Lease Structuring and Title Risk in Warehousing and Dark Store Agreements: Legal Issues for E-Commerce Companies in India 

Posted On - 22 July, 2025 • By - Adnan Siddique

The exponential growth of e-commerce and quick commerce in India has drastically transformed the landscape of commercial real estate. Central to this evolution is the rise of warehouses and dark stores—micro-fulfilment centres embedded within urban zones to enable fast last-mile delivery. These facilities, often tucked into basements, standalone buildings, or mixed-use properties, are critical to operations for companies like Blinkit, Zepto, Amazon, BigBasket, and Swiggy Instamart. 

Yet, while these backend hubs are operationally essential, they often exist in a legal minefield. The primary issues revolve around lease structuring, title risks, zoning irregularities, and regulatory non-compliance.  

Understanding the Nature of Warehousing Leases and Dark Stores

A dark store functions as a mini-warehouse from which goods are delivered, typically located within urban limits. Unlike conventional retail or B2B warehouses that are often situated in industrial clusters, dark stores tend to be leased in residential or mixed-use properties to reduce delivery times. This operational strategy results in complex legal challenges in lease documentation, land use approvals, and due diligence. 

A well-structured lease is the backbone of a compliant warehousing or dark store setup. However, e-commerce companies frequently overlook critical clauses that become contentious when municipal authorities or RWAs initiate proceedings. 

1. Use Clause and Permissible Activity 

  • Leases must clearly specify “warehouse”, “storage”, or “logistics hub” as the purpose. 
  • Generic commercial use language is often insufficient and misleading in zoning-sensitive areas. 
  • Any deviation from the stated purpose can lead to breach of lease and municipal penalties. 

2. Term and Lock-in   

  • Standard lease terms range from 3 to 9 years with lock-in periods of 2–3 years. 
  • For quick commerce operators who scale rapidly or shut non-performing dark stores quickly, flexible exit clauses are critical. 
  • Force majeure and early termination clauses must account for regulatory actions like sealing or zoning violations. 

3. Indemnity and Compliance Clauses 

  • Landlords should indemnify tenants for title defects, ownership disputes, or conversion failures. 
  • Conversely, tenants must indemnify landlords for illegal use of property, nuisance complaints, or zoning violations. 

 4. Access and Modification Rights 

  • Fulfilment centres may require fit-outs, racking systems, loading bays, etc. 
  • Leases must permit structural and non-structural modifications, subject to municipal approval. 
  • Entry and parking provisions for delivery vehicles should be clearly recorded to avoid conflict with RWAs or neighbouring tenants. 

 5. Municipal Dues and CAM Charges 

  • Lease agreements must specify responsibility for property tax, CAM (common area maintenance), water, and electricity charges. 
  • In case of co-located facilities (e.g., dark store within an apartment block or mall), the absence of clarity often leads to disputes. 

Title Risk and Land Use Due Diligence

Often in the race for operational readiness, companies skip a detailed title verification and land use compliance audit—a potentially expensive mistake. Unlike standard commercial leasing, dark stores pose additional title risks due to location in residential or mixed-use areas.  

1. Ownership Verification 

  • Landlords must prove unencumbered ownership through title deeds, sale agreements, or registered gift/will instruments. 
  • In several cases, warehouses are set up in properties held under unregistered GPA or oral partitions, increasing legal exposure. 

2. Conversion and Occupancy Certificates 

  • Check whether the property has been converted from agricultural to non-agricultural use (especially in Hyderabad, Bangalore, and Kochi). 
  • Ensure that the Occupancy Certificate (OC) covers warehouse or commercial use. In cities like Mumbai and Delhi, many dark stores function in buildings approved only for residential purposes. 

3. Zoning and Master Plan Checks 

  • A legal review must verify the zone classification (residential/ commercial/ industrial/ mixed) as per the local Master Plan or Development Plan. 

For instance: 

  • In Mumbai, DCPR 2034 classifies many zones as R-C (Residential-Commercial) but does not allow warehousing. 
  • In Delhi, warehousing is permitted only in notified mixed-use streets after paying conversion and parking charges. 
  • In Gurgaon, the HUDA regulations strictly prohibit storage in plotted residential sectors. 

4. Chain of Title and Litigation Search 

Conduct searches in revenue records, municipal tax records, and local courts to verify: 

  • Chain of ownership 
  • Absence of pending litigation 
  • No acquisition or encroachment notices 

III. Risks Arising from Improper Lease Structuring

Failure to comply with zoning and lease norms can lead to serious consequences: 

1. Sealing and Eviction: Municipal bodies have sealed premises in Delhi (under MCD Act), Noida, and Bangalore for operating warehouses from residential areas. 

2. Regulatory Action and Penalties: In Chennai and Pune, Fire Safety Departments have imposed fines and issued shutdown notices for unapproved warehouses storing flammable or perishable goods. 

3. Litigation and Injunctions: Residents in Kochi, Hyderabad, and Kolkata have filed PILs and suits against operators of dark stores in their neighborhoods. Courts have often held in favour of residents where municipal bye-laws were clearly violated. 

To reduce exposure, companies must build a robust legal process into their dark store real estate strategy. 

1. Standardized Lease Templates: Use jurisdiction-specific lease templates vetted for: 

  • Local development control rules 
  • Commercial use categorization 
  • Proper indemnity and compliance clauses 

2. Title and Zoning Due Diligence: Engage local counsel to conduct thorough land use and zoning assessments, particularly in high-risk cities like Delhi, Gurgaon, and Chennai. 

3. Regulatory Approvals and Licenses: Before occupying any space, obtain: 

  • Trade license (Shops & Establishments Act) 
  • Fire Safety NOC 
  • Building plan approval 
  • Parking and traffic compliance certificates (where required) 

4. Proactive RWA Engagement: Where dark stores operate in apartment complexes or gated colonies, seek written consent from RWAs or societies, especially for delivery vehicle parking, loading/unloading operations, and fire safety compliance. 

Conclusion

As e-commerce evolves toward faster and more hyperlocal fulfilment, warehousing and dark store strategy will remain central to competitive advantage. However, without legally compliant lease agreements and proper title diligence, these operational backbones can become liability minefields. Municipal enforcement is rising, and litigation risk is growing across Indian metros. 

Therefore, companies must approach warehousing leases not merely as operational contracts, but as critical legal instruments that demand thorough vetting. A compliance-first leasing strategy — built on zoning conformity, fire safety, land use compliance, and tenant-landlord clarity — will not only ensure business continuity but also foster trust among landlords, civic authorities, and local communities. 

Authors – Adnan Siddiqui and Amrutha Varshini Sreedhar

King Stubb & Kasiva,
Advocates & Attorneys

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