Effective Rent is the actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate that are paid or given to the tenant (such as a build-out or renovation allowance, free rent, moving allowance, etc.), and is usually expressed as an average lease rate over the term of the lease period. A rent agreement, also known as a rental agreement or lease agreement, specifies the terms and conditions of the parties’ leasing arrangement. Rent Agreement Drafting plays a vital role in such situations.
A written rental agreement should at least include the following provisions:
- Identification of the landlord and tenant.
- Identification of the property.
- Terms and conditions for the rental payment.
- Term of the duration of the tenancy, which commonly is one month.
- Terms and conditions for the tenancy.
- Liability rules for damages and repairs of the property.
- Rules for the termination and renewal of the contract.
Although Lease and Rent Agreement Drafting are often considered synonyms and are almost identical in legal nature, they are two different types of contracts. A lease agreement is a long-term contract, whereas a rental agreement is not.
Importance of A Rental Agreement
The rental agreement being a legal document plays a very important role. During the contract between landlord and tenant, there might arise some disputes between them. Such disputes could be resolved through the agreement. It provides security to the landlord for his property and also protects tenants from unlawful demands of the landlords.
The rental agreement also gives ownership of the property to the tenant for a specified period. Oral agreements are not enforced by law therefore it is always advised to execute a written agreement. Another important factor is it acts as a piece of legal evidence.
Types of Rent Agreements
It has become quite important to reserve the rights of landlord and tenant through legal documents. The rental agreement is created by the tenant’s needs. The following points explain the four main leasing agreements:
- Fixed-term or long-term lease agreement: The rental agreement will be for more than 11 months, hence, it is stated as a fixed-term or long-term lease agreement.
- Short-term agreements: This lease has a duration of less than 11 months. Landlords who are searching for a steady income or who simply wish to rent out their home temporarily choose this agreement. It should be mentioned that unless tenants request it, their lease won’t be renewed. When tenants are seeking a short-term rental home, this sort of lease agreement is also advantageous to them.
- Rent-to-own lease agreement: In this kind of lease arrangement, the buyer is given the choice to rent the particular property for a predetermined amount of time before making a purchase decision. There are two types of rent-to-own arrangements in this category: a lease option agreement, where purchasing the property after the lease expires is optional, and a lease-purchase agreement, where tenants are obligated to do so.
- Month-to-Month lease agreement: According to this rental agreement, the lease is automatically renewed every month up until one of them gives a 30-day notice. For landlords who want to rent out their property for a shorter length of time, this type of rental agreement is the perfect choice.
Duration of Rental Agreement
According to the demands of the parties, rental agreements can be fixed for any length of time and renewed by the provisions of the original contract. However, a rental agreement is typically for 11 months. This is done to get over the tight rental rule, which only applies to leases lasting up to a year. Under the Registration Act of 1908, any property rented to a tenant for more than 11 months must be registered. Therefore, a property that is only used temporarily or for less than 11 months does not need to be registered.
In the case of a lease agreement, the parties need to pay stamp duty, registration charges, and other expenses. Therefore, to be exempt from such expenses, the parties in the rental agreements mutually execute the agreement for 11 months in which one month in the count of 12 months is considered as the month of the notice served by the owner.
The Procedure of Registering A Rental Agreement
Rental agreements do not need to be registered. As notarized agreements are not enforceable in a court of law, they can be helpful in legal disputes. Being registered is therefore always preferable.
One can register the rent agreement by visiting the nearby sub-registrar’s office. It’s important to keep in mind that the registration process must be completed at least four months before the deed expires a result, remembering the date and time the deed was created is critical. Once the deed expires, then a fresh deed needs to be created. After this, a fresh deed has to be created. Both the parties need to be present along with two witnesses for attestation.
Documents Required For A Rental Agreement
- Original proof of ownership of the property.
- Property papers such as tax receipts.
- Two passport photographs of each of the parties and one copy of each of the witnesses.
- Documents related to address proof of both the parties and witnesses.
- Route map of the property that needs to be rented.
Price for A Rent Agreement
In India, the price of a fundamental rental contract might change based on the state, the city, the kind of property, and the length of the contract. But generally speaking, a rent agreement’s cost consists of two things:
Stamp duty: This government levy applies to all legal documents, including leases. While stamp duty varies from state to state, it typically falls between 0.5% and 2% of annual rent.
Registration charges: The government levies this cost to register a rental agreement. The registration charges also vary from state to state, but they are typically between Rs. 500 and Rs. 1000.
Registration Fee
There are no fixed registration charges in the entire country. It varies from state to state. It also includes stamp duty charges.
What Sets A Lease Apart from A Rent Agreement
The key distinction between a lease and a rent agreement is the duration of the contract if that is something you’re interested in learning. A lease contract often covers considerably longer lengths, such as 99 years, whereas a rent agreement frequently only covers shorter periods. Additionally, both share several similar features, such as a set security deposit, rental price, obligation to pay for utilities and upkeep, usage guidelines, and pet-friendly policies.
Important Clause of A Rental Agreement
Name of the occupants
Everyone who resides on the property is listed under “Name of the Occupants.” Such names in particular must be capable of accepting responsibility for the property. If a dispute ever develops, these names might be helpful. As in the case of a tenant who abruptly vacates the property without notifying the owner. In certain situations, even if one tenant is absent, the owner has the right to file a lawsuit against that tenant.
Duration of the tenancy
In the agreement, the parties must specify the specified duration. If all parties agree, the agreement may be extended after the initial term has expired with the required formality. The owner can stay safe by including a statement about the terms of the lease in the rental agreement. The tenant is also safeguarded because the owner cannot compel them to leave the premises before the agreed-upon date.
The rental amount
The sum of the amount fixed for the rent must be specified in the rental agreement. It should also contain the amending terms. This clause also includes the mode of payment and the installment system if any. The dates at which the rent needs to be paid, the fine for late payment, etc. also need to be mentioned in the agreement. This clause protects the parties from the unlawful holding of the money or payment of the money.
Cost of period or maintenance
In some cases, the cost of the maintenance is paid either by the owner or the tenant. Such a sum of payment and the person paying the amount must be mentioned specifically in the agreement. Not only the cost of maintenance but also any other expenses that might be major or minor such as repairs or electric bills, etc. should be covered within the rental agreement. This gives clarity about such factors to both parties during the tenancy period.
Cost of security deposit
The amount that needs to be paid by the tenant to the landlord must be mentioned in the rental agreement and must be signed by both parties. This saves both parties from unlawful demands and allegations. The landlord can also be relieved in the case where the tenant vacates the property without making the payment of rent.
Terms and Conditions
The agreement must include how the property and its surroundings must be treated. Factors such as subletting, alteration in the premises, allowing of the pets, etc. must be cleared in the agreement.
Renewal and Notice period
The renewal and notice periods should be properly mentioned in the agreement for the sake of prior knowledge. It includes the date of renewal of the agreement the notice period and how it needs to be performed.
Amenities attached to the property
It includes all the other amenities that are attached to the property. This needs to be mentioned in the agreement for the security of the landlord and his property. It also includes the latest condition of the property for future reference. This helps the landlord avoid any damages or the financial settlement of any repairs during the tenancy period.
Exit Clause
This clause includes clearance of any other penalties before the termination of the agreement or before the leaving of the property must be resolved.
Signature and Date
This is the most important clause of the rental agreement. In this, both the tenant and the landlord agree to all the terms and conditions of the agreement and accept the agreement by signing this document. It also assures that failure in compliance with the agreement led to face legal penalties by either of the parties. Before signing the agreement it is very important to read every clause of the agreement carefully.
Police Verification
The major aspect of any rental agreement is the police verification of the tenant. This includes a background check of the tenant to avoid any kind of unlawful activity from using the property. It not only ensures the safety and security of the property but also the neighborhood. Non-compliance with this clause of the agreement is punishable under section 188 of the Indian penal code.
How Can I Create An Online Rental Agreement
The Rent Agreement Drafting must then be carefully reviewed to ensure that all the information given is correct. Following that, you must pay the platform using any recognized payment method, such as UPI, a debit card, and so on. The appropriate stamp duty charge (which you might have to calculate), convenience charge, and delivery price (which vary depending on the platform), as well as the applicable Goods and Services Tax (GST), will all be included in the payment.
The platform will have the electronic lease agreement printed on appropriate stamp paper and mailed to the address you give. If you’d prefer to receive a soft copy rather than a hard copy, you can ask for the online rent agreement and e-stamp to be delivered to your email. The rent agreement will typically be delivered within 3-5 working days.
End Notes!
A rent agreement, which is often referred to as a rental agreement or lease agreement, details the conditions of the parties’ leasing relationship. A rental agreement is a legal document between a landlord or property owner and a tenant. It is typically a short-term Legal contract that is automatically renewed each month unless either party ends the contract by giving proper written notice—usually 30 days.
Rental agreements typically spell out the obligations of both the landlord and tenant, such as what (if any) changes can be made to the property, who is responsible for maintenance inside the property, and how and when either party can terminate the contract.
