Rent Agreement in India: Overview and Types

Rent Agreements are the legal understanding between the owner of a land and its tenant. It falls within the gambit of property laws of India. When it comes to establishing a tenancy, a rent agreement is the most essential legal document. To make a rent agreement valid under Indian laws, signature by both the parties, i.e., the landlord and tenant is a must. An ideal offline or online rent agreement format must contain all the details and terms and conditions of the particular tenancy. These days, it is very easy to access online rent agreement drafts in India. However, you always need to ensure that all the clauses and terms of the rent agreement work in favor of both parties. Through this article, you can understand all the basic terms that a valid registered rent agreement must have and the various types of rental agreements in India.  

What is a Rental Agreement?

As stated above, an agreement prepared for the purpose of facilitating a tenancy is a rental agreement. Generally, it is the landlord who gets the rent agreement draft and then gives it to the tenant for review and signature process. However, the terms are not necessarily only in accordance with the landlord’s interest. A rent agreement format is only valid when there is mutual consent of both parties on all the terms and clauses. Further, the parties can also mutually make amendments to any rental agreement. 

Rent agreement clauses

It doesn’t matter if you are a landlord or the tenant, it is equally important for both parties to the rent agreement to have a clear understanding of the clauses and terms set in the agreement. The reason behind this is the fact that any ambiguity in the rent agreement draft can turn out to be disastrous in case of any future issues. Now that we know exactly what a rent agreement is, we will discuss the most basic and important clauses of a rent agreement. 

Details of the parties

The most basic requirement of a valid rent agreement is the details of both the parties, i.e., occupant and landlord. Further, the tenant also has to ensure that they give the exact name and number of the other occupants with him, as a part of that particular tenancy. The details include the name, permanent address, age, and occupation/profession of the parties. 

Description of the rental property

The rental property doesn’t need to always be a housing property. Hence, whenever you enter into a rental agreement, the agreement must have a complete description of the property in question. Along with its address, the list of other amenities and assets of the property, such as the tube lights, fans, A/C, list of any other furniture, etc. must be a part of the rental agreement. This helps avoid future clashes concerning assets of the property. 

Term of tenancy

In all legal agreements, this is one of the most basic terms. In a rent agreement, the termination clause will define the duration of the tenancy. It will also give out the terms for renewal of the rent agreement format between the parties. 

Rent and deposit 

The most important factor of any tenancy is the rent and the deposit amount. Hence, it should be mentioned in the draft of the rent agreement. It ensures that both the parties are available for the costs involved. Further, ideal rent and deposit clauses will also include the consequences of failure to payment of any amount in due time by both parties. 

Maintenance and damages to property of rent agreement

All terms related to the maintenance and the cost and liability in case of damages to the property must be a part of the offline or online rent agreement. 

Rules of the tenancy

This clause has the most effect on the tenant. In this clause, all the rules of the property must be mentioned, such as: 

• Whether pets are allowed or not; 
• No. of occupants allowed; 
• Whether the landlord allows commercial transactions through their property or not; etc. 

Apart from these rules, the consequences of not following them are also a part of this clause. These consequences might include monetary penalties or might even lead to the termination of the contract. 

Lock–in period of rent agreement

This is a clause that locks both parties to the agreement for a certain period after its execution. Since renting a property is a difficult task, the lock-in period generally protects the interest of both parties. The general lock-in period in all online rent agreements is 3 months. This helps both parties in settling down. 

Termination and notice of termination

Even after the end of the lock-in period, no rental agreement can be terminated abruptly. Hence, this clause is put in place. When either party does anything to breach the agreement, they can terminate the agreement based on the terms of this clause. The notice period for a rent agreement might last from one month to three months, depending on the mutual decision of the parties. 

Police verification of tenant

This clause safeguards the interests of the landlord. All tenants must get a police verification before executing the rent agreement. This ensures the credibility of the tenant and helps in building trust between the employer and employee. 

Types of rent agreements 

When you think of types of rent agreements, the most basic are house rent agreements and commercial lease deeds. However, even these fall under the following 2 subcategories of rent agreements in India: 

• Lease Agreement: the minimum duration of a lease agreement or a lease deed is 12 months. People usually opt for commercial lease deed drafts in India. Especially since the longer duration of the lease makes it easier for business owners. With that said, these lease agreements are governed by each state separately based on their Rent control laws. Lastly, an interesting factor is that the lease agreement usually also transfers the interest in the property to the tenant. 
• Leave and License Agreement: generally, a leave and license agreement exists for 11 months. This is the major difference between both agreements. As a result, the leave and license contracts are majorly used for the house rent agreement format. Lastly, the leave and license agreement is not governed by the rent control laws of different states. 

How to execute a rent agreement in India? 

The requirements for executing a rent agreement in India depend on the duration of your rental agreement. Based on the duration of your agreement, you can figure out whether it needs registration or not. According to the Registration Act 1908, it is not mandatory to register a rent agreement, if the duration is for less than 12 months. If your house rent agreement is in a leave and license format, you will not need registration to execute it. 

• When Registration is not mandatory 

 In this scenario, once the rent agreement is drafted, all you need to do is, print it on stamp paper (as applicable to stamp duty). Then, get a signature of both parties and two witnesses. 

• When Registration is mandatory

In this scenario, the parties need to sign the duly notarised rent agreement on the stamp paper before the registrar. This process too, requires two witness signatures. Below is the list of documents required for registering a rental agreement: 

1. Proof of ownership of the property; 
2. Tax Receipt;
3. Passport-sized photos of both parties & witnesses; 
4. Address proof; and
5. Route map of the property. 

Conclusion

You can find hundreds of rental agreement drafts online. However, the most important factor of any legal agreement is your specific requirement. Experts at LegalWiz.in will ensure that all your rights are protected at all costs. Get on a call with our experts today. Contact us now! 

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