Why Rental agreement is important
Bengaluru is a fast growing city with a different kind of people and more strangers so it is good to have a rental agreement done and registered by a lawyer. And rental agreement some time works as address proof and helpful in many ways.
Rental agreement is an important document which defines the legally binding relationship between the tenant and the landlord. Usually, a broker is involved in carrying out the initial transaction between the two parties. However, both the parties can also take help of a lawyer to draw the rental agreement
Always insist on presence of two non-beneficiaries while the rental agreement is being signed between the two parties. The rental agreement ought to be signed by the two non-beneficiaries to make it a valid one. You can register the rental agreement by paying a stamp duty at is INR500/-
The procedure goes as follows:
- Drafting of the rental deed and printing it on a Stamp paper of due value as mentioned
- Getting the a agreement signed by the owner and tenant in the presence of two witnesses
- The two witnesses should also be signing and attesting the document
- Getting the document registered at a nearest Sub-Registrar office after paying due registration charges
- For leases with a term of 11 months or less, notarization is not necessary. For leases created for a year or more, registration ( not notarization ) is recommended
Before taking a premise for rent make sure these details:
- Talk all terms initially itself.
- Verify the Identity of the Owner by asking for his/her ID proof and also whether the rental property belongs to the same person you are dealing with. For this, you can check the Electricity Bill or Tax Bill.
- Whether you are dealing directly with the owner
- Whether there is an agent or broker to whom you need to pay a brokerage of one-month rent.
- In case you pay any token advance request for a receipt or try to make it by cheque , DD or online transfer.
- The Deposit and Token advance varies from state to state
There are few things must be careful about rental agreement:
- Rental cycle – Usually rental cycle must be 11 months. Agreement has to renew every 11 months.
- Lock-in period – Try to get rid of Lock-in period
- Annual rental increment – Usually 5–10% depends on the location and accommodation
- Rent payable– Is rent payable in month end or month beginning. Try to pay month end to control your cash flow.
- Maintenance and other cost– Is maintenance cost and other cost (water, electricity, tax etc,) includes in rent payable or excludes rent payable to owner.
- Security deposit– Usually security deposit in Bangalore is 10 months of rent (Eg: Rent is Rs.10,000 then the security deposit is Rs.1,00,000 ) Try to negotiate and pay in 3 or 4 installment to control your cash flow.
- Is repair, damage cost or structural change borne by tenant or owner? Usually tenant has to bear during tenancy period.
- Notice period– Usually 1–2 months of notice, Tenant has to inform owner at least 1 or 2 months in advance before vacating house.
- Renovation cost– Tenant may paint and clean the house after vacating or appropriate cost (1 Month rent or actual renovation cost) detected from security deposit.
- Get your rental agreement in E-stamp paper and notarize it by lawyer. This helps you to validate your rental agreement as address proof. Notarized agreement is applicable for applying gas connection, Bank application, Employee address proof etc.
- Prefer transferring your rent and security deposit by wire transfer instead cash. Wire transfer records your transaction and avoid any kind of transnational discrepancy between parties.
Advice: Never get into rental deal if you find your landlord is rude or doesn’t suit your behavior. Find suitable landlord and stay happy….
What is the difference between first time rent agreement and renewal of rental agreement
Here are the few difference between renewal and first time rent agreement:
- Title of the agreement will change from rent agreement to renewal rent agreement
- Agreement execution date changes to current date
- Landlord and tenant age might change by one year (This is applicable if parties age described in agreement)
- Renewal agreement commencement and end date changes
- Rent might increase around 5%
- Security deposit will not impact/ change on renewal agreement.
- Maintenance cost of apartment society might have impact if apartment society increased the cost
- Cost of water, parking, electricity might impact in renewal
- Consider removing lock-in period if it mentioned in first time agreement.
Execution of agreement is same as first time agreement:
- Get a legal e-stamp paper from any of cooperative bank near you. Usually cooperative banks are not crowded compare to register office and commercial bank. A Rs.100 stamp paper is suitable for rental market.
- Print agreement draft on e-stamp paper
- Both landlord and tenant has to sign all the pages of agreement at bottom of pages. Witness has to sign at last page of witness column
- Get lawyer notary. Notary is mandatory if you use this agreement as local address proof, to local amenities like gas connection, opening bank a/c, passport application etc..
- Don’t water paper, Hence take a scan image of agreement and share to other party by email or messaging app.
When you notarize a rental agreement, can you break it if the tenant isn't following the contract?
But it’s a contract even if it’s not signed, let alone notarized.
Getting it notarized is maybe something you’d do with a commercial lease
Otherwise, if the tenant has the keys, and the landlord has a deposit or has cashed the check for the first months rent, then that’s tacit acceptance by both parties of the terms.
The landlord can terminate the tenancy with appropriate notice for non-performance under the contract by the tenant.
Usually this will involve failure to pay rent or fees, complaints by neighbors, or other violations of the lease. A landlord may offer a “notice to quit or correct”, but is under no obligation to not simply give a “notice to quit” with no option for the tenant to fix the situation.
The tenant can terminate the contact with both appropriate notice, and a grace period for correcting the problem, for non-performance by the landlord.
Usually this will be for breach of implied warrant of habitability, or non-repair of appliances or failure to provide utilities or essential services such as trash collection, if they are included. The tenant is under an obligation to give the landlord time to correct the problem.