All You Need To Understand About Rental Agreements - IPleaders

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This short article is written by Niharika Agrawal, from IFIM Law School. This article offers with all the essentials of a valid rental arrangement and its format.


This article has been released by Abanti Bose.


Table of Contents


What is a rental agreement?

Importance of a rental arrangement

Duration of rental agreements

Procedure for registering a rental agreement

Documents required for a rental agreement

Registration charges

Important clauses of a rental agreementName of the residents

Duration of the occupancy

The rental amount

Cost of period or maintenance

Cost of security deposit

Terms

Renewal and notification duration

Amenities attached with the residential or commercial property

Exit provision

Signature and date

Police confirmation




What is a rental arrangement?


A rental contract is an essential legal file that needs to be signed by both the celebrations i.e., the landlord and the tenant, in order to manage the tenancy. It consists of all the detailed info about the parties and the conditions associated with the occupancy of the residential or commercial property on lease. It is binding upon both parties. It consists of all fundamental elements such as rent, security deposit, info relating to the residential or commercial property, its size, address, type, and most significantly duration of the arrangement. Since it is binding in nature, both celebrations are encouraged to go through it carefully before finalizing and concurring to the stipulation. The contract remains void till two witnesses or non-beneficiaries exist and sign the arrangement as witnesses.


The rental contract is generally drafted by either of the celebrations with the approval of the other party and both the celebrations need to consent to the same. A rental arrangement might be either oral, written, or indicated. However, it is typically chosen to have a written contract as that could be helpful as a piece of evidence for shared approval of the celebrations. The terms of the contract can not be modified unless and up until celebrations equally consent to it.


Importance of a rental arrangement


The rental agreement being a legal file plays a very essential role. A Rental agreement safeguards the rights of both celebrations and saves them from future disputes. During the contract in between property owner and tenant, there might occur some disagreements between them. Such disputes might be resolved through the contract. It provides security to the property manager for his residential or commercial property and likewise safeguards tenants from unlawful demands of the proprietors.


The rental contract likewise offers ownership of the residential or commercial property to the renter for a specified duration of time. Oral agreements are not imposed by law therefore it is always advised to perform a written agreement. Another essential element is it functions as a piece of legal proof.


Duration of rental contracts


Rental contracts can be repaired for any duration as per the requirements of the parties and can be restored according to the terms of the arrangement. However, when it comes to a rental agreement, it's normally for 11 months. This is to avoid the rigorous rental law which applies for the lease agreement approximately 12 months. According to the Registration Act, 1908, any residential or commercial property that is rented out to the occupant for more than 11 months requires to be signed up. Hence, the residential or commercial property that lasts just or for less than 11 months does not require registration.


When it comes to a lease agreement, the celebrations need to pay stamp responsibility, registration charges, and other expenditures. Therefore, to be exempt from such costs, the parties in the rental arrangements equally perform 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 agreements is elective. However, it is helpful in case of conflicts as notarized agreements are not appropriate in the law court. Therefore, it is constantly better to be registered.


One can sign up the rent contract by going to the close-by sub-registrar's office. It is necessary to note that the process of registration should be finished at least 4 months before the date of expiration of the deed. Therefore, one requires to keep track of the date and time when the deed was produced. Once the deed expires, then a fresh deed needs to be created. After this, a fresh deed needs to be developed. Both the celebrations need to be present in addition to two witnesses for attestation. If just among the parties exists and not both of them, then today party needs to sign the Power of Attorney, giving the rights of arrangement closure.


Documents required for a rental contract


1. Original proof of ownership of the residential or commercial property.

2. Residential or commercial property papers such as tax receipts.

3. Two passport pictures of each of the celebrations and one copy of each of the witnesses.

4. Documents related to attend to proof of both the celebrations and witnesses.

5. Route map of the residential or commercial property that requires to be rented.


Registration charges


There are no fixed registration charges in the whole country. It varies from one state to another. It also consists of stamp task charges.


Important clauses of a rental contract


Name of the residents


Name of the occupants consists of all the people residing on the residential or commercial property. Such names particularly must can taking responsibility for the residential or commercial property. These names could be useful in case any dispute emerges. For example, if any tenant all of a sudden vacates your house without informing the owner. In such cases, the owner has the power to take legal actions versus any of the renters in absence of the other.


Duration of the occupancy


The parties have to point out the set duration in the contract. After the expiration of the period, it can be restored with the recommended rule by mutual consent of the celebrations. Mentioning the period of the tenancy in the rental agreement can keep the owner on the safer side. It likewise safeguards the occupant as the owner can not force them to leave the residential or commercial property before the due date.


The rental quantity


The amount of the amount repaired for the lease must be specified in the rental agreement. It needs to also contain the amending terms. This provision also consists of the mode of payment and the instalment system if any. The dates at which the rent needs to be paid, the fine for late payment, etc also requires to be mentioned in the arrangement. This clause protects the parties from the illegal holding of the cash or payment of the cash.


Cost of duration or maintenance


In some cases, the expense of the maintenance is paid either by the owner or the occupant. Such sum of payment and the individual paying the quantity should be discussed specifically in the agreement. Not only the expense of maintenance however likewise any other costs that may be major or minor such as repair work or electrical bills, etc need to be covered within the rental agreement. This gives clarity about such factors to both parties during the occupancy duration.


Cost of down payment


The quantity that needs to be paid by the tenant to the property manager need to be mentioned in the rental agreement and needs to be signed by both celebrations. This conserves both the parties from unlawful demand and accusations. The property manager can likewise be eliminated in the case where the renter abandons the residential or commercial property without making the payment of rent.


Terms and conditions


The arrangement needs to include how the residential or commercial property and its surroundings should be dealt with. Factors such as subletting, modification in the properties, permitting of the pets, etc should be cleared in the agreement.


Renewal and notice duration


The renewal and notification durations must be properly discussed in the arrangement for the sake of anticipation. It consists of the date of renewal of the agreement and the notice period and how it needs to be carried out.


Amenities connected with the residential or commercial property


It consists of all the other features that are attached to the residential or commercial property. This requires to be discussed in the agreement for the security of the property owner and his residential or commercial property. It likewise consists of the newest condition of the residential or commercial property for future referral. This helps the proprietor to prevent any damages or the financial settlement of any repairs during the occupancy duration.


Exit provision


This stipulation consists of clearance of any other charges before the termination of the arrangement or before the leaving of the residential or commercial property must be resolved.


Signature and date


This is the most important clause of the rental contract. In this, both the tenant and the property manager accept all the conditions of the arrangement and accept the contract by signing this file. It likewise ensures that failure in compliance with the contract led to face legal charges by either of the parties. Before signing the contract it is extremely important to check out every stipulation of the contract carefully.


Police verification


The significant element of any rental contract is the police confirmation of the occupant. This consists of a background check of the tenant to avoid any sort of illegal activity from using the residential or commercial property. It not only ensures the security and security of the residential or commercial property however also the area. Non-compliance with this stipulation of the contract is punishable under Section 188 of the Indian Penal Code.


Common mistakes in a rental arrangement


It is generally observed that the parties make the following errors in the rental arrangement:


1. Do not discuss the terms which might cause the expulsion of the renter.

2. Does not define the lock-in duration and termination. Lock-in duration i.e. the minimum duration till which the tenant can not abandon the residential or commercial property. The renter should also specify priorly the notice period which needs to be sent before ending the contract.

3. Ignores to specify the amount of cash that needs to be paid as lease, fixing charges, and the mode of payment.

4. Ignore the clause relating to subletting of the residential or commercial property.

5. Does not mention the information related to the Power of Attorney.


Format


This is the basic format of the rental arrangement.


RENTAL AGREEMENT


This lease contract is made on ... ...( date) in between ... ......( name of the proprietor) S/o ... ... ...( dad's name of the landlord), Address ... ... ...... (property address of the proprietor). Hereinafter described as the proprietor or the first celebration.


AND


... ... ... ... (Name of occupant), hereinafter referred to as the occupant, or the second party, address ... ... ... ... ...( property address of the occupant)


The term Landlord and the renter shall suggest and likewise include their legal heirs, followers, appoints, representatives, etc.


Whereas the first celebration is the owner and in the ownership of the residential or commercial property No: ... ... ... ... ... ... (address of the rented residential or commercial property) and has actually accepted discharge the stated residential or commercial property to the 2nd party for a regular monthly lease of Rs. ....../- (in words) per month.


Now this lease agreement is experienced under:


1. The occupancy is according to the English calendar and the arrangement is starting from ......( date of commencement of arrangement).

2. The rent contract is approved for the duration of 11 (eleven-month) beginning from ... ...( date of beginning), and the contract can be extended even more with the shared consent of the parties.

3. The purpose of the tenancy is simply for residential purposes and shall not be utilized for any other function.

4. The second celebration will need to pay Rs. ... .../- (in words) as regular monthly rent, which should be paid between 1st to 5th day of on a monthly basis, and if the tenant continues to remain after 11 months from the beginning date, the lease will be increased.

5. The second shall pay the electricity and water charges separately according to their intake to the very first party.

6. The 2nd celebration needs to not sublease the residential or commercial property to the sub-tenant under any circumstances without the approval of the property owner.

7. The 2nd party shall stick to all the guidelines and policies, by-laws set by the regional authorities in regard of the leased residential or commercial property and will not get involved or do illegal activities in the leased residential or commercial property.

8. The second party shall not do any building or make any modification in the rented premises either significant or minor without the authorization of the landlord.

9. The second party will have to permit the property manager or his authorized agent to participate in leased premises for its assessment or basic checking for any repair if required.

10. The second party shall bear the expense of everyday small repair work.

11. This agreement could be withdrawed or ended before the expiry of this tenancy period by serving a one-month previous notice.

12. Both the celebrations have read and understood this arrangement and have concurred to sign the very same without any pressure from any side.


In WITNESS WHEREOF the proprietor and the renter have hereunto subscribed their hand at ______ (location) on this the _____________ (date of rent arrangement) year initially above pointed out in the existence of the following witnesses.


Witnesses:


1.


2.


___________ (name of the proprietor) _________________ (name of the renter)


Model Tenancy Act, 2021


To supply an uniform guideline in India in regards to rental housing, the Model Tenancy Act, 2021, was enacted by the main government. The main objective of this Act is to govern the rental housing market, like and commercial facilities, by developing standards for occupancy, rights, and responsibilities of the property owners and renters and resolutions for the conflicts occurring out of the tenancy. This Act applies to the entire of India consisting of all the states and union areas. According to this Act, the agreement needs to be in written type and both the celebrations need to sign the contract. The rental contract must consist of all the pertinent terms which would be binding on both parties.


The existing rent agreement will remain outside the province of the design occupancy law, as it is still progressive and will not have a retrospective impact. This Act considers all the rental agreements that involve renting property and commercial residential or commercial properties. However, the contract drafted must be for more than 11 months. An agreement of up to 11 months is not covered under this Act. This ultimately suggests that the landlord and the renter can not look for resolution under the rules of the Act in case of any disputes.