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

This article has been published by Abanti Bose.

Tabulation

What is a rental agreement?
Importance of a rental arrangement
Duration of rental arrangements
Procedure for signing up a rental agreement
Documents required for a rental agreement
Registration charges
Important clauses of a rental agreementName of the occupants
Duration of the occupancy
The rental quantity
Cost of duration or maintenance
Cost of security deposit
Terms and conditions
Renewal and notification duration
Amenities connected with the residential or commercial property
Exit clause
Signature and date
Police verification


What is a rental agreement?

A rental arrangement is an essential legal file that requires to be signed by both the parties i.e., the property manager and the occupant, in order to regulate the occupancy. It contains all the comprehensive information about the parties and the terms associated with the occupancy of the residential or commercial property on rent. It is binding upon both parties. It consists of all standard elements such as rent, down payment, info regarding the residential or commercial property, its size, address, type, and most notably duration of the arrangement. Since it is binding in nature, both parties are encouraged to go through it thoroughly before finalizing and agreeing to the provision. The agreement stays invalid till 2 witnesses or non-beneficiaries exist and sign the agreement as witnesses.

The rental contract is generally drafted by either of the celebrations with the approval of the other party and both the parties need to accept the exact same. A rental arrangement might be either oral, written, or implied. However, it is generally chosen to have a written contract as that might be practical as a piece of proof for shared consent of the celebrations. The conditions of the agreement can not be amended unless and till parties equally accept it.

Importance of a rental agreement

The rental contract being a legal file plays an extremely important role. A Rental agreement safeguards the rights of both celebrations and saves them from future disputes. During the contract between proprietor and occupant, there might develop some disputes between them. Such disputes might be resolved through the contract. It offers security to the proprietor for his residential or commercial property and likewise safeguards tenants from unlawful demands of the proprietors.

The rental arrangement also gives ownership of the residential or commercial property to the tenant for a specific amount of time. Oral agreements are not enforced by law therefore it is always recommended to execute a written agreement. Another crucial aspect is it functions as a piece of legal proof.

Duration of rental arrangements

Rental contracts can be repaired for any duration according to the needs of the parties and can be renewed according to the regards to the arrangement. However, when it comes to a rental contract, it's usually for 11 months. This is to avoid the rigorous rental law which is suitable for the lease agreement approximately 12 months. According to the Registration Act, 1908, any residential or that is rented out to the occupant for more than 11 months needs to be signed up. Hence, the residential or commercial property that lasts only or for less than 11 months does not need registration.

In the case of a lease contract, the parties require to pay stamp task, registration charges, and other costs. Therefore, to be exempt from such expenditures, the celebrations in the rental agreements mutually perform the arrangement for 11 months in which one month in the count of 12 months is thought about as the month of the notification served by the owner.

Procedure for registering a rental contract

Registration of rental arrangements is not required. However, it works in case of disagreements as notarized arrangements are not applicable in the court of law. Therefore, it is constantly much better to be signed up.

One can register the lease arrangement by going to the close-by sub-registrar's office. It is crucial to note that the process of registration should be finished a minimum of four months before the date of expiration of the deed. Therefore, one needs to track the date and time when the deed was produced. Once the deed ends, then a fresh deed needs to be created. After this, a fresh deed needs to be produced. Both the parties require to be present in addition to 2 witnesses for attestation. If just among the celebrations exists and not both of them, then today party must sign the Power of Attorney, approving the rights of contract closure.

Documents needed for a rental arrangement

1. Original evidence of ownership of the residential or commercial property.
2. Residential or commercial property documents such as tax receipts.
3. Two passport pictures of each of the parties and one copy of each of the witnesses.
4. Documents related to address evidence of both the celebrations 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 varies from one state to another. It also consists of stamp responsibility charges.

Important stipulations of a rental arrangement

Name of the residents

Name of the residents consists of all the people surviving on the residential or commercial property. Such names specifically should be capable of taking duty for the residential or commercial property. These names might be beneficial in case any dispute develops. For instance, if any renter suddenly vacates your home without informing the owner. In such cases, the owner has the power to take legal actions versus any of the occupants in lack of the other.

Duration of the tenancy

The parties have to mention the set period in the contract. After the expiry of the duration, it can be restored with the prescribed procedure by mutual authorization of the celebrations. Mentioning the period of the tenancy in the rental agreement can keep the owner on the safer side. It likewise secures the occupant as the owner can not force them to leave the residential or commercial property before the due date.

The rental amount

The amount of the amount repaired for the lease should be specified in the rental contract. It ought to also consist of the changing terms. This clause also consists of the mode of payment and the instalment system if any. The dates at which the rent needs to be paid, the fine for late payment, etc likewise requires to be discussed in the agreement. This clause safeguards the celebrations from the illegal holding of the cash or payment of the cash.

Cost of duration or maintenance

In some cases, the expense of the upkeep is paid either by the owner or the tenant. Such sum of payment and the person paying the amount must be discussed specifically in the contract. Not only the cost of upkeep but also any other expenses that might be major or minor such as repair work or electrical bills, etc ought to be covered within the rental agreement. This provides clearness about such elements to both parties throughout the tenancy duration.

Cost of security deposit

The quantity that requires to be paid by the tenant to the property owner should be mentioned in the rental contract and should be signed by both celebrations. This conserves both the parties from illegal need and accusations. The property owner can also be eased in the case where the occupant abandons the residential or commercial property without making the payment of rent.

Terms

The contract needs to consist of how the residential or commercial property and its environments must be dealt with. Factors such as subletting, modification in the premises, permitting of the pets, and so on should be cleared in the arrangement.

Renewal and notification period

The renewal and notification durations ought to be appropriately discussed in the contract for the sake of anticipation. It includes the date of renewal of the agreement and the notification duration and how it requires to be performed.

Amenities connected with the residential or commercial property

It consists of all the other facilities that are attached to the residential or commercial property. This needs to be mentioned in the agreement for the security of the landlord and his residential or commercial property. It also consists of the most recent condition of the residential or commercial property for future reference. This assists the property manager to prevent any damages or the financial settlement of any repairs during the tenancy duration.

Exit provision

This stipulation consists of clearance of any other charges before the termination of the contract or before the leaving of the residential or commercial property should be dealt with.

Signature and date

This is the most essential stipulation of the rental contract. In this, both the tenant and the proprietor consent to all the terms of the agreement and accept the agreement by signing this file. It likewise guarantees that failure in compliance with the agreement caused deal with legal penalties by either of the celebrations. Before signing the arrangement it is very essential to read every provision of the arrangement thoroughly.

Police confirmation

The significant aspect of any rental contract is the authorities 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 only ensures the security and security of the residential or commercial property but also the area. Non-compliance with this stipulation of the arrangement is punishable under Section 188 of the Indian Penal Code.

Common errors in a rental contract

It is typically observed that the celebrations make the following errors in the rental agreement:

1. Do not mention the terms which might cause the eviction of the occupant.
2. Does not define the lock-in duration and termination. Lock-in duration i.e. the minimum period till which the tenant can not abandon the residential or commercial property. The renter should likewise define priorly the notification period which requires to be submitted before terminating the arrangement.
3. Ignores to define the amount of cash that requires to be paid as lease, repairing charges, and the mode of payment.
4. Ignore the clause relating to subletting of the residential or commercial property.
5. Does not mention the information associated with the Power of Attorney.
Format

This is the standard format of the rental contract.

RENTAL AGREEMENT

This rent contract is made on ... ...( date) in between ... ......( name of the property owner) S/o ... ... ...( daddy's name of the proprietor), Address ... ... ...... (residential address of the proprietor). Hereinafter referred to as the property manager or the first celebration.

AND

... ... ... ... (Name of renter), hereinafter described as the tenant, or the second celebration, address ... ... ... ... ...( property address of the occupant)

The term Landlord and the tenant will suggest and likewise include their legal beneficiaries, followers, assigns, representatives, and so on.

Whereas the first party is the owner and in the ownership of the residential or commercial property No: ... ... ... ... ... ... (address of the leased residential or commercial property) and has concurred to blurt the stated residential or commercial property to the 2nd celebration for a monthly rent of Rs. ....../- (in words) each month.

Now this lease contract is witnessed under:

1. The occupancy is according to the English calendar and the arrangement is starting from ......( date of commencement of contract).
2. The rent arrangement is granted for the period of 11 (eleven-month) beginning with ... ...( date of beginning), and the contract can be extended further with the shared permission of the celebrations.
3. The purpose of the tenancy is purely for residential functions and will not be used for any other function.
4. The second party will need to pay Rs. ... .../- (in words) as month-to-month lease, which must be paid between 1st to fifth day of every month, and if the tenant continues to stay after 11 months from the commencing date, the lease will be increased.
5. The 2nd will pay the electrical power and water charges individually according to their usage to the first celebration.
6. The second party ought to not sublease the residential or commercial property to the sub-tenant under any scenarios without the authorization of the landlord.
7. The 2nd party shall comply with all the rules and guidelines, by-laws set by the local authorities in regard of the leased residential or commercial property and will not get included or do prohibited activities in the rented residential or commercial property.
8. The 2nd party shall not do any building and construction or make any modification in the leased facilities either significant or small without the approval of the property owner.
9. The second party will have to permit the property owner or his authorized representative to participate in leased facilities for its evaluation or basic monitoring for any repair work if required.
10. The 2nd celebration shall bear the expense of everyday small repair work.
11. This agreement could be withdrawed or terminated before the expiry of this tenancy duration by serving a one-month prior notification.
12. Both the parties have actually read and understood this agreement and have actually accepted sign the same with no pressure from any side.
In WITNESS WHEREOF the property owner and the occupant have actually hereunto subscribed their hand at ______ (location) on this the _____________ (date of rent arrangement) year initially above pointed out in the presence of the following witnesses.

Witnesses:

1.

2.

___________ (name of the property manager) _________________ (name of the renter)

Model Tenancy Act, 2021

To offer a consistent guideline in India in regards to rental housing, the Model Tenancy Act, 2021, was enacted by the central federal government. The main goal of this Act is to govern the rental housing market, like property and business properties, by developing standards for occupancy, rights, and tasks of the landlords and occupants and resolutions for the conflicts emerging out of the tenancy. This Act applies to the whole of India including all the states and union territories. According to this Act, the agreement ought to remain in written type and both the parties ought to sign the arrangement. The rental agreement should include all the appropriate conditions which would be binding on both parties.

The existing rent contract will stay outside the purview of the design occupancy law, as it is still progressive and will not have a retrospective impact. This Act considers all the rental arrangements that involve renting property and business residential or commercial properties. However, the arrangement drafted need to be for more than 11 months. An agreement of as much as 11 months is not covered under this Act. This ultimately suggests that the property owner and the renter can not seek resolution under the rules of the Act in case of any conflicts.