You should give premises on lease .
hotel requires lot of investments
hence long period of lease for 30 years or so
it would not create legal problems if you become landlord
Renting out to a partnership firm.
We have a commercial property in my mother's name. Me and another person are going to form a partnership where the firm will take two floors of the building on rent from my mother for a nominal amount for a period of 30 years. The firm will start a hotel (Fooding and lodging) in the rented premises. My mother is 73 years old and I am the only successor to her. My questions are as follows: 1. Is it ok to make the rent agreement for a period of 30 years? 2. In case of my mother's death, I shall be the owner of the property. And then I shall become the landlordinf the rental agreement. Me being a partner in the firm which will be my tenant also , will it create any legal problem?
Asked 9 days ago in Property Law
Religion: Hindu
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10 Answers
1. property cannot be taken on rent for a period of 30 years. Rent period should be less than 30 years otherwise stamp duty payable on rent agreement should be equivalent to sale deed beside other complications would arise.
2. As such no issue if you complete some formalities. Partnership firm in s a seperate and distinct entity.
1. You may better enter into a lease agreement for a lesser period of 5 years or 10 years with a clause to renew the same instead of going for such a long period of rental agreement.
2. If you become the owner then you can collect the rental amount as a owner from you as a tenant, because that is a business and this is different role.
There is nothing wrong in being a partner and a tenant to your own building.
Thank you for the answers. What I have understood from then answers so far is that : 1. My mother should not enter into a rent agreement for such a long period of 30 years. 2. It should be a lease agreement. Better if done for a lesser period of time. But the problem is my partner will do all the investments for starting the hotel and we are providing the barebone structure comprising of two floors in the building. He may not agree to a lesser lease period. We may try to convince him to go for a lease period 15 years with provisions for renewal. We have planned for this legal structure for the venture , i.e., a partnership agreement between me and person X, in the ratio of 60:40. The partnership firm will be for a duration of 30 years. My mother being the owner of the premises will lease out to the partnership firm. Do you think this structure is sound or do you suggest any other structure? My main concern down the line is that my successors, in case of my death , should have no problem in selling the premises after expiry of the lease period, if they so desire. Please note that there are other big corporate tenants in the other floors of the building.
Asked 9 days ago
The suggestions rendered were based on future insights.
You may proceed as per the circumstances and the obligations already agreed upon.
There should not be any renewal clause in lease deed
if your partner is investing funds he will not agree for 15 years agreement
register the lease deed
there should be clause if rentals not paid on time lease can be terminated
If you want to avoid issue in future then consult a competent lawyer for drafting of partnership agreement and lease or rent agreement.
1. the mother can lease the premises for 30 years. there would be safeguard and checks in the lease deed itself which will entitle the lessor/owner-mother to terminate the lease before expiry of its term and seek eviction of the lessee-firm.
2. after your mother's demise, assuming you would be her only surviving legal heir, you would step in her shoes and become the lessor/owner of the premises. the lease, if not expired by then, would continue to subsists between you as the lessor and your partnership firm as the lessee.
3. even if you die [after your mom] and the lease is subsisting, your heirs would step into your shoes and be entitled to sell the premises during the pendency of the lease. So the transferee/buyer would become the new lessor. However ensure that there is no restriction in the lease deed restricting the right of the lessor/owner to sell the property to any person of his/her choice during the subsistence of the lease
Dear Client,
The legal structure is quite sound but needs refinements for the issues in your concern regarding future ownership and flexibility. Instead of 30 years, it will be recommended to have a lesser lease period like 15 years with provision for renewal and clearly laid out terms regarding the extension of the lease. This will ensure your partner certainty of his investment while your successors have the flexibility to re-negotiate or even cancel the lease after the initial period. The lease should also state that it does not create any tenancy rights above the lease period, thus safeguarding the future saleability of the property. Since you will both be a partner in the firm and the landlord after inheriting the property, it is important that the partnership agreement and the lease agreement are kept distinct and professionally drafted so that there are no potential conflicts of interest or legal complications. You can further secure the arrangement by including a clause in the partnership agreement that explicitly specifies that your successors will inherit your partnership interest or an exit mechanism. A lawyer should be involved in drafting these agreements precisely, so the rights and obligations of both parties are adequately protected.
Hope that this helps you to solve your problem.
Yes it’s sound but it will incur additional taxation burden due furthermore if there are only 2 partners in firm then after one partner death legal complication can arise
When leasing commercial property to a partnership firm where you are also a partner, there are several legal considerations to ensure the arrangement is sound and future-proof, particularly concerning long-term leases and potential conflicts of interest. Here are insights based on your provided scenario:
