What Is The Difference Between A Lease Deed And Lease Agreement?
- leadindia831
- Oct 10, 2023
- 3 min read
In case you wish to lease your commercial property, or looking to lease one as a tenant, it is important that you understand the difference between documents that are used to enter into commercial leasing arrangements.
What is a lease?
A lease could be understood as a contract outlining the terms under which one party would agree to rent an asset, i.e. a property—owned by another party. It would guarantee the lessee, also called as the tenant, use of a property and guarantees the lessor i.e. the owner of the property, regular payments for a certain period in exchange of the use of the particular property.
Certain situations may arise where one or the other party is taken into surprise or financially disadvantaged, by having not understand the full ramifications of signing documents which are generally used in commercial leasing.
Agreement to Lease
The Tenant and the Landlord will first negotiate the terms of the lease in general and shall use a ‘standard’ Lease Agreement to record their agreement. This is what generally the preliminary step before entering into a Deed of Lease is.
An Agreement to Lease would first enlist main terms for the Deed of Lease such as the length or the term of the lease, monthly rent payments, etc.
The Agreement may also include any work which needs to be carried out on the premises by the tenant and/or the landlord, or any other conditions which are require to be satisfied before commencing to the lease.
When signed, the Lease Agreement will be legally binding on both the Tenant and the Landlord.
However, many tenants fail to get their lawyers to review these Agreement to Lease before signing them. This could be a massive risk, as it may be possible that the Tenant is not able to understand the entire lease as well as the risks associated with signing it.
One of the major risks for tenants with a Lease Agreement is that a tenant will not be able to assign the Agreement to Lease to a third party. After signing, tenants are then locked into the Agreement for the term of the lease and could not easily get out of the Agreement.
The purpose behind this clause is to prevent the Tenant from assigning the lease and its special terms to someone else so as to protect the landlord..
Deed of Lease
The next step after the lease agreement is for the tenant and the landlord to enter into the standard Lease Deed, which is a different agreement from an Agreement to Lease. This lease will mainly be prepared by the landlord’s lawyer, commonly known as the Deed of Lease.
A Deed of Lease would contain all the terms negotiated in the Agreement to Lease as well as providing additional terms related to the day-to-day operation of the lease as well as the obligations of the parties.
It is also important to understand that it is not necessary to sign a Lease Deed.
The Standard Agreement to Lease will provide the terms and conditions of a Deed of Lease, which shall apply even if the deed has not been signed by either the Tenant or the Landlord.
But, it is recommended that both the Tenant and the Landlord enter into a Lease Deed for the following reasons-
When there is a dispute between the parties about the matters related to the lease, the Lease Deed will be able to provide the parties with a solution.
A Deed of Lease will allow you to assign or sublet the lease provided the necessary conditions are met.
In case you have decided to sell your business a Lease Deed will need to be in place.
An Agreement to Lease shall bind you to the terms set in the Deed of Lease, hence it is important to be aware of these terms so you are aware of your rights and obligations.
Therefore, before entering into either an Agreement to Lease or a Deed of Lease, it is advised to seek advice from your lawyer first. Your lawyer would be able to discuss with you the risks involved with the proposed lease and will be able to negotiate any necessary changes required for your circumstances.
Lead India offers you a team of experienced advocates who have been successfully assisting their clients with drafting, reviewing, negotiating as well as representing them in the court of law. Hence, if you wish to talk to a lawyer or seek free legal advice, you may contact us.
SOURCE:-
Visit us: https://www.leadindia.law
Call Us: +91–8800788535
Email: care@leadindia.law
Facebook: https://www.facebook.com/leadindialaw
Twitter: https://twitter.com/leadindialaw
Pinterest: https://in.pinterest.com/lawleadindia
Comments