Everything you need to know about the rent agreement
In this article “everything you need to know about Rent Agreement”. I will explain about what is A Rent agreement? How to Draft a Good rent Agreement? What you need to check in a rent agreement? In what conditions you should get it notarized or get it register, how much does it costs? And what are the documents you need for it. So Keep Reading.
Why you need a rented House?
In the fast growing world, many people have to move away from their home town to new cities (sometimes within the city). Reason for this could be better jobs, new business opportunities; Education or Lifestyle.
However it is not possible to buy a new house, every time you shift to a new place. So a better option is to take a house on rent. And once you complete the tougher part of finding a suitable house (Read How to find the best rental home), you come the final stage of making and signing the rent Agreement. Most of the time rent agreement is made by your broker (if you have hired one), and also he will get it notarized or help you in registration (if it is a registered Lease). But even then, you should read the agreement carefully before signing, as it beneficial for both landlord and tenant.
However, most people do not pay much attention to it as they are not aware of the legal points that should be incorporated in a rent agreement. It is this lack of scrutiny that creates legal issues between tenants and landlords. So to avoid these conflicts and peace of mind, you need to read this article till the end. It contains, what is a rent agreement, its components and all the other things you need to know.
What is a Rent Agreement?
A Rent Agreement is a contract between the tenant and the landlord. It gives the tenant the right to live in a property for a fixed period of time. However For this, the tenant has to pay a monthly rent to the landlord.
So the Rent agreement is a base document clarifying all the terms and conditions to be followed by both landlord as well as tenant. The rent agreement is a contract which clearly defines, the expectations between landlord and tenant, including rent, rules regarding pets, and duration of agreement thorough many clauses. A well thought out, and well-worded lease contract can help ensure both parties’ best interests are protected, as neither can alter the agreement without written consent from the other.
I have provided a sample rent agreement in the last part of this post; also you will get all the information about the required documents and other formalities, you need to complete, before shifting to your rented home. So keep reading.
Which type of Rental Agreements you should use?
There are 2 types of residential Rent agreement normally used in India. First type is a Notarized Agreement and the Second is a Registered Lease Agreement. Many people don’t know the difference between the two, and when it comes to choosing between these two types, they get confused,. But don’t worry, by the end of this article all your doubts would be cleared, and you will be more confident when it comes to dealing with a rented property.
As per the Registration Act, 1908, the registration of a lease agreement is mandatory if the leasing period is more than 12 months. If an agreement is registered, stamp duty and registration fee needs to be paid for it. Generally Stamp duty is between 1% and 6% of the average annual rent. I will give you full details and complete process of a registered agreement, later in this article.
So the total cost of doing a Registered Lease could be a few thousands (cost is normally shared equally between Landlord and Tenant), also you need more documents and visit the sub-registrar office to complete the process.
However, to save this cost and time, a large number of rent agreements in India are made for a period equal or less than 11 months. These agreements define all the terms agreed upon between both the parties.
Advantages of 11 months agreement
- Cost of these agreements can be as low as 200 rupees, which is just a fraction when compared to a registered lease agreement.
- Due to transferrable jobs, kid’s education and various other reasons, many people don’t want to commit for a longer period.
- Owners also feel more secure in a shorter lease, because they can ask the tenant to vacate the property, if they don’t find the tenant suitable.
- Owner may want to sell the property or use it for himself after 1 year.
- Shorter Lease period has lesser chance of dispute and most people don’t want to go to court for any dispute.
- These agreements can be renewed with the consent of both parties at the end of the term.
Rent Agreement Format
Your Rent agreement has three main parts
The first part contains the information of the Property owner (Lessor), Tenant (Lessee) and the Property.
2nd part is about the Rent amount, Security Deposits, Common area maintenance charges, Electricity and Water Charges, move-in , move-out charges by the society or the builder and Agreement renewal terms
3rd part is about the general terms and conditions like society rules, payments for major and minor repairs, upkeep of the property, paint and finally the handover conditions after completion of the agreement period.
Agreement should be signed by the Landlord, tenant and 2 witnesses, also it should be duly notarized.
I have given a sample rent agreement below, for your referance. You can make changes according to your requirment.
This Lease Agreement is made at Gurgaon on this 28th Day of February 2020, between:
Mr. ————————– S/O- Mr. ——————– R/o : ——————————————— (hereinafter called the Lessor) of the one part,
Mr. ———————————-S/O Mr. ———————————————-R/O ————————————————-(hereinafter called the Lessee) of the other part,
The Expression Lessor and Lessee shall mean and include their respective heirs, successors, representatives and assigns.
Whereas the Lessor is the lawful owner in possession of ————————————————- (hereinafter called the Said Property)
Whereas the Lessor has represented that, the said property is free from all encumbrances and the Lessor has a clean and unrestricted right to the said property and is legally competent to enter into this Lease Agreement on the terms and conditions contained herein.
The Lessee(s) being in need of above premise for a temporary period of 11 months is desirous of procuring on a lease basis from 28th February 2020 to 27th January 2021.
NOW HIS DEED WITNESSETH AS FOLLOWS
- The temporary lease of said property will be given to the Lessee by Lessor and the lease shall commence with effect from 28/02/2020 and shall remain for a period of 11 months upto 27/01/2021. The tenancy can be extended or renewed at the end of this tenancy period with the increase of rent @ 10% or by mutual consent.
- Lease Agreement Holds a lock-in period of 6 months. The Lessee cannot vacate the premises 6 months from the agreement date.
- That the Lessee shall pay to the Lessor for leasing the said Property, on a temporary basis, the rent of Rs. 16500/- (Rupees Sixteen Thousand Five Hundred Only), including maintenance per month in advance on or before 5th of every English Calendar month. Electricity and other charges like water, etc. will be directly paid to respective authorities, by the Lessee with proof of payment to Lessor.
- That the Lessee also agrees to pay Rs. 16500/- (Rupees Sixteen Thousand Five Hundred Only) as interest free security to the Lessor which is refundable after deducting the electricity, water or any other charges (if any) at the time of handing over the peaceful vacant possession of the property to the Lessor.
- That the Lessee shall not sublet the property.
- That the Lessee shall pay water and electricity charges according to the consumption of electricity units as per prescribed rates to the concerned department.
- The Lessee shall comply with all the rules and regulations of the local authorities / regulators whatsoever in relation to the said property. That the Lessee shall pay the applicable society charges and one time entry and exit fee.
- That the Lessee at the time of occupation shall see that, all the electrical, sanitary fittings and fixtures are intact and in perfect working order. The Lessee shall be responsible to restore them in the same or new condition when they started leasing the property.
- The Lessee shall not carry out any structural additions or alterations to the building layout, fittings and fixtures.
- That the Lessee shall permit the Lessor or any of his/her authorized agent to enter upon the said property for inspection and to carry the necessary repair at all reasonable times.
- All day-to-day repairs (such as fuses, leakage of water taps, other leakages, etc.) have to be done by the Lessee at his own expenses.
- That at the expiry of the lease period the Lessee shall physically handover the vacant property to the Lessor with all the fittings and fixtures intact and in perfect working order, as well as without any damage to any elements of the property.
- That if the Lessee makes default in making the payment of rent and commits any other breach of this deed the Lessor shall be entitled to immediately ask the Lessee to leave the property. In such case, the Lessee shall, without demur, immediately vacate the property.
- That the Lessee shall not do or cause to be done any act or activities of illegal, immoral, un-social nature in the said premises and also will not create any nuisance to the neighborhood in any manner whatsoever.
- That before refunding the said deposit, the Lessor or her representative shall make an independent, discretionary assessment of the flat and he/she shall assess the damages to the house, if any, and the quantum thereof. Such damages shall be deducted from the deposit and only the balance amount shall be refunded to the Lessee.
- This agreement shall be governed and construed in accordance with the laws of India and the parties hereto irrevocably submit to the exclusive jurisdiction of the courts of New Delhi.
- That the Lease Agreement can be terminated by both parties by serving one month written notice after the lock-in period. If any of the clauses of this agreement are not adhered to by the Lessee, then at the request of the Lessor, the Lessee will immediately leave the property, without any demur and without causing any damage to the Lessor.
IN WITNESS WHEREOF THE PARTIES ABOVE NAMED HAVE AFFIXED THEIR SIGNATURES ON THIS DEED OF AGREEMENT ON THE DATE MONTH AND YEAR WRITTEN IN THE PRESENCE OF THE WITNESS GIVEN BELOW:
Lessor Name: Mr. ———————
Lessee Name: Mr. —————
As mentioned earlier in this article, the registration of a lease agreement is mandatory if the leasing period is more than 12 months (as per Registration Act, 1908). Registration process for a Rent agreement is almost same as registration process of a new property.
Process for Registering Rent Agreement and Cost involved in it.
For registered agreement both the owner and tenant need to visit Sub-registrar‘s office. Also don’t forget to take 2 witnesses along with you. You will find many document writers near the Sub-registrar’s office, which can help you in drafting and printing the Rent Agreement. Also you need to pay stamp duty to the state government. You can buy the E-Stamp papers from the vendors available around the Sub-registrar’s office.
(For property in Gurgaon, Sub-registrar’s office is in Vikas Sadan, Near Rajiv chowk. For new Gurgaon, you need to go to IMT Manesar).
In Gurgaon, Stamp duty is 1.5 % of the average annual rent, if the tenure of the agreement is between 1 year and 5 years. And for rent tenure between 5 years and 10 years, stamp duty is 3 %.
Along with the stamp duty you also need to pay registration charges based on the transaction value. You need to make a Demand Draft for the amount payable. Registration charges for Gurgaon are mentioned in the following table.
|Transaction value (in Rupees)||Registration Charges (in Rupees)|
|1 to 50,000||100|
|50,001 to 1,00,000||500|
|1,00,001 to 5,00,000||1,000|
|5,00,001 to 10,00,000||5,000|
|10,00,001 to 20,00,000||10,000|
|20,00,001 to 25,00,000||12,500|
Apart from Stamp Duty and Registration charges, you may also have to pay Document writer’s fees, which could be 500 Rs to 1 K.
Now let’s look at the documents, you need to carry with you at the time of registration.
- Original proof of property ownership
- Aadhar Card
- Any of these documents (Voter ID card, Passport or Driving License)
- 2 passport size photographs.
- Power of attorney, in case of actual owner is not present.
- Aadhar Card
- Any of these documents (Voter ID card, Passport or Driving License)
- Two Passport size photographs.
- Power of attorney, in case of tenant is not present.
- Original Passport, if the tenant is foreigner.
- If Tenant is a registered company, then a copy of board resolution is required (in favor of the authorized signatory).
Apart from the Rent Agreement, Tenant’s Police Verification is also mandatory in India.
Process for Police Verification
- Fill the Police verification form.
- Paste 1 Photograph
- Both Tenant and owner need to sign it.
- Attach a copy of tenant’s ID Proof.
- Go to relevant Police station and get it verified.