Residential tenancies are largely about occupation. Commercial leases are about business continuity, capital expenditure, and a multi-year financial obligation that appears on your balance sheet. A clause that looks like boilerplate — restoration, escalation, assignment — can be the most expensive line in the document.
This guide walks through the terms that decide how a commercial lease actually performs, from both sides of the table, and then covers executing it digitally.
Get the parties and the premises exactly right
Two unglamorous details cause a disproportionate share of commercial lease problems.
The tenant entity. Is the tenant the operating company, a holding company, or an individual promoter? This determines who is liable if the business fails, and whether the landlord will want a personal or parent guarantee. Landlords should check that the named entity actually has substance; tenants should avoid casually offering personal guarantees on a corporate obligation.
The demised premises. Commercial space is usually described by area, and area can be measured more than one way. Carpet area, built-up area, and super built-up area can differ substantially for the same unit — and if rent is quoted per square foot, the measurement basis directly sets your rent. Specify which basis applies, state the number, and attach a floor plan. Also record what comes with the space: parking bays, signage rights, storage, terrace or common-area access, and any exclusive-use areas.
Rent, escalation, and the compounding you did not model
Rent itself is straightforward. Escalation is where long leases surprise people.
A typical clause escalates rent by a fixed percentage at fixed intervals — for example a step-up every three years. The arithmetic matters: escalation usually compounds on the then-current rent rather than the original, so a nine-year lease with three escalations lands considerably higher than a naive calculation suggests. Before signing, build the full rent schedule for the whole term and look at the final year, not the first.
Other points to settle:
- Payment mechanics: due date, mode, and whether rent is payable in advance.
- Late payment: interest or a stated charge, and at what point arrears trigger termination rights.
- Rent-free or fit-out period: common where the tenant needs time to build out. Say clearly whether the free period counts toward the lease term and toward the lock-in.
- Taxes: whether rent is exclusive of applicable indirect taxes, and who bears property tax.
Lock-in and notice are two different things
This is the most misread pair of clauses in commercial leasing. A lock-in period is a window in which neither side may terminate; if the tenant vacates during it, rent for the remaining lock-in generally stays payable. A notice period is the warning required to end the lease after the lock-in expires.
A lease can perfectly well have a three-year lock-in and a six-month notice period, and those interact: the earliest practical exit is the end of the lock-in, having served notice six months before. Tenants planning a possible relocation should model that timeline explicitly. Landlords should note that lock-ins cut both ways — they also prevent the landlord from re-letting to a better tenant.
Where a shorter, more flexible arrangement suits both sides, a leave and license structure may be more appropriate than a lease; our leave and license guide explains the substantive difference, which is more than terminology.
Deposit: the amount matters less than the refund mechanism
Commercial deposits are usually several months of rent, and larger where the tenant will alter the premises. The clauses that determine whether you actually get it back:
- Timing of refund — on handover, or within a stated number of days after handover and reconciliation.
- Permitted deductions — arrears, unpaid utilities, damage beyond fair wear and tear, restoration cost. Make the list closed rather than open-ended.
- Whether it escalates — some leases top up the deposit each time rent steps up.
- Whether it can be set off against final rent — often prohibited, which matters for the tenant's cash flow at exit.
- Interest — usually none, but say so rather than leaving it ambiguous.
Fit-out and restoration: the end-of-lease cost nobody budgets
Tenants generally pay for their own fit-out and expect to. What catches businesses out is the restoration obligation: a requirement to return the premises to their original condition at the end of the term. Stripping out partitions, flooring, cabling, HVAC modifications, and signage can represent a meaningful capital cost arriving exactly when you are also paying for a new space.
Points to negotiate:
- Which alterations require landlord consent, and whether consent may be withheld unreasonably.
- Which items must be removed and which may — or must — remain.
- Whether the landlord will take over genuinely useful improvements rather than requiring removal.
- A condition schedule with photographs at handover, so "original condition" is documented rather than argued about years later.
That last item is worth insisting on from both sides. A dated photographic schedule attached to the lease removes most restoration disputes before they start.
Who pays for what: draw the line explicitly
Commercial premises generate a longer list of recurring costs than residential ones. Allocate each expressly:
- Common area maintenance — the basis of calculation, whether it is capped, and whether the landlord must provide a statement of actual costs.
- Utilities — separate metering wherever possible; apportionment formulas are a recurring source of friction.
- Structural repairs versus internal repairs — normally landlord and tenant respectively, but define the boundary.
- Building systems — lifts, HVAC, fire safety, backup power: who maintains, who pays, and what happens during downtime.
- Insurance — building insurance is typically the landlord's; contents, plate glass, and public liability typically the tenant's.
- Property tax and statutory charges — including who bears increases during the term.
Use, alterations, and assignment
The permitted use clause should be wide enough to accommodate how your business might reasonably evolve. A clause limited to one narrow activity can block a pivot, a new product line, or a change of trading name. Tenants should also confirm that the intended use is consistent with the building's approved use and any applicable zoning — a lease does not override a planning restriction.
Assignment and subletting deserve attention disproportionate to their length. Many commercial leases prohibit both, or permit them only with written consent. If your plans include intra-group restructuring, sharing space with a partner, or a possible sale of the business, address it before signing. Once the lease is executed, needing consent hands the landlord a negotiating position.
Also worth settling: signage rights, exclusivity or non-compete undertakings in retail contexts, access hours, and the landlord's right of entry with notice.
Stamping, registration, and execution
Commercial leases usually attract stamp duty, and the calculation frequently reflects rent, term, and deposit. Because duty is jurisdiction-specific — in India, state-specific — there is no single national figure. Registration is a separate question, and longer terms are more likely to require it. Do not treat stamping as satisfying registration or vice versa; our eStamp and stamp duty primer sets out the distinction and what under-stamping actually risks.
Execution can be entirely digital. On WeSignDeal, a commercial rent agreement runs through the same workflow as other documents: enter party and premises details, upload supporting documents, send each party a secure verification link where they complete a live selfie, signature, and document upload, choose how stamp duty is handled where it applies, and then collect Aadhaar eSign from every signer. The executed PDF carries the stamp certificate as page one and a full audit trail behind it.
Two practical notes. First, where a party is a company, the individual signing must be authorised to bind it — check that before issuing links. Second, fields lock once verification links are issued and payment is completed, so the premises description, area basis, rent schedule, and escalation should be final at that point. How it works covers the sequence and Pricing shows the per-signer eSign cost, which matters on multi-party leases with several landlords or guarantors.
Pre-signature checklist
- Tenant entity correctly identified; guarantees understood.
- Area basis stated, number confirmed, floor plan attached.
- Full rent schedule modelled to the final year, including compounding.
- Lock-in and notice periods read together, with the earliest exit date calculated.
- Deposit refund timing and closed list of permitted deductions.
- Fit-out consents and restoration obligation priced; photographic condition schedule attached.
- CAM basis and cap, utilities metering, repair boundary, insurance split.
- Permitted use wide enough for foreseeable change; zoning confirmed.
- Assignment, subletting, and signage rights addressed.
- Stamp duty position and registration requirement both confirmed for the jurisdiction.
Related reading
- Residential rent agreements online
- Leave and license agreements
- eStamp and stamp duty primer
- FAQ Centre — stamp duty options, verification, and signing
Start a commercial rent agreement, or see all document types on Do Agreement Online.
General information only, not legal advice. WeSignDeal is a technology and document facilitation platform, not a law firm. Commercial leasing law, stamp duty, and registration requirements vary by jurisdiction — take professional advice on a lease of any significance.
