Lease Agreement Drafting in Kolkata: Legal Requirements

Drafting a lease in Kolkata: the clauses that decide the dispute five years later

Most lease disputes in Kolkata are not disputes about law. They are disputes about a document written in twenty minutes at a stamp vendor's table, signed by both parties, and never read again until someone wanted the property back. The rent was fixed with no escalation clause. The deposit was called "advance" with no condition for its return. The tenant was allowed to "make necessary repairs", now read as permission to rebuild a wall. The right to enter is nowhere recorded, so a leaking roof cannot be inspected without an argument.

A lease is a commercial document and should be drafted as one, whether the premises is a shop on Rabindra Sarani or a floor of an office building in Salt Lake. The difference between a good and a bad draft is rarely the rent; it is the treatment of exit, default and outgoings, where almost every dispute begins.

The statutory frame

A lease is defined in section 105 of the Transfer of Property Act, 1882 as a transfer of the right to enjoy immovable property for a term, in consideration of a price paid or promised. Sections 106 to 108 supply the default rules — notice to quit, the lessor's duty to disclose defects, the lessee's duty to pay rent and keep the property in repair — but almost all of them can be varied by contract. That is precisely why the draft matters: where the document is silent, the statute fills the gap, and the statutory default is frequently not what either party assumed.

Registration is governed by the Registration Act, 1908, which makes it compulsory for a lease from year to year, for a term exceeding one year, or reserving a yearly rent. An eleven-month lease is therefore used to avoid registration; the consequence is that the document creates no leasehold interest beyond its term, and a tenant holding over under it is in a weak position. Stamp duty is chargeable under the Indian Stamp Act, 1899 as amended in West Bengal on the average annual rent and the term, and an under-stamped instrument is impounded and penalised when produced in evidence. Within the city, the West Bengal Premises Tenancy Act, 1997 governs landlord and tenant once a tenancy exists, and the Kolkata Municipal Corporation Act, 1980 governs the assessment that forms part of the outgoings.

Clauses worth arguing about before signature

• Description and measurement. Identify the premises by floor area, municipal holding number and boundaries, not a popular name. For a flat, refer to the deed of apartment or the society's share certificate.
• Term and commencement. State the date of commencement, the date of expiry, and whether the tenant has a right of renewal. A renewal "at the landlord's discretion" is worth nothing to a tenant who has built a business on the site.
• Rent and escalation. Fix the rent, the payment date, the mode, and an escalation — typically a stated percentage every three years. Silence leaves the rent nominal for a decade.
• Security deposit. Call it a deposit, state what it secures, and provide for refund within a fixed number of days after vacant possession, after specified deductions. An "advance" with no refund clause invites a claim for adjustment against future rent.
• Outgoings. Allocate municipal tax, water, electricity, lift maintenance, common area charges and society dues expressly. A clause saying the tenant pays "all taxes" is read narrowly and produces disputes about which taxes were meant.
• User, alterations and subletting. Specify the permitted use and require written consent for any change, prohibit structural alterations and subletting, and say what happens to fixtures on determination.
• Repairs and entry. Distinguish day-to-day repairs, which the tenant bears, from structural repairs, which the landlord bears, and reserve a right to enter on reasonable notice for inspection and repair.
• Determination and forfeiture. State the notice period on each side, the events of default — non-payment beyond a grace period, unauthorised use, insolvency — and whether forfeiture requires notice to cure.
• Holdover and damages. Provide for mesne profits or double rent after expiry — the clause that determines the economics of a delayed handover.
• Dispute resolution and registration. Choose the court or an arbitration clause consciously, and record that the instrument will be registered where the term requires it.

From draft to registered instrument

1. Title and authority check. Confirm that the landlord owns what he is letting, that a co-owner or a guardian is not required to consent, and that a leasehold plot permits sub-letting.
2. Draft and negotiation. Circulate a draft, mark the commercial points, and settle them in writing rather than in conversation. Retain the marked drafts — they are the best evidence of intent.
3. Valuation of stamp duty. Compute duty on the average annual rent and the term, including any premium that is really consideration. E-stamping through the authorised portal is now the ordinary mode.
4. Execution. Both parties sign each page; two witnesses attest. Where a company is a party, check the board resolution and the authority of the signatory.
5. Registration. Present the instrument at the Additional District Sub-Registrar's office having jurisdiction over the property, with identity proof, photographs and the stamp certificate. Registration fixes the date against third parties.
6. Handover. Prepare an inventory and a joint inspection note recording the condition, the meter readings and the keys. This document decides the deposit dispute at the end of the term.
7. Record the tenancy. Where the premises is assessed by the Kolkata Municipal Corporation, the tenancy should be reflected in the assessment record; where it is a flat, the society or apartment association should have a copy.

What to bring when the draft is being prepared

• The landlord's title deed, the municipal assessment record and the latest tax receipt; for a flat, the share certificate and the society's no-objection requirement, or the deed of apartment.
• For a leasehold plot, the original lease and the lessor's consent to sub-letting.
• Both parties' identity and address proofs, and PAN where tax deduction applies.
• Any previous lease and handover inventory, and a written note of the commercial terms — rent, deposit, escalation, outgoings, term, renewal — agreed before drafting begins.

Timelines and costs

Where leases fail

The first failure is characterisation. A document called a licence, with a licence fee and a right of entry, is often a lease in substance. The "licensee" then acquires the protection of the tenancy statute and cannot be removed on a week's notice.

The second is the eleven-month device. It avoids registration but yields a document that expires quickly and gives the tenant no enforceable long-term interest. Where rent is then accepted for years without a fresh document, the tenancy becomes month-to-month, determinable on notice, and the notice period becomes the whole dispute.

The third is silence on outgoings. A tenant who has paid municipal tax for eight years resists arrears the lease never allocated to him, and a landlord who has paid society maintenance claims it back under a clause saying "all charges". Both positions are arguable, which means both are expensive. The fourth is the deposit: without a refund clause and an inventory, the deduction is arbitrary and the claim unprovable. The fifth is service of notice — sent to the premises rather than the address for notices, or by ordinary post with no proof of delivery, the notice may be held invalid and the eviction petition begins again.

Kolkata practice notes

Registration in Kolkata is decentralised by ward and police station, so the correct Additional District Sub-Registrar's office depends on where the property sits, not on where the parties live. Where the premises is in a co-operative society or under the Apartment Ownership Act, the society's consent to letting, and its transfer fee, are separate requirements that a registered lease does not satisfy.

Eviction in the city is ordinarily filed before the civil judge (junior division) under the West Bengal Premises Tenancy Act, 1997, on a ground the Act recognises — default in payment, subletting without consent, nuisance, or bona fide requirement. Each has its own evidentiary requirement, and a petition pleading several grounds without proving one is the commonest reason these cases fail.

Frequently asked

Is registration compulsory for every lease? No. It is compulsory for a lease exceeding one year, or reserving a yearly rent, or from year to year. Shorter leases are optional, but an unregistered document proves only what it records and gives weaker protection against third parties.

How is stamp duty calculated? On the average annual rent and the term, with provision for premium and advance. The registering office computes it under the West Bengal schedule; check before execution, not after.

Can the landlord increase rent mid-term? Only if the lease provides for escalation. Without a clause, the rent is fixed for the term, and a unilateral increase is a breach.

What notice must a landlord give? The lease should specify it. Where silent, the statutory notice under the Transfer of Property Act applies and the tenancy statute may add requirements; fifteen days is conventional for a month-to-month tenancy, but the document should say so.

Is TDS or GST applicable on rent? Tax at source applies to rent above the statutory threshold, and GST applies to commercial letting in specified circumstances. Silence on who bears them creates a dispute at the first demand.

A lease drafted once, properly, costs a fraction of the litigation it prevents. Advocate Panchanand Shaw, 14 Hare Street, opposite Bankshall Court, Kolkata 700001, drafts and registers leases and advises landlords and tenants on eviction and deposit disputes, and can be reached on +91 90070 00603.