All You Need To Know About Rental Agreements - IPleaders
This short article is written by Niharika Agrawal, from IFIM Law School. This post handle all the essentials of a valid rental agreement and its format.
This article has been published by Abanti Bose.
Table of Contents
What is a rental agreement?
Importance of a rental contract
Duration of rental arrangements
Procedure for signing up a rental arrangement
Documents required for a rental contract
Registration charges
Important provisions of a rental agreementName of the occupants
Duration of the tenancy
The rental amount
Cost of period or maintenance
Cost of down payment
Terms
Renewal and notice duration
Amenities attached with the residential or commercial property
Exit clause
Signature and date
Police confirmation
What is a rental agreement?
A rental arrangement is an essential legal file that requires to be signed by both the celebrations i.e., the property manager and the renter, in order to control the occupancy. It includes all the in-depth info about the celebrations and the terms and conditions associated with the occupancy of the residential or commercial property on lease. It is binding upon both celebrations. It consists of all standard aspects such as lease, down payment, info regarding the residential or commercial property, its size, address, type, and most significantly duration of the agreement. Since it is binding in nature, both parties are advised to go through it carefully before signing and accepting the stipulation. The agreement remains invalid up until 2 witnesses or non-beneficiaries are present and sign the agreement as witnesses.
The rental arrangement is mainly drafted by either of the parties with the permission of the other party and both the parties have to agree to the exact same. A rental arrangement might be either oral, written, or indicated. However, it is generally preferred to have a written agreement as that might be helpful as a piece of proof for mutual authorization of the parties. The terms of the contract can not be amended unless and until parties equally concur to it.
Importance of a rental contract
The rental arrangement being a legal file plays an extremely essential function. A Rental arrangement safeguards the rights of both celebrations and conserves them from future disputes. During the agreement in between property owner and occupant, there might emerge some disagreements between them. Such disagreements could be dealt with through the arrangement. It supplies security to the property owner for his residential or commercial property and likewise safeguards occupants from unlawful needs of the landlords.
The rental arrangement also gives ownership of the residential or commercial property to the occupant for a specific duration of time. Oral agreements are not imposed by law therefore it is always encouraged to carry out a written contract. Another crucial factor is it functions as a piece of legal proof.
Duration of rental arrangements
Rental arrangements can be repaired for any duration according to the requirements of the parties and can be restored according to the terms of the arrangement. However, in the case of a rental contract, it's generally for 11 months. This is to prevent the stringent rental law which applies for the lease contract up to 12 months. According to the Registration Act, 1908, any residential or commercial property that is leased out to the tenant for more than 11 months needs to be registered. Hence, the residential or commercial property that lasts only or for less than 11 months does not need registration.
When it comes to a lease arrangement, the celebrations require to pay stamp responsibility, registration charges, and other expenses. Therefore, to be exempt from such expenditures, the celebrations in the rental arrangements mutually carry out the contract for 11 months in which one month in the count of 12 months is thought about as the month of the notice served by the owner.
Procedure for registering a rental contract
Registration of rental contracts is elective. However, it works in case of disputes as notarized arrangements are not appropriate in the court of law. Therefore, it is always much better to be registered.
One can register the lease arrangement by checking out the neighboring sub-registrar's workplace. It is necessary to keep in mind that the procedure of registration need to be finished a minimum of 4 months before the date of expiration of the deed. Therefore, one requires to monitor the date and time when the deed was created. Once the deed ends, then a fresh deed needs to be developed. After this, a fresh deed needs to be produced. Both the parties need to be present in addition to 2 witnesses for attestation. If just among the parties is present and not both of them, then the present party should sign the Power of Attorney, granting the rights of arrangement closure.
Documents required for a rental arrangement
1. Original proof of ownership of the residential or commercial property.
2. Residential or commercial property papers such as tax receipts.
3. Two passport photos of each of the parties and one copy of each of the witnesses.
4. Documents associated with attend to evidence of both the celebrations and witnesses.
5. Route map of the residential or commercial property that requires to be leased.
Registration charges
There are no fixed registration charges in the entire country. It differs from state to state. It likewise includes stamp task charges.
Important provisions of a rental agreement
Name of the residents
Name of the residents consists of all the people living on the residential or commercial property. Such names particularly should can taking responsibility for the residential or commercial property. These names might be beneficial in case any conflict emerges. For instance, if any renter all of a sudden leaves your house without informing the owner. In such cases, the owner has the power to take legal actions versus any of the renters in lack of the other.
Duration of the occupancy
The celebrations need to point out the set period in the contract. After the expiration of the duration, it can be restored with the prescribed formality by shared authorization of the parties. Mentioning the period of the occupancy in the rental contract can keep the owner on the safer side. It also safeguards the occupant as the owner can not require them to leave the residential or commercial property before the due date.
The rental amount
The sum of the amount fixed for the rent should be defined in the rental contract. It ought to likewise consist of the modifying terms. This clause also includes the mode of payment and the instalment system if any. The dates at which the lease requires to be paid, the fine for late payment, etc also requires to be discussed in the contract. This stipulation secures the celebrations from the unlawful holding of the cash or payment of the money.
Cost of period or maintenance
In many cases, the expense of the maintenance is paid either by the owner or the occupant. Such amount of payment and the individual paying the amount must be mentioned particularly in the agreement. Not only the cost of maintenance but likewise any other expenses that might be major or small such as repair work or electrical costs, and so on must be covered within the rental contract. This offers clarity about such aspects to both parties throughout the tenancy duration.
Cost of security deposit
The amount that needs to be paid by the tenant to the proprietor must be mentioned in the rental agreement and should be signed by both celebrations. This saves both the celebrations from illegal need and claims. The property manager can likewise be alleviated in the case where the renter leaves the residential or commercial property without making the payment of lease.
Terms
The contract must consist of how the residential or commercial property and its surroundings should be treated. Factors such as subletting, change in the facilities, permitting of the pets, and so on must be cleared in the arrangement.
Renewal and notice period
The renewal and notice durations ought to be properly mentioned in the arrangement for the sake of prior understanding. It consists of the date of renewal of the arrangement and the notice period and how it needs to be carried out.
Amenities connected with the residential or commercial property
It includes all the other facilities that are connected to the residential or commercial property. This needs to be mentioned in the contract for the security of the landlord and his residential or commercial property. It also consists of the most recent condition of the residential or commercial property for future reference. This assists the proprietor to prevent any damages or the financial settlement of any repairs during the occupancy duration.
Exit clause
This stipulation includes clearance of any other charges before the termination of the arrangement or before the leaving of the residential or commercial property need to be dealt with.
Signature and date
This is the most crucial provision of the rental arrangement. In this, both the tenant and the property manager consent to all the terms of the agreement and accept the agreement by signing this file. It likewise ensures that failure in with the agreement led to face legal charges by either of the parties. Before signing the contract it is extremely essential to read every provision of the agreement thoroughly.
Police verification
The major aspect of any rental contract is the police verification of the tenant. This includes a background check of the renter to avoid any sort of illegal activity from utilizing the residential or commercial property. It not only ensures the security and security of the residential or commercial property however likewise the area. Non-compliance with this stipulation of the agreement is punishable under Section 188 of the Indian Penal Code.
Common mistakes in a rental agreement
It is generally observed that the parties make the following mistakes in the rental arrangement:
1. Do not point out the terms which might cause the expulsion of the tenant.
2. Does not specify the lock-in period and termination. Lock-in duration i.e. the minimum duration till which the tenant can not abandon the residential or commercial property. The occupant needs to likewise define priorly the notification period which needs to be sent before terminating the contract.
3. Ignores to specify the amount of cash that needs to be paid as lease, repairing charges, and the mode of payment.
4. Ignore the clause associating with subletting of the residential or commercial property.
5. Does not mention the details associated with the Power of Attorney.
Format
This is the fundamental format of the rental arrangement.
RENTAL AGREEMENT
This rent contract is made on ... ...( date) in between ... ......( name of the property owner) S/o ... ... ...( dad's name of the property manager), Address ... ... ...... (property address of the proprietor). Hereinafter referred to as the landlord or the first party.
AND
... ... ... ... (Name of tenant), hereinafter described as the tenant, or the second party, address ... ... ... ... ...( property address of the tenant)
The term Landlord and the occupant shall mean and also include their legal beneficiaries, followers, designates, representatives, etc.
Whereas the very first celebration is the owner and in the possession of the residential or commercial property No: ... ... ... ... ... ... (address of the rented residential or commercial property) and has actually consented to blurt the said residential or commercial property to the 2nd celebration for a month-to-month rent of Rs. ....../- (in words) monthly.
Now this rent arrangement is experienced under:
1. The tenancy is according to the English calendar and the arrangement is beginning from ......( date of commencement of agreement).
2. The rent arrangement is granted for the duration of 11 (eleven-month) beginning from ... ...( date of commencement), and the agreement can be extended even more with the shared authorization of the parties.
3. The purpose of the tenancy is simply for property purposes and will not be used for any other function.
4. The second party will have to pay Rs. ... .../- (in words) as month-to-month lease, which ought to be paid between 1st to 5th day of monthly, and if the tenant continues to stay after 11 months from the beginning date, the lease will be increased.
5. The second will pay the electrical power and water charges separately according to their consumption to the very first celebration.
6. The 2nd party should not sublease the residential or commercial property to the sub-tenant under any situations without the authorization of the proprietor.
7. The 2nd celebration will follow all the guidelines and guidelines, by-laws set by the regional authorities in respect of the rented residential or commercial property and will not get included or do unlawful activities in the leased residential or commercial property.
8. The 2nd celebration shall refrain from doing any construction or make any change in the leased facilities either significant or minor without the approval of the property manager.
9. The 2nd party will have to permit the landlord or his authorized agent to participate in rented premises for its inspection or general checking for any repair work if required.
10. The 2nd celebration shall bear the cost of everyday minor repair work.
11. This arrangement might be revoked or terminated before the expiration of this occupancy duration by serving a one-month prior notice.
12. Both the parties have checked out and understood this agreement and have actually accepted sign the very same without any pressure from any side.
In WITNESS WHEREOF the property owner and the occupant have hereunto subscribed their hand at ______ (place) on this the _____________ (date of lease arrangement) year first above pointed out in the presence of the following witnesses.
Witnesses:
1.
2.
___________ (name of the proprietor) _________________ (name of the renter)
Model Tenancy Act, 2021
To provide an uniform regulation in India in terms of rental housing, the Model Tenancy Act, 2021, was enacted by the central federal government. The main objective of this Act is to govern the rental housing market, like property and industrial premises, by establishing standards for tenancy, rights, and tasks of the proprietors and renters and resolutions for the disputes arising out of the occupancy. This Act uses to the whole of India consisting of all the states and union areas. According to this Act, the agreement ought to be in written kind and both the celebrations ought to sign the arrangement. The rental contract must include all the appropriate conditions which would be binding on both celebrations.
The existing lease agreement will remain outside the province of the design tenancy law, as it is still progressive and will not have a retrospective result. This Act thinks about all the rental agreements that include renting domestic and industrial residential or commercial properties. However, the arrangement drafted must be for more than 11 months. An arrangement of as much as 11 months is not covered under this Act. This ultimately means that the property owner and the tenant can not look for resolution under the rules of the Act in case of any disagreements.
