Rent agreements define the relationship between tenants and landlords and provide a contract between the landlords and tenants. It is a written record of the rights and duties of the parties.
However, disputes related to unfair eviction, rent defaults, broken leases, or withheld security deposits are common with regard to rental agreements in India.
What is a Rental Agreement?
A rent agreement is a legally binding document that defines the terms and conditions of the tenancy. It contains several important clauses related to the tenancy such as the rent amount, security deposit, term of the agreement, maintenance and repairs, termination and renewal, and other important clauses.
It is not only important to prevent misunderstandings and disputes between landlords and tenants but is also crucial while dealing with third parties like banks for instance, for obtaining loans or for applying for government assistance.
The agreement can only be binding when signed in the presence of two witnesses who are non-beneficiaries. It can be oral, written, or implied but is usually preferred to be written.
A rental agreement can be drafted by any party after seeking the consent of the other party. Rental agreements made for a duration of 12 months or more need to be registered in court which requires money.
To avoid the registration cost, rental agreements in India are usually made for a term of 11 months.
Different Types of Rental Agreements in India:
- Commercial rental agreements
- Residential rental agreements
- Single room rental agreements
- Shared rental agreements
- Commercial Rental Agreements: These are solely used for commercial purposes and have no personal use. Commercial rental agreements are used to rent a commercial property from another individual or business. These are used for solely business-related activities. These should be printed on non-judicial stamp paper to make them legal. The signatures of both the landlords and tenants are essential to make it binding legally. The tenancy agreement for real estate is often termed a lease.
- Residential Rental Agreements: These agreements lay down the terms and conditions of the tenancy and the duties of both landlord and tenants. It is necessary in cases of temporary occupation of property for a fixed period.
- Single Room Rental Agreements: In this type of agreement, a tenant rents a single room in a shared house or building. This agreement is popular as it is a very affordable option and offers privacy and independence.
- Shared Rental Agreements: It is a contract between two or more individuals who agree to share their living spaces. It is often chosen to cut down on their living expenditures.
- Paying Guest Agreement: Recently, the Paying guest trend has led to a rise in paying guest agreements in Indian metropolitan cities among students and professionals where the tenant or the paying guest receives a fully equipped room with utilities and meals. The contract enlists the amenities, modes and methods of payment and house regulations.
- Leave and License Agreements: This is a favoured option over conventional leases in Tamil Nadu and in cities like Chennai. It does not bestow any ownership on the tenant but gives them the right to use the premises for a specific time like 3 years. It provides more flexibility and better eviction procedures making it more preferred by the landlords.
The documents that are required for rental agreements in India include:
- Identity proof
- Address proof
- Passport-size photographs
Stamp Duty on the Rental Agreements
This is the amount to be paid to the government that will depend on the State and the city where the agreement has been registered. This duty can be paid by purchasing a stamp paper of the appropriate value.
For instance, the stamp duty applicable in Delhi is 2% of the average annual rent for lease agreements entered for 5 years. Whereas, in Noida, the stamp duty for rent agreements entered for a duration of 11 months is 2% of the annual rent.
Clauses in a Rental Agreement
A rental agreement generally includes the following terms: duration of tenancy, rent amount, security deposit, insurance and maintenance, etc. However, it must include:
- Names and addresses of both tenants and landlords.
- Monthly rental amount and other costs should be specified.
- Signatures of both parties are required to make it legally enforceable.
- Security deposit terms and amount should be laid down.
- Period of stay or tenancy should be included.
- Maintenance charges and fittings and fixtures should be included.
- Brokerage fees, renewal terms and termination clauses should be mentioned.
- Rights and duties of both landlords and tenants should be specified.
- Indemnification clause indemnifying the tenant in case of misrepresentation.
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Laws governing Rental Agreements
- Rent Control Act: It serves as the foundation for rent regulation throughout the country. It allows the court to calculate fair rent that acts as a threshold for the landlords.
- Indian Contract Act, 1872: This Act defines the necessary requisites for entering into a contract that also applies to the rental agreement entered between the parties.
- Transfer of Property Act, 1882: Sections 105, 107, 108, 109, and 111 of this Act guide the legal intricacies of leases.
- Registration Act, 1908: Registering the agreement under this Act gives legal validation to the agreement.
- Consumer Protection Act, 2019: Tenants and landlords can file complaints for unfair practices related to rent agreements.
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Benefits of having a Rental Agreement
- Legal protection: Rental agreements establish a formal, written legally binding relationship between the parties which can be also used to produce evidence in the future in cases of disputes. It offers protection to both the parties by laying down their rights and duties.
- Relationship between the parties: The rental agreement establishes the relationship between the parties which is completely commercial and provides clarity regarding the responsibilities of both parties.
- Privacy of the tenant: The agreement explicitly prohibits the entry of the landlord into the rental unit. This ensures privacy for the tenants.
- Terms and conditions: Rental agreements specify the terms and conditions related to the tenancy like maintenance duties, security deposit, and rent stability. This ensures clarity and helps to avoid disputes.
Rent Agreement vs Leave & License Agreement
- Rights and Possession: A rent agreement grants the tenant exclusive possession and enjoyment of the property, creating a specific interest in their favor. A leave and license agreement only permits the licensee to use the premises for specific purposes without transferring any interest or exclusive possession.
- Transferability: A lease can be transferred or inherited as per its terms, while a license is non-transferable and ceases upon ownership transfer of the property.
- The intent of Parties: The nature of the agreement (lease or license) is determined by the overall intent of the parties as reflected in the document, emphasizing the importance of precise drafting.
Common Disputes in Rent Agreements
Disputes can arise for various reasons, including:
- Unfair Eviction: It is eviction without proper notice or forced eviction despite paying rent on time.
- Rent Default: This includes tenants failing to pay rent as per the agreement and disputes over delayed payments or penalties.
- Broken Lease: Premature termination of the lease by either party and disagreements over conditions for breaking the lease.
- Security Deposit Issues: This occurs when landlords refuse to return security deposits and deductions are made without justification.
Legal Remedies for Tenants
Tenants facing issues can rely on the following remedies:
i) Protection Against Unfair Eviction
Under the Rent Control Act, landlords must provide proper notice before eviction. Eviction is only allowed under specific circumstances, such as non-payment of rent and violation of agreement terms.
If evicted unfairly, tenants can file a complaint with the local rent authority or seek a court order to stay the eviction.
ii) Recovery of Security Deposit
Tenants can issue a legal notice demanding the return of the deposit. They can also file a suit in a small causes court if the deposit is withheld without valid reasons.
iii) Addressing Premature Lease Termination
- If the landlord terminates the lease early without valid reasons, tenants can seek compensation for relocation expenses or loss.
Legal Remedies for Landlords
Landlords also have rights and remedies when tenants violate the rent agreement:
1. Eviction of Defaulting Tenants: If the tenant fails to pay rent, the landlord can issue a notice of eviction. If the tenant refuses to vacate, landlords can file an eviction suit under applicable rent control laws.
2. Enforcing Lease Terms: Landlords can claim damages if tenants break the lease prematurely without notice. They can retain part of the security deposit to cover losses (if specified in the agreement).
3. Legal Action for Property Damage: Landlords can sue tenants for any damages caused to the property beyond normal wear and tear.
Steps to Avoid Rent Agreement Disputes
- Draft a Comprehensive Rent Agreement: Individuals must clearly outline all terms, including rent amount, notice period, security deposit, and maintenance responsibilities.
- Register the Rent Agreement: Registration makes the document legally enforceable.
- Maintain Written Records: Keep records of rent receipts, notices, and communication.
- Conduct Property Inspections: Both parties should inspect the property before moving in or out.
Conclusion
In India, the general rule is to keep the original signed copy of the rental agreement in case a dispute emerges between the tenant and the landlord.
The landlord-tenant disputes are very rampant in India. Therefore, understanding the laws related to rental agreements is crucial to enforcing your rights and seeking prompt legal advice.
For seeking personalised information regarding the legal remedies available contact us at: info@ashwaryasinha.com and office@ashwaryasinha.com
