In India , Rental agreements and their importance is often realized only after the ship has sailed ie., after an issue has occurred. Ravi Kumar planned to rent a house in Chennai for three years before moving into his own house. He agreed to pay INR 6,000 as rent and deposited INR 60,000 towards the advance deposit money.
Nonetheless, Ravi was in for bad surprise to hear the increase in rent by INR 1,000 after a period of eight months. When contacted, the property owner confirmed that such an increase is nominal, given that the rentals have risen in the area.
Ravi Kumar had no option but to pay the hike in the rental amount. The reason behind the acceptance was due to non-inclusion of such clause in the lease agreement.
Ravi Kumar would have avoided the hassle if he studied the rental agreement thoroughly before signing the contract or renting the premises.
It could have been a win-win situation for the owner and tenant had the rental agreement been understood and executed properly. Like Ravi Kumar, most residents pay little attention to the rental agreement and end up suffering due to the sudden hike in the rentals. In addition, most of the tenants are unaware of the clauses to be included in the agreement.
Below are relevant provisions that shall be included in a rental agreement or is a checklist that will prevent annoyances at a later stage.
Confirm the actual owner
Before signing a rental agreement, ensure that the person with whom you are transacting is the rightful owner of the property. Often, NRIs and investors offer their property to caretakers who supervise and manage the transactions related to the property. In such cases, caretakers utilize the opportunity to lease the property without the knowledge of the owner.
Verify the documents of the sale deed and share certificate. Besides, obtaining a no-objection certificate (NOC) is helpful if the property is part of a housing society. The NOC is useful in cases where the rental property is under mortgage. The original documents or the sale deed remains in the custody of the bank.
You have to receive the NOC from the bank. The NOC consists of owner’s details such as name, contact details, and address of the property.
As a tenant, you also have to understand arbitrary eviction. It is helpful when you are dealing with an unsolicited person. In such cases, it becomes easy for the rightful owner to file a trespassing case against the tenant if he or she denies vacating the premises within a given period. You cannot challenge the eviction notice.
Contents of the rent agreement
Although there is no particular format available for a rental agreement, the following points are some core factors/points that are necessary to be present in the document.
- Name of the tenant
Every adult living in the unit, including all the members of the family, married or unmarried are tenants and signs the rental agreement. Such possibility ensures that every member is responsible for the mentioned terms, including the amount of the rent and the use of the property.
It means, as an owner, you can seek full rent of the property from any one of the adult should others skip the payment or unable to pay. If there is a violation, you can terminate the contract, which includes all the members who signed the rental agreement. This is not a general practice as only the house head signs the contract since he pays the rent.
- Occupancy Limits
The rental agreement should also provide information on occupancy limitation. Furthermore, it should clearly state that the residence is for tenants who signed the lease along with minors if any. Such an inclusion clearly states the responsibility that each member has towards the agreement and the property.
The inclusion of such a step helps in determining who live in the property – probable that they are among those whom you screened. The inclusion of the clause gives you the authority to evict the tenant if they move with a friend or relative or sublets the property without your knowledge and permission.
- Tenancy Terms
The leasing term indicates the lease period and its type. For example, you can rent the property as a lease or on a fixed-term basis. Rental agreements run as a monthly or self-renew process until the owner or the tenant terminates the contract.
If you choose to lease the property, which in cases last for a year, you can decide the terms and period based on the tenants and the flexibility you are willing to offer to the party at the time of negotiation.
The rental agreement should also contain details related to the amount of rent payable for the property per month. In case of the lease, you can specify the lump sum amount payable for a single year. You can also mention details regarding the payment date and the payment procedure. To avoid disputes and confusion, you can spell details such as:
- Payment methods which are acceptable
- Late fee applicability and grace period
- Charges on rent cheques bounces
Security deposits are a constant source of friction between the owner and the tenant. It is best to avoid hassle at a later stage by defining the amount, limitations, and the return of deposits. It further includes:
- The amount of the security deposit
- Usability of the amount by the owner in case of damages and limitation of the use by the tenant (as last month’s rent in case of vacating the property)
- Description of the return of the security deposit along with subtractions, if any, after the tenant moves out.
- Mention of legal non-returnable fees.
6. Repairs and Maintenance
The best defense mechanism against the security deposit and withholding the rental amount is indicating the obligations for repair and maintenance of the landlord and the tenant. The lease agreement should include:
- Responsibility of the tenant in keeping the property in clean condition, along with sanitary maintenance, which also includes the payment of damages caused due to the negligence of the tenant.
- The responsibility of the tenant to notify the owner against a dangerous condition on the premises, with detailed description of the problem, and information about the procedures for handling the complaint and repair requests
- Indicating the details of additions and restrictions about tenant’s alterations, such as addition of dishwasher, a burglar alarm, or painting the property without permission.
7. Permissions to enter for owner for inspection
It is preferable to add the right to enter the property by the owner to avoid false claims by the tenant. It will protect illegal entry and privacy rights.
The clause defines the authority of the owner to access legally the property, for example, entering the premises to check the condition of the property or carry out a few repairs.
You can also include the advance notice period that you provide to the tenant before entering the property.
It is in the large interest of the owner and the tenant to include restrictions in the rental agreement. The restrictions also help in creating a peaceful environment with the neighbors.
The inclusion of restrictions as a clause will prevent trouble among the tenants, which prevents property damage, and limits the exposure to lawsuits.
The restrictions should contain details about the actions prohibited along with the disruptive behavior, loud music or repairs carried out beyond reasonable times say 9 or 10 pm in the night..
- Dealing with pets
You have to specify whether you are willing to accept pets. You should clearly state your stand or acceptance of pets in the property.
If you allow pets, you can specify restrictions, such as limiting the number of pets and their sizes. You can further include the clause that the tenant will look after the maintenance of the property by keeping it clean from animal waste.
- Other inclusions
Ensure that the rental agreement consists of all the relevant details the complies with the local laws including the rent control ordinances, safety codes, occupancy rules, anti-discrimination laws. Make sure you follow the state laws.
Provide complete details of security deposits, its limitation, and returning period. You can further add additional details to the rental agreement, based on the negotiations with the tenant.
However, if you live in a society, do follow the society’s rules to comply with the community laws. Such an action protects the interest of the tenant, the owner, and the property against damage.
You can also specify legal restrictions, such as limiting the type of business activity that the tenant runs from the home. You can also include rules and regulations about the use of parking lot and use of common areas in the apartment or the society.
The inclusion of all the crucial details in the rental agreement assists in avoiding disputes between the owner and the tenant. You can find a practical format here.
A rental agreement provides peace of mind to the owner and the tenant. Complying with the rules and regulations avoids the trouble for a tenant. On the other hand, owners maintain transparency in dealing with the tenants.
Details of the rental agreement help each other avoid disputes at a later stage. The above clauses are the crucial factors of a rental agreement. However, the addition of further details or terms is possible according to the negotiation and dealing with a tenant.