All You Need To Know About Rent Agreements In India

With rapid urbanization and increasing population, there has been a massive surge in the prices of rental properties in the last decade. The high price of real estate is often attributed to an increased preference for renting instead of buying. Additionally, metro-polarization and changing lifestyle patterns of the millennials also play out as a factor. The modern generation finds renting even more lucrative for several reasons, one of them being the flexible living arrangement that allows them to move to different cities easily. However, the renting culture in India and the recent behavior shift have flagged their own set of challenges, such as a lack of standardized rental agreements and regulations. 

Signing a notarized agreement is often seen as a make-do arrangement for the owners and tenants. But this negligence of not getting the rental agreement registered, more often than not, results in difficulty for both parties.

What is a Rent Agreement?

A rent agreement is a legally binding document that outlines the terms and conditions of a rental arrangement between a landlord and tenant for the lease of an immovable property for a fixed period.

This agreement sets out the rights and responsibilities of both parties during the tenancy period. It typically details the name and address of the landlord and tenant, length of the rental period, the amount of rent due, security deposits required, termination of the agreement, the rights and responsibilities of both parties, and any other relevant terms and conditions. Rent agreements are executed for residential as well as commercial properties.

It is simple paperwork that is done before or after taking a property on rent. Usually, the rent agreement is executed for 11 months or more, which is renewable at the option of the parties. 

Types of Rent Agreements in India

Several types of rental agreements can be used to outline the terms and conditions of a rental property. The type of rent agreement chosen will depend on the specific circumstances of the landlord and tenant. Here are some common types of rent agreements:

Fixed-term lease Agreement

This is a lease agreement that has a specific start and end date, and the tenant is required to pay rent for the entire duration of the lease. This concept is termed a lock-in period and the tenant is not allowed to leave the property until that lock-in period gets over, in case if the tenant wants to terminate the lease early, they may be required to pay a penalty or the rent for the remaining lock-in period.

Leave and License Agreement

This type of agreement allows the tenant to rent the property on a month-to-month basis, with the rent payment due on the same day each month. The tenant can terminate the lease at the end of any month by providing the required notice, and the landlord can terminate the lease by providing the required notice as well.

Roommate Agreement

This type of agreement is used when two or more people share a rental property. The agreement outlines each roommate's rights and responsibilities, including the payment of rent and the sharing of common areas.

Commercial lease Agreement

This type of agreement is used when renting a property for business purposes. It includes details such as the permitted use of the property, the duration of the lease, and the rent payment.

Sublease Agreement

This type of agreement is used when a tenant rents a property to another person. The original tenant remains responsible for paying rent to the landlord, and the subtenant pays rent to the original tenant.

Key Aspects of Rent agreement

Parties Involved

There are usually 3 parties involved in the rent agreement:

• Landlord: The owner of the property who is renting it to the tenant
• Tenant: The individual who is renting the property from the landlord.
• Witnesses: Two witnesses are mandatory to sign the rental agreement. They can be anyone who is not a party to the agreement like friends or neighbors.

In some cases, rental agreements are initiated by real estate brokers, who may also be party to the agreement. However,  it is not always the case and tenants can enter into a rental agreement without the brokers' assistance. Other individuals or entities involved in the rental agreement, such as property managers, agents, and guarantors, may also be named in the Parties Involved clause.

Property Description

A Property Description clause in a rent agreement is a section that provides a detailed description of the rental property being leased to identify the property and for the record of the landlord. It typically includes the address of the property, as well as information about the size, layout, and condition of the property. The purpose of this clause is to ensure that both the landlord and tenant have a clear understanding of the property being leased. This helps to avoid any confusion or disputes regarding the rental property and ensures that both parties are aware of their responsibilities and obligations related to the property.

The property description may include details such as the number of bedrooms and bathrooms, the size of the living areas, the type of flooring and fixtures, and any appliances or furnishings that are included in the rental. It may also include information about any shared spaces or amenities, such as a pool or gym, and any restrictions or limitations on their use.

The property description should always be accurate and up-to-date and if there are any changes to the property, such as renovations or repairs, it should be necessary to update the property description in the rental agreement. A detailed property description in a rent agreement can help ensure that both the landlord and tenant have a clear understanding of the rental property and their responsibilities and obligations related to it.

Security Deposit 

The Security Deposit clause in a rent agreement outlines the terms and conditions of the deposit paid by the tenant at the beginning of the lease. A security deposit is a sum of money paid by the tenant to the landlord as a form of insurance or guarantee against any damages, unpaid rent, or other charges that may occur during the term of the lease.

Usually, the Security Deposit clause includes information about the amount, method, and time of payment of the security deposit, and the circumstances under which it will be returned to the tenant. It may also include information about the use of the security deposit, such as how it will be held, invested, or refunded.

For a smooth rental experience, both landlords and tenants should review the Security Deposit clause carefully and ensure they understand its terms and conditions.

Tenure of the Agreement 

A Tenure Clause in a rent agreement is a section that outlines the length of time for which the tenant is allowed to occupy the rental property. This clause specifies the start date and end date of the lease, and the conditions under which the lease can be renewed or extended.

The Tenure Clause typically includes information such as:

• Start and end dates of the lease: This specifies the exact dates between which the tenant is allowed to occupy the rental property.
• Renewal or extension options: The clause may include information about whether the lease can be renewed or extended, and under what conditions.
• Notice requirements: The clause may specify the notice period required for either the landlord or tenant to terminate the lease agreement.
• Automatic renewal: Some leases may automatically renew if neither party provides notice of termination, so the clause may outline this possibility.
• Termination conditions: The clause may include information about the circumstances under which either party can terminate the lease agreement, such as for non-payment of rent, violation of lease terms, or breach of contract.

Termination Clause 

There is a termination clause in a rent agreement that specifies the circumstances under which the lease can be terminated by either the landlord or the tenant. This clause specifies the circumstances under which the lease can be terminated before the end of the agreed-upon term.

Termination can happen upon the expiry period of the rental agreement or as and when the tenant or landlord wishes to vacate the house by giving one month's notice. 

Maintenance and Repair 

A Maintenance and Repair clause in a rental agreement outlines the responsibilities of the landlord and the tenant regarding the rental property's maintenance and repair. It specifies who is responsible for certain types of repairs or maintenance, and under what circumstances they must be carried out. The maintenance and repair clause typically includes information such as:

• Landlord responsibilities: This outlines the maintenance and repair responsibilities of the landlord, such as repairing major appliances, plumbing systems, and structural damage to the property.
• Tenant responsibilities: This outlines the maintenance and repair responsibilities of the tenant, such as keeping the property clean, replacing light bulbs, and reporting any damage or issues on time.
• Notice requirements: The clause may specify the notice period required for either the landlord or tenant to report maintenance or repair issues to the other party.
• Emergency repairs: The clause may include information about how emergency repairs will be handled, such as who to contact and how quickly repairs must be made.

Possession Clause

By executing a rent agreement, the tenant gets the right to possession of the leased property. On the expiration or termination of the rent agreement, the tenant should vacate the said premises without delay with all their goods and belongings. In the event, tenants fail or neglect to remove themselves or their articles from the premises on expiry or earlier termination of the rent agreement, the landlord shall be entitled to recover damages at the rate of double the daily amount of compensation per day and or the landlord shall be entitled to remove the tenant and their belongings from the Licensed premises, without recourse to the Court of Law.

Governing Laws

The governing laws on rental agreements can vary depending on the state or city in which the rental property is located. In general, however, rental agreements are governed by a combination of local, state/provincial, and federal laws. The Rent Control Act and the Model Tenancy Act, of 2021 are recent laws for rental spaces in India. The objective of the Model Act is to establish a rent authority for regulating rental spaces and to protect the interests of landlords and tenants along with speedy adjudication.

Importance of Having A Rent Agreement

In a tenancy agreement, all the factors that can lead to a dispute between the landlord and the tenant are incorporated into the agreement, thereby preventing tenancy disputes to a certain extent if the agreement is well written.

Rent agreements cover every aspect of a tenancy, including rent rules, the conduct of the parties, evictions, entry rights, possession rights, and pet information. A rent agreement can significantly reduce disputes since it is a legal document that specifies all that is either the duty of one party or the right of the other, as well as a penalty that is also specified in the agreement if it is violated.

Conclusion

In conclusion, a rental agreement is a legal contract between a landlord and a tenant that outlines the terms and conditions of a rental arrangement. The agreement typically includes sections such as the parties involved, property description, security deposit, tenure, termination, and maintenance and repair clauses.

It is important for both landlords and tenants to carefully review and understand the terms of the rental agreement before signing it.