A lease deed is a document or a written contract between the property owner or a landlord also known as lessor and the tenant or lessee, which contains all the terms and conditions, including the rent to be paid, security deposit to be made, etc. A lease deed is usually required, when the property is rented out for a long period of time. A deed has to be registered, if the lease period is for more than 11 months. In addition, registration of a lease deed is mandatory under Section 17 (D) of the Registration Act, 1908.
Similar to a rental agreement, there are some basic details that need to be included in a lease deed. Some of these include:
1. Name of the parties: The names of both the parties- the lessor, as well as the lessee needs to be included as mentioned on legal documents. Both the parties must make sure that there is no error in names of either party.
2. Lease Deed Period: This is the total period for which the lessee is allowed to lease the property. This is generally a larger time period, usually more than one year.
3. Lease Consideration: The lease consideration refers to the financial terms associated with the lease contract. This includes the lease amount payable by the lessee to the lessor at regular intervals (monthly/ quarterly/ bi-annually/ annually) as specified.
The Security Deposit paid to the lessor is also to be mentioned in the deed. This amount has to be returned by the lessor to the lessee at the end of the lease period.
4. Notice Period and Exit Clause: In case the lessor or the lessee feels the need to terminate the lease agreement before the lease period mentioned, they can do so by giving advance notice to the either party. This notice period may vary from one month to several months, or as desired by the lessor or lessee through mutual consideration.It also has the provision to compensate the lessor/ lessee for any loss incurred if the deed is terminated before the mentioned period.
5. Lease Deed Renewal Terms: This includes the terms and conditions for renewing the lease of the property after the mentioned time period. Usually, a renewal fee is charged by the lessor for lease renewal.
While at most times property leases are automatically renewed, it is at the discretion of the lessee whether to continue with the lease or not. Also, some lease agreements also allow ownership rights of the property to the lessee on payment of appropriate price at the end of the lease period.
6. Sub-Letting Clause: Sub-letting gives the right to the lessor to further lease the property to different parties and collect lease (or rent) from them in exchange. The main lessee may also make a profit from this sub-letting exercise.
Rental Agreement
Rental agreements on the other hand are entered into for a period of 11 months, with an option to renew the agreement at the expiration of the agreement. As a rental agreement that is 11 months long is just a license for the tenant to occupy the premises for a short duration, rent control laws do not apply. Further, rental agreements that are 11 months long allow the landlord to take more measures in case of eviction of tenant from the property. Hence, most landlords prefer to enter into a rental agreement that is 11 months long, with an option to renew at the end of the agreement period.
Difference between lease deed and Rental agreement
An agreement to lease generally covers the broad aspects of the lease, such as the duration, the rent payable, the rights of renewal of the lease, etc., while a lease deed also includes detail about the day-to-day operations of the lease.
Documents required for Rental agreement registration
The registration of a lease agreement is vital as it protects the landlords and tenants against any disputes in the future. One can register a rent agreement by approaching the sub-registrar’s office. One should note that the registration should be done at least four months before the date of deed expiration. After that, a fresh lease deed must be created.
The following documents are required for lease deed registration:
Identity proof, such as Aadhaar Card, Driving Licence, passport, etc., of the landlord and tenant.
Address proof of the authorised signatory, from both the parties.
Passport-sized colour photographs of the authorised signatory, from both the parties.
Company PAN Card and company seal/stamp, if it is a commercial property.
The original proof/evidence of ownership or title of the property.
Property documents, such as Index II or tax receipt of the property to be leased.
Route map of the property leased out.
Lease Deed Format
The lease deed format is a standard proforma for executing a lease deed between a Lessor and a Lesse. The Lease Deed format contains the details such as-
Name of the Lessor
Name of the Lessee
Term of Lease
Norms of Violation
Terms and Conditions
Notice Period
Details of the Property
Market Value of the Property
Lease Terms
Lease Deed format slightly varies according to the states of execution. The lease Deed Format can be modified in accordance with the conditions and preferences of both the parties. A sample Lease deed format is shown below.
Lease Deed Format
Sub-letting is a common practice wherein the original lessor does not have to worry about managing and collecting rent from various lessees. S/he deals with only one lessee and gets payment from one entity only. However, it is illegal to sub-let a property without including the sub-letting clause in the agreement.
Why lease deeds are for 99 years?
When the development authority allots development rights of the land to the builder, it is usually for a lease of 99 years. This implies that anyone who gets a leasehold land, will own it for 99 years, after which the ownership is given back to the landowner. The long-term leases control the transfer of land and its uses. This time span is seen as a safe interval choice, given that it will cover the lifespan of the lessee and will safeguard the ownership of the lessor.
