. If CAM is on an actuals basis with no cap, effectively yes. Tenants should negotiate a cap, an escalation limit, an audit right, and disclosure of the actual CAM charged in preceding years. CAM is frequently a substantial part of real occupancy cost and is negotiated far less carefully than rent.

18. Can I assign my lease or sublet?

A. Only if the lease permits it. Corporate tenants should specifically carve out transfers to group companies and ensure that a change of control of the tenant is not treated as an assignment, since a blanket prohibition will otherwise catch an ordinary internal reorganisation or a share sale.

19. What is GST on commercial rent, and who pays it?

A. Renting of commercial property is a taxable supply. Where the landlord is registered, it is charged on the invoice and the tenant may claim input credit subject to the usual conditions. Where the landlord is unregistered and the tenant registered, the reverse charge position introduced in late 2024 applies and should be confirmed before the first payment is made.

20. Do I have to deduct TDS on rent?

A. Section 194-I requires deduction on rent for land or building above the prescribed annual threshold, which was revised recently, with a separate provision for individuals and Hindu undivided families not liable to audit. The obligation sits with the tenant, and failure attracts interest and disallowance.

21. We are a foreign company setting up in India. What do we need from the lease?

A. More than occupation. The lease has to support your registered office or place-of-business position, permit display of your name board, satisfy the documentation requirements of the Registrar of Companies and, separately, of the GST authorities, and match the structure you are using — a subsidiary, branch, liaison office or project office each carry different requirements. These should be settled before the lease is signed, not discovered during registration.

22. Can the lease be registered if I am not in India?

A. Yes, through an attorney under a power of attorney that satisfies Section 33 of the Registration Act, properly authenticated abroad and stamped in India within the permitted period. For a corporate tenant, a board resolution authorising the signatory is required.

23. What happens at the end of the lease?

A. Whatever the reinstatement clause requires. This is a frequently unbudgeted cost — stripping out fit-out and restoring the premises to a defined condition can be substantial. Agree the standard at the start, record the condition at handover with photographs, and settle the deposit and reinstatement position in a written surrender document rather than by handing over the keys.

24. Can lease disputes be arbitrated?

A. Ordinary commercial tenancy disputes governed by the Transfer of Property Act generally can be, where the lease contains an arbitration clause. Disputes governed by rent control legislation are not arbitrable, but as most commercial tenancies in Delhi fall outside rent control, an arbitration clause is usually available and worth including with a specified seat.

25. How long does it take to get possession back from a defaulting tenant?

A. Longer than most landlords expect. That reality is an argument for drafting rather than for litigation strategy — defined events of default, short cure periods, a deposit sized to real exposure, a bank guarantee for substantial tenancies, and a clear exit mechanism do far more work than any remedy available afterwards.

26. Do you act for landlords or for tenants?

A. Both, on separate matters. We do not act for both sides of the same transaction. Where we act for a tenant we negotiate against the landlord’s standard form rather than marking it up cosmetically, and where we act for a landlord we build a form that will hold across a portfolio.