This post is composed by Niharika Agrawal, from IFIM Law School. This post handle all the fundamentals of a valid rental contract and its format.

This post has actually been published by Abanti Bose.

Tabulation

What is a rental contract?
Importance of a rental agreement
Duration of rental arrangements
Procedure for signing up a rental contract
Documents needed for a rental arrangement
Registration charges
Important stipulations of a rental agreementName of the residents
Duration of the tenancy
The rental amount
Cost of duration or upkeep
Cost of down payment
Terms and conditions
Renewal and notice period
Amenities connected with the residential or commercial property
Exit provision
Signature and date
Police verification


What is a rental arrangement?

A rental arrangement is a crucial legal file that needs to be signed by both the celebrations i.e., the property owner and the renter, in order to control the tenancy. It contains all the detailed details about the parties and the terms and conditions related to the tenancy of the residential or commercial property on rent. It is binding upon both celebrations. It includes all standard factors such as lease, down payment, details relating to the residential or commercial property, its size, address, type, and most importantly duration of the agreement. Since it is binding in nature, both parties are advised to go through it thoroughly before signing and consenting to the provision. The arrangement remains invalid until 2 witnesses or non-beneficiaries are present and sign the arrangement as witnesses.

The rental contract is mainly prepared by either of the parties with the approval of the other party and both the parties have to concur to the same. A rental contract could be either oral, written, or implied. However, it is generally chosen to have a written contract as that might be useful as a piece of evidence for shared consent of the celebrations. The conditions of the contract can not be changed unless and till celebrations mutually concur to it.

Importance of a rental contract

The rental contract being a legal file plays a very crucial role. A Rental arrangement safeguards the rights of both parties and saves them from future conflicts. During the contract in between landlord and tenant, there may arise some disagreements between them. Such disputes might be fixed through the contract. It provides security to the property owner for his residential or commercial property and also secures occupants from illegal needs of the property managers.

The rental contract likewise gives ownership of the residential or commercial property to the tenant for a specified time period. Oral agreements are not implemented by law for that reason it is constantly recommended to execute a written contract. Another essential aspect is it functions as a piece of legal proof.

Duration of rental contracts

Rental arrangements can be repaired for any duration according to the needs of the celebrations and can be renewed according to the regards to the agreement. However, when it comes to a rental arrangement, it's normally for 11 months. This is to avoid the rigorous rental law which is relevant for the lease contract as much as 12 months. According to the Registration Act, 1908, any residential or commercial property that is leased out to the occupant for more than 11 months needs to be registered. Hence, the residential or commercial property that lasts just or for less than 11 months does not need registration.

In the case of a lease arrangement, the celebrations need to pay stamp responsibility, registration charges, and other costs. Therefore, to be exempt from such expenditures, the celebrations in the rental contracts equally carry out the arrangement 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 arrangement

Registration of rental agreements is not mandatory. However, it is helpful in case of conflicts as notarized agreements are not suitable in the law court. Therefore, it is always much better to be registered.

One can sign up the lease arrangement by visiting the neighboring sub-registrar's office. It is necessary to note that the process of registration must be finished at least 4 months before the date of expiration of the deed. Therefore, one requires to monitor the date and time when the deed was created. Once the deed expires, then a fresh deed needs to be created. After this, a fresh deed has actually to be created. Both the celebrations require to be present along with 2 witnesses for attestation. If just one of the celebrations exists and not both of them, then the present party should sign the Power of Attorney, giving the rights of contract closure.

Documents needed 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 photographs of each of the parties and one copy of each of the witnesses.
4. Documents related to address evidence of both the parties and witnesses.
5. Route map of the residential or commercial property that requires to be leased.
Registration charges

There are no set registration charges in the entire nation. It differs from one state to another. It likewise includes stamp task charges.

Important clauses of a rental agreement

Name of the occupants

Name of the residents includes all the people surviving on the residential or commercial property. Such names specifically should be capable of taking obligation for the residential or commercial property. These names could be helpful in case any conflict occurs. For example, if any occupant suddenly abandons the house without notifying the owner. In such cases, the owner has the power to take legal actions versus any of the tenants in absence of the other.

Duration of the occupancy

The parties have to point out the set period in the contract. After the expiry of the period, it can be restored with the prescribed formality by shared permission of the parties. Mentioning the period of the occupancy in the rental agreement can keep the owner on the much safer side. It likewise safeguards the renter as the owner can not require them to vacate the residential or commercial property before the due date.

The rental amount

The amount of the amount repaired for the rent must be defined in the rental contract. It ought 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 lease needs to be paid, the fine for late payment, etc likewise requires to be mentioned in the agreement. This stipulation protects the parties from the unlawful holding of the cash or payment of the cash.

Cost of duration or upkeep

In some cases, the cost of the maintenance is paid either by the owner or the occupant. Such amount of payment and the individual paying the amount must be discussed particularly in the arrangement. Not only the expense of maintenance but likewise any other costs that might be significant or small such as repairs or electrical expenses, and so on must be covered within the rental arrangement. This offers clarity about such factors to both celebrations during the tenancy duration.

Cost of security deposit

The amount that needs to be paid by the tenant to the property owner must be pointed out in the rental contract and should be signed by both celebrations. This conserves both the parties from illegal demand and claims. The proprietor can also be relieved in the event where the tenant abandons the residential or commercial property without making the payment of lease.

Terms and conditions

The contract should consist of how the residential or commercial property and its environments must be treated. Factors such as subletting, alteration in the properties, allowing of the family pets, etc need to be cleared in the arrangement.

Renewal and notice period

The renewal and notice periods ought to be effectively discussed in the agreement for the sake of anticipation. It includes the date of renewal of the agreement and the notice period and how it requires to be performed.

Amenities connected with the residential or commercial property

It includes all the other facilities that are connected to the residential or commercial property. This needs to be pointed out in the agreement for the security of the property owner and his residential or commercial property. It likewise includes the current condition of the residential or commercial property for future referral. This helps the property owner to prevent any damages or the monetary settlement of any repair work during the tenancy period.

Exit clause

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

Signature and date

This is the most crucial provision of the rental arrangement. In this, both the renter and the landlord accept all the terms of the arrangement and accept the agreement by signing this file. It also assures that failure in compliance with the contract resulted in face legal penalties by either of the parties. Before signing the contract it is extremely important to check out every clause of the thoroughly.

Police confirmation

The significant aspect of any rental arrangement is the cops confirmation of the renter. This consists of a background check of the tenant to prevent any type of unlawful activity from utilizing the residential or commercial property. It not just guarantees the security and security of the residential or commercial property but also the area. Non-compliance with this clause of the arrangement is punishable under Section 188 of the Indian Penal Code.

Common errors in a rental contract

It is generally observed that the celebrations make the following mistakes in the rental arrangement:

1. Do not point out 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 period till which the occupant can not abandon the residential or commercial property. The renter needs to also define priorly the notification duration which requires to be submitted before ending the arrangement.
3. Ignores to specify the amount of cash that requires to be paid as lease, fixing charges, and the mode of payment.
4. Ignore the provision associating with subletting of the residential or commercial property.
5. Does not mention the details connected to the Power of Attorney.
Format

This is the basic format of the rental contract.

RENTAL AGREEMENT

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

AND

... ... ... ... (Name of renter), hereinafter referred to as the tenant, or the 2nd party, address ... ... ... ... ...( residential address of the occupant)

The term Landlord and the renter will indicate and also include their legal heirs, successors, assigns, agents, etc.

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

Now this rent agreement is seen under:

1. The tenancy is according to the English calendar and the agreement is starting from ......( date of start of contract).
2. The lease agreement is approved for the period of 11 (eleven-month) beginning with ... ...( date of commencement), and the contract can be extended even more with the mutual approval of the parties.
3. The purpose of the occupancy is simply for residential purposes and will not be utilized for any other purpose.
4. The second party will have to pay Rs. ... .../- (in words) as month-to-month rent, which should be paid between 1st to 5th day of monthly, and if the tenant continues to remain after 11 months from the beginning date, the rent will be increased.
5. The 2nd will pay the electrical energy and water charges separately according to their usage to the first celebration.
6. The second celebration ought to not sublease the residential or commercial property to the sub-tenant under any circumstances without the permission of the property owner.
7. The second celebration shall stick to all the guidelines and regulations, by-laws set by the regional authorities in respect of the leased residential or commercial property and will not get involved or do illegal activities in the rented residential or commercial property.
8. The 2nd celebration will refrain from doing any construction or make any change in the leased properties either major or minor without the consent of the proprietor.
9. The 2nd celebration will need to permit the property owner or his authorized representative to get in into rented properties for its inspection or basic monitoring for any repair work if required.
10. The second party shall bear the expense of daily small repairs.
11. This contract might be revoked or ended before the expiry of this tenancy period by serving a one-month previous notification.
12. Both the celebrations have actually read and understood this agreement and have actually consented to sign the exact same without any pressure from any side.
In WITNESS WHEREOF the property owner and the tenant have hereunto subscribed their hand at ______ (place) on this the _____________ (date of lease agreement) year first above pointed out in the presence of the following witnesses.

Witnesses:

1.

2.

___________ (name of the property owner) _________________ (name of the tenant)

Model Tenancy Act, 2021

To supply an uniform policy in India in terms of rental housing, the Model Tenancy Act, 2021, was enacted by the central government. The main objective of this Act is to govern the rental housing market, like property and industrial premises, by developing guidelines for tenancy, rights, and duties of the property managers and occupants and resolutions for the disagreements arising out of the occupancy. This Act uses to the whole of India consisting of all the states and union territories. According to this Act, the arrangement needs to remain in written kind and both the parties should sign the arrangement. The rental contract must include all the pertinent conditions which would be binding on both celebrations.

The existing lease agreement will stay outside the province of the model tenancy law, as it is still progressive and will not have a retrospective result. This Act thinks about all the rental agreements that include leasing property and business residential or commercial properties. However, the arrangement prepared need to be for more than 11 months. An agreement of as much as 11 months is not covered under this Act. This eventually means that the landlord and the tenant can not seek resolution under the rules of the Act in case of any disagreements.