So, what exactly is a rental agreement?

It is a legal agreement between a landlord of a property and the tenant looking forward to renting the property for a given period of time. A rental contract is written on a stamp paper and includes the following information -

  • The name of the owner
  • The name of the tenant
  • The details of the property
  • The amount of rent including grace period and due date of payment
  • The term of the agreement
  • Mode of paying the rent
  • Charges of electricity, water, and maintenance
  • Scenarios of contract termination before the expiration period
  • The sum of security deposit and related terms and conditions
  • Procedure for handling emergency requests
  • Related rules and regulations

Format of Rental Agreement can be downloaded from here.


What are the types of rental agreements?

In India, basically, there are 2-types of rental agreements –

  • A lease agreement
  • A license agreement
  • Long term lease
  • Commercial lease
  • Tenancy Agreement
  • Short-term lease

What terms are commonly used in a rental contract?

Here are some of the commonly used terms used in a house rent agreement given below –

  • The names of all the people involved in the agreement – An ideal rental agreement should include the name of the landlord, tenant, and the witnesses.
  • The Rent – It includes the amount of payment done by a tenant to his or her landlord for the rented-out property.
  • The Duration – It talks about the period of time wherein the landlord’s property will be in temporary possession of the tenant
  • The Deposits – It means the sum of money deposited, if any, including the reason behind the deposit, the terms, and conditions related to the refund or adjustment of the same
  • Reasons and terms of use – The reason why the property will be used and the conditions of using the property.
  • Utilities – It includes the utilities that are included in the contract and the ones for which the tenant will be responsible.
  • Insurance – Generally, applicable on commercial rental contracts, it reads if or not the tenant needs to cover the property under a suitable insurance policy.
  • Maintenance and Repairs – It reads whether the owner of the property or the tenant is responsible for maintenance and repair of the property.

What about the security deposit?

When it comes to renting a property in India, advance or security deposits are integral to rental agreements. In most of the cases, it is a refundable amount that the landlord repays the tenant, once the agreement comes to an end. An advance is generally deposited at the time of signing the rental agreement.

In case, the tenant caused any damage to the property and its belongings, the landlord may use a part of the advance to repair those damages and return the remaining amount of the advance to the tenant at the time of termination or cancellation of the agreement.


How a rental agreement is made legally valid and enforceable?

Once everything is done and you are all set to get a print out of the rental agreement, check with the following check-list. The pointers given below will ensure that your rental agreement is error-free. Have a look –

  • You need to get the print out of the rental agreement on a Stamp Paper of the relevant value.
  • Make sure that both the parties, the landlord and the tenant, put their signatures at the bottom of every page and at the last page of the agreement.
  • The agreement should also include the signature of the witnesses with the full name and address.
  • It should also include the full details of the dimensions of the property.

Are lease and rental agreements different or are interchangeable terms?

Although lease agreements and rental agreements are, most often,, used as interchangeable terms, there are certain differences between these two. If you have any doubts about the same, going through the following pointers will be helpful.

No Rental Agreement Lease Agreement
1 It is a month-to-month agreement. It is an agreement made for a specific period of time.
2
  • The owner of the property is allowed to make amendments to the rules and regulations and rent during the term of the rent, provided the tenant is given proper notice. 
  • The owner of the property is not allowed to amend any rules or regulations or the amount of the rent.  In case the owner of the property wants to make some changes, he or she has to wait for the expiration of the lease agreement in order to renegotiate.

Tenure of rent agreement

A rent agreement should specify the tenure the agreement.The standard tenure of rent agreement is usually the 11 months unless any other time is specified in the agreement. the reason behind the standard tenure of rent agreement which is 11 month is if rent agreement is exceeds 11 months than it should have to be registered, and for the same registration charges have to be paid.


Notarisation of rent agreement

Rent agreement is notarised by the owner and tenant for any immovable property. The agreement is notarised for making agreement authenticated. Notarised of the agreement is generally authentication that information contained in the documents are valid, signs are valid etc.

Form 15H is for senior citizens aged 60 years and above. This is also a self-declaration form wherein the senior citizen states that his income from all sources is within the exempted limit. If the form is submitted, TDS would not be deducted.

So, understand when TDS is levied on withdrawals from your EPF account to know the amount that you would get on such withdrawals. You can also claim a refund of the TDS deducted if your tax liability is less than the TDS deducted and deposited on your behalf.


Stamp duty and registration charges of rent agreement

The rent agreement is required to be stamped and registered if the rent agreement is made of more than 11 months. for the purpose of same stamp duty charges and registration charges shall be paid for it. Stamp duty charges are different for every state and it is determined on the basis of value of the stamp.

E-stamping is known as electronic stamping through which a stamp duty can be paid to the government. e-stamping can be used for rent agreement, for this you have to purchase the e-stamp papers from the allotted centers in your city, now you can print rent deed on the stamp paper. Tenant and landlord shall be signed the documents on their designated place along with the sign of two witnesses.


Mandatory clause that should be included in rent agreement

Here are the 5 clauses that should be included in the rent agreement:-

  • Amount of rent, security deposit and other payments(penalty) made by tenant to landlord
  • Duration of rent agreement and renewal of agreement
  • List of fitting and fixture
  • Registration of agreement
  • Restriction if any imposed by landlord

Consequences if rent agreement is not registered and stamp duty is not paid

If a rent agreement is not registered or stamp duty is not paid then rent agreement is not considered as a valid documents. Registration of rent agreement is mandatory. unregistered rent deed is not considered as reliable documents.


Format of rent agreement

Format of Rental Agreement can be download from here.


Conclusion

So, these are some of the most important information that you should know about a rental agreement, no matter if you are a landlord, the owner of the property or a tenant. Dear reader, renting a property or putting your property on rent, both have certain levels of legalities involved. Therefore, it is highly recommended to keep things clear from the very beginning. It will safeguard both the parties from any kind of disputes and conflicts that might crop up in the future.


Frequently Asked Questions

Q- What if you rent a property without agreement?

If the landlord and the tenant are relatives or good friends, they can go this way. However, it is not the right way to do it.in There has to be valid documentation (legal) of the rental contract, no matter what. In case, you fail to stick to the rules and do not go for a legal rental agreement, both the parties might land in trouble, in case of any dispute. Always remember, it’s better keeping things clear for avoiding any kind of property related differences in the future.


Q- Why rental agreements are generally signed for 11 months only?

If you have rented a house ever or put your property on rent, you must have signed a rent contract. However, have you ever thought that why most house rent agreements last for 11 months only? Most of the contracts have a duration of 11 months for avoiding stamp duty and other related charges. As per the Registration Act of 1908, if the duration of lease is more than 12 months, then a lease agreement is compulsory.


Q- Suppose you are a landlord. Can you visit the property without the permission of your tenant while the term is still on?

No, you are not allowed to do the same without the permission of the tenant. Although the owner of the property or the landlord does possess all the rights to go and examine his or property, it needs to be done by providing a proper notice to the tenant before visiting the premises.


Q- Is the security deposit mandatorily 10 months of the actual value?

Well, the answer is no. There is no such rules or regulations when it comes to making the initial security deposit. However, in some states, it is more of a standard. It can be anything from 2 to 3 months to 10 months. It varies from one city to the other and more or less negotiable. So, there is nothing to be worried about. No matter how much your state’s standard security demand is, make sure to check it beforehand.


Q- Is your future landlord also the owner of the property?

Before putting your signature on an agreement paper, make sure that the person who you know as your landlord is the real owner of the property. There are certain instances, wherein the actual owner of a property is a non-resident Indian (NRI) or a real estate investor. These people (they owners) hand over their houses to caretakers in their absence. These caretakers, in the absence of their actual owners, lease the property to third parties without even informing the owner. Therefore, it is highly advisable to verify all the documents before signing on the dotted lines.


Q- Suppose you are the tenant. Are you obliged to pay out for the maintenance charged?

Most of the tenants have this question in mind. So, what actually is the maintenance charge? It is a charge that is paid towards the upkeep of a property. As you are the current occupant of the property, it’s you who will be making use of the amenities and facilities, right? Therefore, you indeed are responsible for paying for the maintenance charges. However, in some cases, the owner or the landlord is needed to pay for maintenance. No matter what, everything should be made clear between the landlord, the tenant, and the members of the community.


Q- What is the standard notice period for termination of a rental agreement before the expiration of the agreement?

In general, it can be anywhere from 1 month to 3 months for either the landlord or the tenant to vacate the property. However, whatever may be the standard notice period, it should be clearly mentioned in the rental contract with a mutual agreement between both the parties. If you are a tenant, your landlord cannot ask you to leave the property all of a sudden. Similarly, as a tenant, you also need to inform your landlord in advance that you are planning to vacate the house.


Q- Is it mandatory to notarize rental agreements?

Well, as far as India is concerned, it is not compulsory to get a rental agreement notarized. However, there are some property owners who do prefer notarizing the same and that’s completely a personal choice.


Q- As a tenant, can you make a rental agreement once you move in?

Yes, if it’s unavoidable, you can go into a rental agreement after you move into the property. However, in such a case, it is utterly important to ensure that the landlord is trustworthy. If you are paying a lump sum amount, make sure you do it through online transfer or via cheque. However, it is highly recommended to get the rental agreement done as soon as possible. It can be quite risky to continue the entire term without any legal agreement. And, in case, the owner of the property or the landlord is refraining from making the agreement even after 30 days of your stay, ask him to get it done. And, even then if he does not bother to do the same, stop paying the rent immediately and move out of the premises.


Q- As a tenant, are you allowed to modify the property structurally or aesthetically?

No, you are not allowed to modify the property structurally or aesthetically without informing the landlord. If you do any changes without the approval of the owner, you might land yourself in trouble. And, even if the landlord gives his or her consent, make sure to get his or her approval in written. It will help you avoid any kind of discrepancies in the future. So, it’s better to be on the safer side.


Q- What do you mean by stamp duty denomination?

A rental agreement on which a stamp duty is paid is deemed as a legally valid piece of document. It has got an evidentiary value. Moreover, it is regarded in courts, as well.


Q- When do you use a rental agreement?

A rental agreement can be used for many purposes. It includes –

  • When putting your property (house, apartment, flat or a commercial property) for rent.
  • To make sure that your tenant or landlord, whichever is applicable, abides the rules and regulations.
  • To write down and implement common and specific rules and regulations.
  • To get the agreement registered with the local authorities.

Q- Is rent agreement is required for HRA exemption?

Yes you must have a proper rent agreement which may contains the details of all the relevant clauses of rent agreement and documents must be signed between tenant and landlord. the agreement must mention that premises is rented by you.


CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.