What should any LESSEE/ TENANT consider, before availing an INDUSTRIAL PROPERTY on a LONG-TERM-LEASE?

Legal Insights by Advocate Hussain Nalwala

1. Whether the Lessee/ Tenant intends to sign a Letter of Intent (or) Term Sheet (or) Memorandum of Understanding;
2. Whether the Letter of Intent (or) Term Sheet (or) Memorandum of Understanding shall capture a brief understanding or detailed understanding between the Lessee/ Tenant and the Owner/ Developer?
3. Whether the Letter of Intent (or) Term Sheet (or) Memorandum of Understanding shall be of a binding (or) non-binding nature?
4. Whether the Lessee/ Tenant is availing a Built-to-Suit (BTS) Property (or) a Bare Shell Property (or) a Warm Shell Property?
5. What shall be the tenure/ term/ period of the lease transaction?
6. What shall be the basis on which the Lock-in-Period of the Lease needs to be decided?
7. What shall be the various stages, basis which the Lessee/ Tenant needs to shell out the Security Deposit to the Owner/ Developer?
8. What types of Deeds/ Documents need to be signed between the Lessee/ Tenant and the Owner/ Developer?
9. What Deeds/ Documents need to be Registered/ Lodged before the Registration Authority?
10. Deriving the best methodology in drafting Deeds/ Documents, so as to save on Government Taxes/ Duties?
11. Deriving the best methodology in drafting Deeds/ Documents, so as to save on Transfer Premiums payable to any Industrial Development Corporations?
12. Understanding the deliverables by the Owner/ Developer, thereby enabling the Lessee/ Tenant to secure itself against any breach by the Owner/ Developer?
13. What sort of authorities are engaged in giving permissions, sanctions, certifications, revisions, etc. with respect to the property at hand?
14. Whether the Owner/ Developer is an Individual/ Proprietary Concern/ Partnership Firm/ Company, thereby enabling the Lessee/ Tenant to negotiate certain legal riders, in case of a dispute scenario?
15. What shall be the mechanism to resolve disputes, that may arise in future?
16. What shall be the exit mechanism, whether there exists any dispute or not?

This being a mere tip of the iceberg, the various laws applicable and the disputes that most probably arise in such long-term contractual relationships, especially leasehold transactions, are matters of grave concern, since the stakes involved by the Lessee/ Tenant as well as the Owner/ Developer are critical in nature, be it their immovable properties, their moveable assets, their equipment and machinery, their businesses as a going-concern, their employees, their clients and customers, and a lot more that a layman or a business owner could ever perceive.
Hope this episode adds value to your decision making process, do share your feedback with me on [e-mail] or call me at [phone]