What Should You Check in a Commercial Lease in India Before You Sign?

Check seven things before you sign a shop lease. Look at the lock-in, rent increase and rent start date. Then check the shop's use, extra charges, exit terms and registration. One small mistake can cost you lakhs.

Most founders spend weeks on the menu, the name and the colour of the walls. The lease often gets one quick read on signing day. But the lease decides your biggest cost for years. Give it the same care as your menu.

This is general information, not legal advice. Always get a lawyer to read the agreement before you sign.

Lock-in: the months you cannot leave without paying a penalty.

You may have to pay rent for the full lock-in, even if you close early. This is a big risk in your first year.

Example (easy maths):

• Rent is ₹1,00,000 a month. The lock-in is 36 months.
• Sales are poor. You leave after 12 months.
• 36 − 12 = 24 months left. 24 × ₹1,00,000 = ₹24 lakh.

You could owe ₹24 lakh for a shop you no longer use.

Ask the landlord for:

• A short lock-in, such as one to three years on a nine-year lease.
• A lock-in for the landlord too, so they cannot push you out after your fit-out.
• A clear rule on whether your deposit can pay lock-in dues.

Escalation: how much the rent goes up, and how often.

Some leases raise rent a little every year. Others raise it a lot every few years. The totals are not the same.

Example (easy maths): Rent starts at ₹1,00,000 a month. It goes up 5% each year.

• Year 1: ₹1,00,000.
• Year 2: ₹1,05,000.
• Year 3: ₹1,10,250.

Each jump is a little bigger than the last. Over nine years, it adds up.

Check: How often does rent go up, and by what percent? Does CAM go up too? Do the maths for every year before you agree.

Civil work, the kitchen, gas lines and licences can take months. In most Indian leases, you pay rent during all of this.

Make sure the agreement says:

• The exact date rent starts. Not just "on possession".
• The date moves if handover or licence papers are late.
• Whether CAM and bills start on the same date.

You can ask for lower rent in the first month or two. Some landlords agree. Either way, plan to pay rent for months with no sales.

The lease must name your business clearly, like "café with cooking and seating". Avoid vague words like "commercial purposes".

Check these too:

• Power and gas: Is the power load enough for your kitchen? Who pays to raise it?
• Exhaust: Does the building allow a kitchen exhaust?
• Signboard: Where can it go, and who pays?
• Hours: Some malls limit opening hours.

Your food licence needs proof that you hold the shop. FSSAI accepts papers like a rent agreement or electricity bill (FSSAI advisory). Ask for a clause that the landlord gives you papers, NOCs and signatures within a fixed number of days.

Ask the landlord to list every monthly charge in one table. Include rent, CAM, property tax, parking, bills and GST.

CAM (common area maintenance): what you pay to run shared areas, like lifts, guards and cleaning.

Check:

• CAM: Is it fixed, or "actuals"? If actuals, can you see the bills?
• Security deposit: money you give at the start and get back when you leave. Ask how many months, and when it comes back.
• Repairs: Who fixes the roof, leaks and shared pipes? Write it down.

The Model Tenancy Act, 2021 is a model law for states, not a law for all of India (PIB). It suggests a deposit limit of six months' rent for shops (Drishti IAS). Check your state's rule.

• Renewal: Can you choose to renew? Is the new rent set by a formula? "Mutual agreement" often means the landlord decides.
• Notice: How many months' notice after the lock-in?
• Handing back: Must you return an empty shop? Removing a kitchen costs money.
• Transfer: If you sell the business, can the lease go with it?

Stamp duty: a tax you pay on the agreement. Registration: recording the agreement at the government office.

A lease longer than one year must be registered (Registration Act, Section 17). That is one reason 11-month agreements are common.

Leave and licence: a type of rent agreement, common in Maharashtra. There, it must be written and registered, and the landlord must do it (Section 55).

Stamp duty differs by state, so check your state's rule. An unregistered agreement may be hard to use in a dispute.

It is fine to ask questions. A fair landlord expects them, and a clear agreement protects both of you.

• ☐ Lock-in: how many months? Does it bind the landlord too?
• ☐ Rent increase: what percentage, and how often?
• ☐ Rent start date: an exact date that moves if handover is late?
• ☐ Use: is my business named clearly?
• ☐ Power, gas, exhaust, signboard, hours: all allowed?
• ☐ Licence papers and NOCs: given within fixed days?
• ☐ All charges in one table?
• ☐ Deposit: how many months, returned when?
• ☐ Repairs: who fixes what?
• ☐ Renewal, notice, handing back, transfer: written?
• ☐ Registration: who does it, who pays?
• ☐ Lawyer: has one read it?

A good lease on a weak spot is still a weak business. Viabe Location Check looks at one address for your café or restaurant. It looks at rent, nearby competitors and the people around. It gives a viability score that is a composite indicator, not a forecast of your sales. The price is shown on the Location Check page.

Check a location before you sign

Is a shop lease valid without registration?

A lease longer than one year must be registered. Some states have extra rules, so check with a lawyer.

What is a good lock-in for a café or restaurant?

There is no fixed rule. Ask for a lock-in shorter than the full lease. Make sure the landlord is locked in for as long as you are.

When does rent start?

Usually on the date in the agreement, or on handover. Get an exact date written in. Make it move if the landlord is late.

Should I sign an 11-month agreement or a longer lease?

An 11-month agreement is easier to set up, but the landlord may not renew it. If you spend a lot on fit-out, a longer registered lease protects you better.

How much security deposit is normal?

It differs by state and by landlord. The Model Tenancy Act suggests up to six months' rent for shops. Check if your state follows it.