In India, we do not register rent agreements most times to save money spent on the registration process. It may cause future complexities if a dispute arises between the parties. There is no legal agreement through which they can approach the court and get justice. Even a drafted agreement lacks proper clauses. So let us know how to prepare a rent agreement? What are the essential provisions? How to get the rent agreement registered?
What is a rent agreement?
A rent agreement is a powerful legal document signed by both the parties, i.e., the landlord and the tenant, to regulate the tenancy. It contains all the related information about the parties and the terms and conditions related to the tenancy of the property on rent. It is binding on both parties.
Importance of Rent Agreement
- It is a legal document
- Safeguards the rights of both landlord and tenant
- Peaceful resolution of disputes through a valid agreement
- Protect the tenant from arbitrary demands of the landlord
- Secures landlord’s property
Steps before giving property on rent:
- Police verification of tenant
Police verification is the first step before giving property for rent. It includes a background check of the tenant. The procedure of police verification:
- First, download the police verification form from the official website of the state police. If the verification form is not there, the model form can be freely available online.
- Second, submit the form after mentioning all the information with all the relevant documents of the tenant to the nearest police station.
- Third, the police will conduct the inquiry and inform the landlord if they find any or no criminal record against the tenant.
This verification is compulsory because under Section 188 of I.P.C. absence of proper verification is punishable.
- Procedure to draft a rent agreement
Steps to make a legally binding rent agreement:
- Names of the parties
Mention all the details of the landlord and the tenant, i.e. their full name, father’s/husband’s name, age, and permanent address/current address, in the agreement.
It is an essential point concerning the ownership of the property. The landlord has to mention all the information confirming that he has the authority to give the property for rent and he is the original owner. The tenant will agree to the same if he signs the agreement. So that in the future, no dispute arises regarding the ownership of the property.
Determination of rent is a very crucial clause. It is important to specify:
- the amount of rent,
- the mode of payment (by cash or by online methods, like through RTGS, U.P.I., cheque),
- the duration of rent payment (first week of every month or the 7th day of every month),
- the duration after which the default in payment of rent will lead to legal consequences and,
- duration after which the rent will increase.
- Duration of tenancy
Make a rent agreement for a definite period because an indefinite period of rent agreement attracts legal complexities. Commonly, 11 months is advisable for a rent agreement.
- Security deposit
The points to be kept in mind while framing this clause:
- The amount of security deposit paid by the tenant,
- For how much time landlord will keep this amount,
- Refund mode in case the agreement is over and not renewed,
- A locking period clause states that no refund to the tenant if he vacates the property before the duration.
Mention the purpose for which they gave the property on rent, i.e. is it for residential or commercial purposes? The rent laws of relevant states mention that purpose can be a ground for eviction of the tenant when the tenant uses the property for a different purpose than that mentioned in the rent agreement.
- Condition of the property
Landlord gets compensation in case of property damage. The landlord can attach all the photographs and information as an annexure to the agreement stating the condition of the property before they give it on rent (for example, air conditioner installed or provided furniture).
- Registration of rent agreement
Section 17, Registration Act, 1908, mentions that it is compulsory to register any rent agreement made for over 12 months because, usually, a rent agreement is for 11 months. This happens because the landlord or the tenant does not want to bear the additional charges of registration.
If you are making a rent agreement for 11 months, then keep in mind the following points:
- The landlord should take the stamp paper for the agreement in his name, which will prove that he has given the property on rent,
- Take stamp paper costing Rs. 500/-( it may vary from state to state),
- Mention all the clauses in the agreement,
- Signature of both the landlord and the tenant. Also, get it witnessed by two known people. They will also enter their signature and photo into the agreement.
Register the rent agreement made over 11 months by submitting it to the sub-registrar in the registry office of the concerned state by paying the stamp duty and the government fees and getting it properly registered to save yourself from future legal complexities.
Consequences of non-registration of rent agreement
- A tenant can claim no House Rent Allowance in the absence of agreement,
- No stability. The landlord can get the property vacated by following the normal tenancy laws whenever he wants, or the tenant arbitrarily does not pay the rent or does not vacate the property in the absence of agreement.
Every state in India has their respective laws which govern the landlord-tenant relationship. But, to provide a uniform regulation in India for rental housing, the central government enacted the Model Tenancy Act, 2021. The primary aim of this Act is to govern the rental housing market, like residential and commercial premises, by establishing guidelines for tenancy, rights, and duties of the landlords and tenants and resolutions for the disputes arising out of the tenancy. This Act applies to the whole of India, including all the states and union territories.
The existing rent agreement will remain outside the purview of the model tenancy law, as it is still progressive and will not have a retrospective effect. This Act considers all the rental agreements that involve renting residential and commercial properties. However, the agreement drafted must be for over 11 months. The act does not cover an agreement of up to 11 months. This means that the landlord or the tenant cannot claim protection under this act if the agreement is not registered and is up to 11 months.
So, if you are a landlord or a tenant, get your rent agreement registered and follow all the legally admissible steps to avoid future complexities.
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