What to check in a rent agreement
Read a commercial rent agreement for the clauses that cost tenants money, before you sign.
6 min read
A rent agreement for a shop or office is usually handed to you as a standard form, with the words "everyone signs this". It is still a contract, and the clauses that cost tenants money are rarely in the first paragraph. Read it before you pay the deposit — after that, you have much less to bargain with.
Before you read: is the landlord the owner?
Ask to see proof that the person signing owns the property, or is authorised to rent it out: a title or sale document, a recent property tax receipt, and their ID. Renting from somebody who turns out not to be the owner can leave you with a fitted shop and no right to stay in it.
The clauses to read slowly
| Clause | What to check |
|---|---|
| Rent and increases | The starting rent, by how much it rises, and how often |
| Security deposit | How much, when it is returned, and what can be deducted from it |
| Term and lock-in | How long the agreement runs, and for how long neither side may end it |
| Notice period | How much notice each side must give to leave |
| Use of the premises | Whether your kind of business is allowed — food, a workshop, a clinic |
| Maintenance and repairs | Who pays for what: society charges, structural repairs, everyday wear |
| Utilities | Whose name the electricity and water connections are in, and how they are billed |
| Fit-out and changes | Whether you may alter the space, and whether you must undo it when you leave |
| Subletting and transfer | Whether you may share the space or hand the lease to a buyer of your business |
The lock-in is the clause that hurts most. If the business fails or needs to move in the first months, a lock-in can leave you owing rent for the rest of it. Negotiate it as short as you can, and make sure it binds the landlord too — they should not be able to ask you to leave during it either.
The use clause decides your licences
Many registrations ask for the rent agreement as proof of address. GST asks for the rent or lease agreement when the premises are rented; FSSAI asks for proof of the premises. If the agreement says "for residential use" or "for office use only" and you are running a kitchen, you may find the document you need for your licence does not support it.
Make sure the agreement names your actual activity, in plain words.
Things to ask for in writing
- A rent-free period for fit-out. You will spend weeks setting up before you earn anything. Many landlords agree to a few weeks or months free; ask.
- An inventory of what is there. Fans, lights, fittings, the condition of the floor and walls — with photographs, signed by both of you. It decides what is deducted from your deposit later.
- Who handles the society or market association. And what its rules say about signboards, opening hours and deliveries.
- The landlord's consent for registrations. If a registration needs an NOC from the owner, ask for it now, while you are signing.
Stamp duty and registration
Rent agreements must be printed on stamp paper or e-stamped, and longer agreements usually need to be registered. The rules, the duty and the length that triggers registration all differ by state. Check your state's registration department, or ask the lawyer who drafts it — and agree with the landlord, in writing, who pays.
An unregistered agreement that should have been registered can be hard to rely on in a dispute. The small cost of doing it properly is cheap insurance for a place you are about to spend money fitting out.
Pay by bank, and keep receipts
Pay the deposit and rent by bank transfer, never cash, and keep every receipt. They prove you paid if there is a disagreement, and they are a business expense at tax time.
Before you sign, open the registration checklists below to see which documents each of your registrations will need from this agreement and from the landlord.