I know many businessmen dread going through the long rental agreement. You wished that someone could guide you to go through just a few critical ones. So here they are…

My Pain:

During the pandemic when my service apartment business dropped to zero, I had to continue paying the monthly rent. I regret not having put Force Majeure clause in the contract agreement with my Landlord.

My experience:

I know it requires patience to look at a detailed agreement contract. But here are the important points that every business owner must check before signing any agreement:

• Check Date of Stamp paper, it should not be later than the start date of the lease.
• Ensure Lease must be registered and cost equally divided between both the parties, the typical cost of registration is one month’s rent.
• Period of Lease: Time period of lease must be specified clearly (start and end dates)
• Renewal: Rent revision percentage mentioned clearly on renewal of lease.
• Termination: Notice period to vacate from either side should be clearly mentioned.
• Repairs & Maintenance: Major repairs & painting of the property should be done by landlord or tenant, this should be negotiated and mentioned clearly.
• Use of the Premises: Commercial use of property for the specific use as Serviced apartment/Guest house/Furnished accommodation should be clearly mentioned. Means tenant is into subleasing for residential purpose should be acceptable to the landlord.
• Common Area Maintenance (CAM): Rent is inclusive/exclusive of any maintenance charges of community or common Area Maintenance…or not?
• Security Deposit:
  1. Security deposit payment details e.g. amount paid, mode & date of payment.
  2. Security deposit refund terms & conditions to be clearly mentioned.
• Rent:
  1. Mode of payment of rent, date by which to be paid if any?
  2. penalty for delayed payment, rate of interest if any?
  3. TDS deduction applicable and agreed by landlord as per government specified rates at all times to be mentioned.
• Taxes & Levies:
  1. Any taxes to be paid to government authorities must be paid by landlord like property tax etc.
  2. Property to be declared as commercial use property by landlord to municipal corporation and taxes paid accordingly by Landlord.
  3. Electricity and water connections should be commercial usage and not residential.
• Force Majeure: Clauses like force majeure must be included.
• Custody of the agreement: Make two original copies. One for each party.
• Governing law & Arbitration: Arbitration proceedings should be held in the city where the property is located. Like we have Serviced apartment in Chennai & Bangalore we have put city of jurisdiction as Chennai & Bangalore respectively.

My Conclusion:

However, I would still advise you to spend a small amount and take a legal opinion on final draft of the lease agreement contract before signing.

Do put your comments in case you found my blog useful.

Also Checkout :

• Starting a service apartment business
• Setting up a service apartment
• Manpower for service apartment