All You Need To Understand About Rental Agreements - IPleaders
This post is written by Niharika Agrawal, from IFIM Law School. This article handle all the fundamentals of a valid rental agreement and its format.
This article has been published by Abanti Bose.
Tabulation
What is a rental agreement?
Importance of a rental contract
Duration of rental contracts
Procedure for signing up a rental agreement
Documents needed for a rental agreement
Registration charges
Important clauses of a rental agreementName of the occupants
Duration of the occupancy
The rental quantity
Cost of period or maintenance
Cost of down payment
Conditions
Renewal and notice period
Amenities connected with the residential or commercial property
Exit provision
Signature and date
Police confirmation
What is a rental arrangement?
A rental arrangement is an important legal document that requires to be signed by both the celebrations i.e., the landlord and the renter, in order to control the tenancy. It consists of all the in-depth information about the celebrations and the conditions associated with the tenancy of the residential or commercial property on lease. It is binding upon both celebrations. It includes all basic elements such as rent, down payment, details relating to the residential or commercial property, its size, address, type, and most importantly duration of the arrangement. Since it is binding in nature, both celebrations are advised to go through it carefully before finalizing and concurring to the clause. The arrangement stays void up until 2 witnesses or non-beneficiaries exist and sign the contract as witnesses.
The rental arrangement is primarily prepared by either of the celebrations with the consent of the other celebration and both the parties need to agree to the very same. A rental contract could be either oral, written, or suggested. However, it is typically chosen to have a written contract as that might be useful as a piece of proof for shared permission of the parties. The terms of the contract can not be amended unless and till parties mutually accept it.
Importance of a rental arrangement
The rental arrangement being a legal document plays an extremely essential function. A Rental arrangement safeguards the rights of both celebrations and conserves them from future disagreements. During the contract between property manager and occupant, there may arise some conflicts between them. Such disagreements could be resolved through the arrangement. It offers security to the proprietor for his residential or commercial property and also safeguards tenants from unlawful demands of the proprietors.
The rental arrangement also gives ownership of the residential or commercial property to the occupant for a specific time period. Oral agreements are not enforced by law for that reason it is constantly recommended to carry out a written agreement. Another essential element is it serves as a piece of legal proof.
Duration of rental contracts
Rental contracts can be repaired for any period as per the requirements of the parties and can be renewed according to the terms of the agreement. However, in the case of a rental agreement, it's generally for 11 months. This is to avoid the rigorous rental law which is suitable for the lease arrangement approximately 12 months. According to the Registration Act, 1908, any residential or commercial property that is leased out to the occupant 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 require registration.
In the case of a lease arrangement, the celebrations require to pay stamp responsibility, registration charges, and other costs. Therefore, to be exempt from such expenses, the celebrations in the rental arrangements equally 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 signing up a rental contract
Registration of rental contracts is elective. However, it works in case of disputes as notarized agreements are not applicable in the law court. Therefore, it is constantly much better to be registered.
One can register the lease contract by visiting the neighboring sub-registrar's workplace. It is essential to note that the procedure of registration should be finished a minimum of four months before the date of expiration of the deed. Therefore, one requires to monitor the date and time when the deed was developed. Once the deed ends, then a fresh deed requires to be created. After this, a fresh deed has actually to be created. Both the celebrations need to be present together with 2 witnesses for attestation. If only one of the celebrations exists and not both of them, then today celebration must sign the Power of Attorney, approving the rights of contract closure.
required for a rental arrangement
1. Original evidence of ownership of the residential or commercial property.
2. Residential or commercial property documents such as tax receipts.
3. Two passport photographs 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 needs to be rented.
Registration charges
There are no set registration charges in the entire country. It differs from one state to another. It also consists of stamp task charges.
Important clauses of a rental contract
Name of the occupants
Name of the residents includes all the individuals surviving on the residential or commercial property. Such names particularly should can taking responsibility for the residential or commercial property. These names could be useful in case any dispute arises. For instance, if any renter all of a sudden abandons your house without notifying the owner. In such cases, the owner has the power to take legal actions versus any of the occupants in lack of the other.
Duration of the occupancy
The celebrations need to mention the fixed duration in the arrangement. After the expiration of the duration, it can be renewed with the prescribed formality by mutual permission 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 tenant as the owner can not require them to vacate the residential or commercial property before the due date.
The rental quantity
The amount of the quantity repaired for the rent should be specified in the rental agreement. It should also contain the amending terms. This stipulation also includes the mode of payment and the instalment system if any. The dates at which the rent requires to be paid, the fine for late payment, etc likewise requires to be mentioned in the agreement. This provision protects the parties from the illegal holding of the money or payment of the money.
Cost of duration or maintenance
In many cases, the expense of the maintenance is paid either by the owner or the tenant. Such sum of payment and the individual paying the amount needs to be pointed out specifically in the contract. Not only the expense of maintenance however also any other expenditures that may be major or minor such as repairs or electric costs, and so on need to be covered within the rental arrangement. This provides clearness about such elements to both celebrations during the occupancy duration.
Cost of down payment
The quantity that requires to be paid by the tenant to the landlord need to be discussed in the rental arrangement and must be signed by both celebrations. This saves both the celebrations from unlawful demand and allegations. The landlord can likewise be eliminated in the event where the renter leaves the residential or commercial property without making the payment of lease.
Conditions
The contract should include how the residential or commercial property and its surroundings need to be dealt with. Factors such as subletting, change in the facilities, allowing of the family pets, etc must be cleared in the agreement.
Renewal and notice period
The renewal and notice durations must be appropriately mentioned in the arrangement for the sake of previous knowledge. It includes the date of renewal of the contract and the notification duration and how it requires to be performed.
Amenities attached with the residential or commercial property
It includes all the other facilities that are connected to the residential or commercial property. This requires to be mentioned in the contract for the security of the property manager 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 property owner to avoid any damages or the monetary settlement of any repair work throughout the tenancy period.
Exit clause
This provision includes clearance of any other penalties before the termination of the contract or before the leaving of the residential or commercial property need to be dealt with.
Signature and date
This is the most essential clause of the rental agreement. In this, both the tenant and the property owner accept all the conditions of the arrangement and accept the contract by signing this document. It likewise assures that failure in compliance with the arrangement caused face legal charges by either of the parties. Before signing the arrangement it is very essential to read every clause of the contract carefully.
Police verification
The major element of any rental contract is the authorities confirmation of the occupant. This includes a background check of the tenant to avoid any kind 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 provision of the agreement is punishable under Section 188 of the Indian Penal Code.
Common errors in a rental agreement
It is normally observed that the parties make the following mistakes in the rental arrangement:
1. Do not mention the terms which may cause the expulsion of the tenant.
2. Does not define the lock-in period and termination. Lock-in duration i.e. the minimum duration till which the occupant can not leave the residential or commercial property. The tenant must also define priorly the notice period which needs to be sent before ending the agreement.
3. Ignores to define the amount of money that requires to be paid as lease, fixing charges, and the mode of payment.
4. Ignore the provision connecting to subletting of the residential or commercial property.
5. Does not point out the details connected to the Power of Attorney.
Format
This is the fundamental format of the rental contract.
RENTAL AGREEMENT
This lease arrangement is made on ... ...( date) in between ... ......( name of the property manager) S/o ... ... ...( father's name of the landlord), Address ... ... ...... (domestic address of the property manager). Hereinafter referred to as the landlord or the first party.
AND
... ... ... ... (Name of occupant), hereinafter referred to as the occupant, or the 2nd party, address ... ... ... ... ...( domestic address of the renter)
The term Landlord and the renter shall indicate and likewise include their legal heirs, followers, appoints, representatives, and so on.
Whereas the very first celebration is the owner and in the possession of the residential or commercial property No: ... ... ... ... ... ... (address of the leased residential or commercial property) and has concurred to blurt the stated residential or commercial property to the 2nd celebration for a regular monthly lease of Rs. ....../- (in words) per month.
Now this lease arrangement is seen under:
1. The tenancy is according to the English calendar and the arrangement is starting from ......( date of start of agreement).
2. The lease arrangement is approved for the duration of 11 (eleven-month) beginning with ... ...( date of commencement), and the contract can be extended even more with the mutual approval of the celebrations.
3. The purpose of the occupancy is simply for property functions and will not be used for any other purpose.
4. The second party will have to pay Rs. ... .../- (in words) as month-to-month rent, which need to be paid between 1st to fifth day of monthly, and if the renter continues to remain after 11 months from the beginning date, the rent will be increased.
5. The second will pay the electrical energy and water charges individually according to their consumption to the first celebration.
6. The 2nd party should not sublease the residential or commercial property to the sub-tenant under any scenarios without the approval of the property owner.
7. The second party shall abide by all the guidelines and regulations, by-laws set by the local authorities in regard of the rented residential or commercial property and will not get included or do prohibited activities in the leased residential or commercial property.
8. The 2nd party will not do any building and construction or make any modification in the leased facilities either major or small without the approval of the property manager.
9. The 2nd party will have to permit the property manager or his authorized agent to enter into rented properties for its assessment or basic checking for any repair if required.
10. The 2nd celebration will bear the expense of daily minor repair work.
11. This contract might be withdrawed or ended before the expiration of this tenancy period by serving a one-month prior notice.
12. Both the parties have checked out and understood this arrangement and have actually accepted sign the exact same with no pressure from any side.
In WITNESS WHEREOF the property manager and the renter have actually hereunto subscribed their hand at ______ (place) on this the _____________ (date of lease agreement) year first above mentioned in the existence of the following witnesses.
Witnesses:
1.
2.
___________ (name of the property owner) _________________ (name of the tenant)
Model Tenancy Act, 2021
To offer an uniform regulation in India in regards to rental housing, the Model Tenancy Act, 2021, was enacted by the central government. The primary objective of this Act is to govern the rental housing market, like residential and commercial premises, by establishing guidelines for occupancy, rights, and tasks of the proprietors and tenants and resolutions for the disputes developing out of the tenancy. This Act uses to the entire of India including all the states and union territories. According to this Act, the agreement needs to be in written form and both the parties need to sign the contract. The rental contract must consist of all the pertinent conditions which would be binding on both parties.
The existing rent arrangement will remain outside the province of the model tenancy law, as it is still progressive and will not have a retrospective result. This Act considers all the rental arrangements that involve leasing property and commercial residential or commercial properties. However, the contract drafted should be for more than 11 months. A contract of approximately 11 months is not covered under this Act. This eventually implies that the proprietor and the occupant can not look for resolution under the rules of the Act in case of any disputes.