Arun (Software Engineer) 10 February 2017

Lease agreement for long term - 20 years

Hello Experts,

Firstly thanks for this forum, where in, common man like me are getting to know so much about the law, which, at no other place, we can get to know so clearly and easily apart from this forum.

I have a land and a third party is approaching me to rent the land for them to build a Fuel station. They're saying they need the land for a minimum period of 20 years with a rental increase of 10% every 3 years. After 20 years, based on owner's (my) decision, they will either hand over the land back or continue the station.

Coming to my questions,

1) IS it safe to hand over the property to them for 20 years? Will there by any legal issues when I ask them the land after 20 years?

2) What kind of agreement we both have to enter into? Can you help me with a sample agreement if any?

3) What are the points that I might have to include in the agreement, so that, I get the upper hand after 20 years?

4) They are also saying that, once I hand over the land, they will be investing a huge amount for creating the fuel station. If that is the case, will there be a possibility for them to raise a concern that " we have invested so much and we wated to continue the fuel station" even after 20 years?

Please help with your expertise as this is one of the Major decision that I need to take in my life as the agreement is for 20 years, which is like 30-40% of one's life on an average!

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3 Replies

Bhawani Mahapatra (Law Officer) 10 February 2017

Arun,

Nice to see people are now taking expert opinion before taking a major decision. Here are few suggestions point wise to your query.

1.There is no problem in leasing out your property for 20 years & there won't be any legal issue after expiry of lease term.

2. You must have a registered lease deed clearly mentioning the intention of both you and the lessee, details of schedule of land with boundries, tenure, rent, escalations.

3. You must not ask for a sample format for your 20yr lease deed & should take help of a local lawyer who have experties in making such deed. You must clearly mention the "exit clause", grounds for termination, dispute resolution mechanism arising out of said lease, scope of extention of tenure, notice period for termination, resource against failure of obligation by other parties, Jurisdiction of dispute beside your agreed commercial clauses. ( I can prepare the same for you, but it will take time)

4. If you don't want to go beyond 20 yr term, pls mention the same in the agreement in the beginning to avoid confusion. (else easementary right may come in to play)

You can get the draft agreement vetted from a reputed civil lawyer before signing

best of luck.

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Arun (Software Engineer) 10 February 2017

Hello Sir,

Thanks for your time and Inputs. That definitely clarifies most of my concerns.

My main concern was that, if he claims, he invested so much amount in the property and couldn't get the expected returns back in this 20 years and so will need to extend the lease for some more years, will it be considered, incase we get to the courts for this dispute?

Like you mentioned, I will definitely put that, we are not interested to continue beyond 20 years in the beginning itself.

I have definitely made a note of all your points and like you suggested, will take help from a local lawyer on this.

If possible, please send me a draft when you get sometime!