How to Draft a Commercial Lease Agreement for Office Space in India

Finding the right office is only one part of a business decision. The bigger challenge is putting terms on paper in a way that protects your business from day one. Many conflicts around office rentals do not arise due to bad intentions. This happens due to the rental agreement not being clear enough and being drafted in a hurry, causing confusion later.

If one wants to rent an office space in India, they need to have a commercial lease deed that clearly states how the rented property can be used, what will be the duration of the tenancy and what will be the roles and responsibilities of both the landlord and the tenant.
Further, it will also clearly define details such as rent and security deposits, exit clauses and other legal formalities.

This blog walks you through how to draft a rental agreement for a commercial office in India, step by step, so you know what to include, what to avoid, and how to keep the agreement clean, practical, and legally sound.

Drafting a lease is easier when you first understand how rental agreements in India work, the kinds of agreements you might encounter, and the details that really matter. You can read more in our guide: Rent Agreement in India: Overview and Types.

What is a Commercial Lease Agreement?

When a business takes an office or commercial space on rent, the relationship is governed by a formal written contract called a commercial lease agreement. This document clearly sets the terms between the property owner and the business using the space such as how the property can be used, the duration ot the lease and the rights and responsibilities of the landlord and tenants.

A commercial lease agreement isn’t just paperwork, it’s the foundation of a smooth landlord-tenant relationship. Knowing how these agreements work, what clauses matter most, and how they are legally structured can make all the difference. For a detailed guide, check out our guide: Know All About Lease Deed in India.

A commercial lease agreement in India applies only to properties used for business activities. This includes offices, coworking spaces, retail units, warehouses, and industrial premises. Unlike residential agreements, commercial leases offer more flexibility – but also carry higher legal and financial risk if drafted incorrectly.

At its core, the agreement answers practical questions such as:

• Who is renting the property and for what purpose
• How long the office can be used
• How much rent is payable and when
• What expenses the tenant must bear
• How and when either party can exit

For office rentals, this agreement serves as a backbone to day-to-day operations. It not only removes ambiguity but also protects business continuity and helps both parties avoid disputes by putting expectations in writing.

Types of Commercial Lease Agreements in India

Commercial leases are not standard templates that might work for every situation. The structure heavily depends on how costs and responsibilities are shared between the landlord and the tenant.

1. Gross Lease

The tenant pays a fixed rent. The landlord takes care of property tax, insurance, and maintenance. This option offers cost clarity and is easier to manage.

2. Net Lease

Along with rent, the tenant is required to pay property related expenses as well. These expenses depend on the type of net lease agreed upon. These are the following structures that net leases are commonly divided into.

Type of Net Lease	What the Tenant Pays	Common Usage
Single Net Lease	Rent + a portion of property tax	Less common, limited cost sharing
Double Net Lease	Rent + property tax + insurance premiums	Mid-level cost responsibility
Triple Net Lease	Rent + property tax + insurance + maintenance	Common in long-term commercial leases

3. Percentage Lease

Under percentage lease type, the tenant pays a fixed based rent along with an agreed percentage of their sales revenue. This is commonly used for retail stores and commercial outlets where rent is dependable of the business’s performance.

4. Ground Lease

Only the land is leased. The tenant constructs and owns the building during the lease term, as per agreed conditions.

5. Build-to-Suit Lease

The landlord constructs the property based on tenant’s business needs. The tenant leases the space once construction is completed.

6. Sublease

The original tenant rents the property to another party. The original tenant remains responsible for the main lease obligations.

Each lease type works differently. Understanding the structure helps both parties choose terms that suit their business and financial planning.

Essential Clauses in a Commercial Lease Agreement

Certain clauses decide how smooth or stressful a commercial lease will be over time. These are the ones that need special attention.

Clause	What It Covers
Lease Duration & Renewal	Specifies the lease term and whether renewal is allowed, along with conditions for extension
Early Exit Terms	Defines notice period, lock-in period, and penalties for early termination
Rent & Payment Terms	States rent amount, due dates, payment mode, and frequency
Rent Escalation	Explains when and how rent will increase during lease period
Late Payment Charges	Mentions penalties or interest applicable to delayed rent payments
Security Deposit	Records deposit amount, usage conditions, and refund timeline
Maintenance & Repairs	Clearly divides maintenance responsibilities between landlord and tenant
Permitted Use	Defines how the commercial space can be used and restricts unauthorised activities
Subletting & Assignment	States whether tenant can sublet or transfer the lease
Alterations & Improvements	Covers rules for property modifications and restoration obligations
Exit & Termination	Lays down procedures and consequences for ending the lease
Force Majeure	Addresses unexpected events affecting lease obligations
Dispute Resolution	Specifies how disputes will be resolved and applicable jurisdiction

These clauses form the practical backbone of a commercial lease and help prevent misunderstandings later.

Documents Required for a Commercial Office Rent Agreement

Having all necessary documents ready before drafting and registering a commercial office rent agreement can save time and prevent any last minute obstacles making entire process smoother.

The following list of documents helps with identity verification, ownership and nature of business, confirming the agreement is legally valid and enforceable.

Identity proof

Aadhaar card or any valid government-issued ID. Non-Indian parties must submit their original passport.

Photographs

Two recent passport-size photographs of the landlord and tenant.

Power of Attorney

This is required if the agreement is being signed or registered by an authorised representative on behalf of either parties

Proof of business

Documents showing the nature and existence of the business operating from premises.

Proof of property ownership

Original ownership documents of the property provided by the landlord.

Government approvals

Any approvals or permissions required for the type of commercial activity being carried out.

Stamp paper

The commercial rental agreement must be printed on stamp paper of prescribed value as per state laws.

Company documents

Memorandum of Association and Articles of Association, if the tenant is a company.

Association documents

Agreement or understanding documents, if the tenant is an association of persons.

Business arrangements

Bonds, dealership agreements, or similar documents, if applicable.

Corporate agreements

Shareholder agreements or listing agreements, if relevant to the tenant’s business structure

Keeping these documents handy from the beginning helps prevent delays and ensure that the commercial lease agreement is legally sound from the start.

Steps to Draft a Commercial Lease Agreement

Drafting a commercial lease agreement works best when done step by step. This keeps the document clear and legally sound.

• Identify the parties

Clearly mention landlord and tenant. Include full legal names and business details where applicable.

• Describe the property

Add the complete address and a clear description of the commercial office space being leased.

• Set the lease terms

Define rent amount, payment schedule, lease duration, and renewal options in clear terms.

• Allocate responsibilities

Specify who handles maintenance, repairs, and insurance to avoid confusion later.

• Add key clauses

Include exit terms, penalties for non-compliance, force majeure, and dispute resolution clauses.

• Review and finalise

Both parties should review the draft carefully to ensure all terms are clear and agreed upon.

• Sign and register

Once finalised, the agreement should be signed by both parties. Registration may be required based on lease duration and local laws.

Following this process helps create commercial lease agreement that is clear, balanced, and easier to enforce.

Common Mistakes to Avoid

• Using a residential agreement template
• Skipping registration to save costs
• Leaving exit clauses vague
• Not defining maintenance responsibilities
• Ignoring local stamp duty rules

A poorly drafted commercial lease agreement India can lead to long legal battles.

Final Thoughts

A well drafted commercial office rental agreement goes beyond filling in details in standard clauses. It strictly has to be written in clear language, has to be legally accurate and should have a structure that protects both parties’ interests over the long term. This not only helps prevent conflicts but also makes you compliant with state laws and allows businesses to run without legal hurdles that are unnecessary.

Our team at LegalWiz provides end to end support from accurately drafting your commercial lease agreement to proper registration, which is handled by expert teams, who not only make the process smooth but also reliable, so you can stay focused on growing your business.