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Anoushka Chopra | 16 Feb 2023

What is a Lease Agreement and What are its Important Elements?

What is a Lease Agreement and What are its Important Elements?

Leasing property is extremely common in India. Based on the individual needs and requirements of buyers, people decide whether leasing is suitable for them or if they would want to take another course of action for their benefit. Goes without saying, you might end up missing out on the perks of leasing if you are not aware of what the term means. 

Note that people can lease all kinds of things. From cars to boats, everything can be leased. However, the term “lease” is mostly used in the real estate industry, for both residential and commercial properties. 

Leasing can be defined as an arrangement in which the owner of the property agrees to transfer the right to use the land and its equipment to the said party for a specific time and in exchange for a certain amount of money. In real estate terms, the owner of the property is called the lessor, and the individual paying money to use the property is known as the lessee.

To ensure that this agreement is legally binding, both parties need to sign a written legal document known as the lease agreement. This document is an outline of all the terms and conditions that have been agreed upon between the parties, and the timelines that are to be followed in terms of payment and use of the property. This document holds a lot of importance because it protects the rights of all parties involved. It ensures that in case there is a breach of contract or demand for termination, mutually agreed-upon measures can be put into action to reach a solution. 

While the structure of a lease agreement depends on the needs and wishes of the parties involved, every state has come up with some lease laws that need to be kept in mind while creating the contract. For the agreement to be legally binding, the laws need to be followed no matter what. Even though these laws differ from state to state, here is a basic outline of what laws in most states include - 

  • Security Deposits 

  • Lessor and Lessee Rights 

  • Late Rent Payments 

  • Lease Agreement Violations 

  • Landlords have Access to the Property once the Resident Shifts

Before you move on to finalizing and signing a lease agreement for yourself, ensure that you are well aware and updated on the laws that exist in your state. 

Moving on, every lease agreement needs to include a few elements that the contract is incomplete without. Many times, we are in such a hurry to seal the deal and move into our newly leased property, we end up rushing the whole process. You will regret not paying sufficient attention to the agreements and contracts when you face difficulties in the future. We say it is better to be safe than sorry! 

For a satisfactory lease agreement, you can start by making sure that all the elements have been included and all clauses have been discussed in detail and with clarity. 

Also Read: Leave And License Agreement

Elements of a Lease Agreement 


Mention the full names and contact information of both the lessor and the lessee. The lessor is also known as the owner of the property and the lessee the user of it.  

Subject Matter

Complete details of the property that is to be used by the lessee along with its city, locality, and address. The subject matter should necessarily be an “immovable property”. 


The total amount of time that the owner has agreed to lease his/her property to the user. Mention the exact date, and whether the transfer of property is supposed to take place in the present or the future. 

Also Read: Types Of Commercial Lease

Rights and Obligations

A detailed explanation of all the terms and conditions that are to be followed by both parties. Here the most important thing is to mention the rights of the tenant. For instance, entry timings or whether he/she is required to give prior notice before leaving the property for a long time. 


An overview of the maximum number of people that are allowed to stay at the property and whether the owner is willing to permit entry of visitors. This also includes the specific names of the people that will be allowed and the ones that may not be permitted, if any. 


Note down anything the owner of the property may not be comfortable with. It can range from not wanting to install additional appliances to making any changes to the furniture and decor.

Also Read: Power Of Attorney Act

Deposit and Fees

Any additional fee or security deposit that is to be submitted by the tenant. Include the mode of payment and the timelines for the same. 

Utilities and Maintenance

Explain in detail who is responsible for which utility and what is the course of action in case there is a loss or mishandling of any utility. Also, mention which equipment has already been repaired and paid for by the owner. 

Dispute Resolution

If any time in the future, a dispute arises between both parties, there needs to be a mutual solution decided by both beforehand. Mention in order the steps that will be taken for resolution in case such a situation arises.

Apart from including all the above-mentioned elements, make sure that the language used in the agreement is clear and precise. No details are too many details, it is acceptable to be comprehensive till the time you are not deviating from the point of discussion. 

Lastly, it is okay to be unsure of the agreement that you are required to sign. To make sure that you have no doubts, regrets, or concerns - you can also take advice from a qualified lawyer and then sign the contract. 

Take as much time as you need to, just don't sign the argument without getting all your apprehensions cleared!

Also Read: Documents to check to prevent real estate fraud


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