Parties renewing a lease should ensure that the renewal terms are not contravening any laws within the jurisdiction where the agreement is being applied.

This is an example of how a government can impose penalties to a lease renewal where the original lessee has violated the lease usage rules. The tenants were holding themselves out to be residential tenants, when in fact they were commercial tenants and occupying premises which were confirmed to be commercial zones in India. The Bhopal hoteliers have threatened to go on strike if the Bhopal Development Authority does not reduce the fine.

Read the article here.

Takeaway:

• When entering into a commercial lease intended for strictly commercial purposes, landlords should ensure that a 'permitted use' clause states the premises cannot be used for residential use.