Despite the digitization of signatures, stamping and registration of commercial lease agreements is of crucial importance. Lease Agreements exceeding a tenure of 12 months mandatorily need to be registered. We often receive queries related to stamp duty and registration of commercial lease agreements. It can be hard, especially for early-stage startups to have clarity on such issues in the beginning phases of their business. In order to address some of the most common queries in this regard, we bring to you a set of Frequently Asked Questions (FAQs) relating to stamping and registration of commercial lease agreements.
1. Which Act regulates Stamp Duty?
The Indian Stamp Act of 1899 was enacted to specify and regulate stamp duty collection on instruments. Stamp duty must be paid per the applicable stamp rules of the state in which the property is located for the execution of any lease agreement.
2. Is Stamp Duty paid in full (lump sum) or in instalments?
Stamp Duty is a legal requirement that must be paid in full and on time.
3. When a document or agreement is stamped, is it considered a legal document?
A stamp duty-paying document is considered a valid legal document that can be used as evidence in court.
4. Can lease agreements be digitally signed without stamping?
The First Schedule of the IT Act, 2000, specifically excludes any contract for the sale or conveyance of immovable property or any interest in such property from the application of the IT Act. So, a lease agreement cannot be digitally signed.
5. Is it necessary to register the agreement once it has been stamped?
Under the Transfer of Property Act of 1882 and the Registration Act of 1908, leases of immovable properties from year to year or for any duration longer than twelve months, or reserving a yearly rent, shall be registered.
6. When is the lease agreement notarized and when it is registered?
If the lease is for less than a year, the document can be attested by a Notary Public; if the lease is for more than a year, it must be registered with the Local Sub-Registrar to become legally binding. A notarized lease agreement will never be considered a substitute for a registered agreement. Regardless of the length of the lease, certain states, including Maharashtra, Telangana, and Andhra Pradesh, among others require the agreement to be registered.
7. Where is a lease agreement registered?
In every state, the lease agreement is registered at the office of the Sub Registrar having jurisdiction over the area where the leased property is located, by paying the relevant registration fees.
8. How many witnesses are required at the time of registering the lease agreement?
All parties, the lessor and the lessee, must be present, as well as two witnesses for attestation, in order to register the lease agreement.
9. What is the recourse available if one of the parties is not available at the time of registration of an agreement?
If all parties are not present at the same time, he or she must sign a Power of Attorney authorizing the agent to sign the agreement.
10. Where can I find applicable stamp duty?
Each state has its own laws governing applicable stamp duty on lease agreements. A sample is produced below:
Stamping and registration of lease agreements not only makes it easier for the parties to communicate, but it also safeguards their interests. The lessor and lessee should always rely on a written agreement.
If you have any queries regarding the drafting or stamping of commercial lease agreements, please feel free to reach out to us, by clicking on the button below: