Investing in real estate has become increasingly popular over the last few decades and has become a common investment vehicle. More and more Indians are putting their investment in buying apartments in group housing societies. Most of the time second home is for the investment purpose and it makes sense to put it on rent when the apartment is ready. This way you can earn a profit out of substantial gains in property value and earn a good rental income as well.
When it comes to the relationship between a property owner and a tenant, it’s best to be safe than sorry. Yet, hasty decisions, cutting corners and blindly trusting brokers are the reasons for many a legal battle waged by landowners against rogue tenants.
This articles covers crucial points that a layman should know before having a lease agreement or a rent contract signed. While having any of these agreement signed, the home owners should be vigilant enough with respect to their rights and rules involved. The agreement seems simple but is very complicated as wrongly formulated terms could be dangerous to either party. Every single State in India has its own regulated laws for rent agreements which should be necessarily followed to have a valid agreement. The parties should make sure that terms formulated in the contract are consensual terms to avoid confusion at the time of termination of the contract.
Rent or Lease Agreement:
Before we get into further details, let us discuss type of lease agreements that exist in India.
- Lease agreement with 11 months lease period: Lease agreement which runs for 11 months which are not governed by the Rent Control Law.
- Lease agreement with 12 months or more lease period: These type of agreements are covered under Rent Control Laws. When a lease agreement is signed for 12 months, the tenant gets the ownership of the property for an indefinite period of time. This condition has certainly propelled the number of problems like tenant refusing to leave the flat etc. It is mandatory to register lease agreement with more than 11+ months tenure.
So, in that case a better option would be to have a lease and license agreement for 11 months. The period is renewable after the passage of the said time depending upon the circumstances. This agreement bestows a right to live only for the said time period i.e. 11 months. One could also have short term lease agreement but those are generally very exorbitant ones. This provides a great amount of security to the landlord from the tenants.
How to draft a good lease agreement
- Take the complete details of the tenant with his proof of identity and documents in support of his real address etc. as it helps in identifying the impostors, criminals or unwanted people in case of any untoward incident.
- Insist on preparing a rent deed. The rent deed for the tenancy up to a period of 11 months can remain unregistered. In case of tenancy is being created for a period more than 11 months then the rent deed should be registered to give it a legal value under the tenancy laws in India.
- The rent deed must mention all the terms and conditions of the tenancy which may contain the monthly rent to be paid by the tenant, the expenses related to the services consumed by the tenant. It may also contain the parking charges and other extra expense involved.
- The rent deed must contain the period of tenancy i.e. the period when the tenancy commences and the period when it is going to be over. The date of payment of the rent may be also mentioned. It should also cover various other important aspects of the tenancy laws in India.
- The process for premature termination of the lease agreement should me included.
- It should also contain the proposed increase in the rent which can be automatic after the period of time or can be negotiated mutually under the tenancy laws in India.
- In the properties which are only for residential use, it should be specifically mentioned that the same is being rented out only for residential purposes only and is not to be used for any other purpose.
- The other aspects of sub-letting, misuse, damages etc may be covered and mentioned in the lease deed under the tenancy laws in India.
- It is always better to consult a good lawyer and get his advice on all aspects related to tenancy laws in India and then get the lease deed or the tenancy agreement drafted accordingly.
Basics things to consider before renting your Apartments
- The rent should be clearly mentioned (also whether it includes maintenance fee).
- The mode of payment, whether in cheque or cash, plus the date of payment, is also important. Any interest to be paid in case of delayed payment should also be stated clearly.
- The purpose of tenancy should be clearly written- whether it will be used for commercial or residential purpose..
- Do a background check of the tenant.
- Ask tenant for office address, permanent address etc.
- Get police verification done. It is a mandatory to get verification of tenants done from local police station.
This process helps in background check of the tenant. Not doing this is a punishable offence under Section 188 of the Indian Penal Code. This lowers the risk that the house is not being rented out to a personal with criminal background. For this the landlord simply has to fill the verification form and submit it to the local police station along with identification proof of the tenant. The forms are available online on websites of state police departments.
Grounds for eviction
A landlord can ask the tenant to leave if he has completed the tenure as per the lease agreement. Other valid grounds are refusal to pay the rent or indulging in unlawful activities on your property. You can demand eviction if the tenant has sub-let a part or all of your property without your permission. Unfortunately, due diligence in selecting a tenant and an iron-clad lease agreement are no guarantees against legal hassles with rogue tenants.
Interference of RWAs in housing societies
Though it is the legal right of the owner to lease out his property, the housing society in which the flat is situated also has a say in it. “Individual societies are legally empowered to deny tenancy based on their bylaws. However, they have no constitutional right to do so. Though housing societies are known to deny tenancy based on the person’s eating habits or his marital status, such decisions can be easily challenged in the court of law.
Remedies if things turns ugly
- Approach the designated authority in your state: Every state government has appointed a competent authority to oversee disputes related to rented property within its borders. So a landlord is free to approach this body
- Approach the civil court: In case either party is not happy with the decision given by the state competent authority, he may approach the small cause or city civil court.
The Logical Buyer suggests that homeowners must get the background check and police verification done before renting out their apartments. One should not rely on the property brokers to get the lease drafted and must ensure above conditions are well captured in it.