Rental Agreements: Important Clauses and Format

A Rental Agreement is a legal document that details the rights and responsibilities between two parties to the agreement. It is an important document and needs to be signed by both the parties; i.e., the Landlord and the Tenant. Thus, the parties to the Rental agreement are the property owner renting out their property; the Landlord, and the one who is residing or staying in the rented property until the agreement’s expiration; the Tenant. A Rental Agreement contains all of the important details regarding the residential property, the renter, the property owner, the lease duration, and the rent amount for the specified term.

Geeky Takeaways:

• An important foundation is provided by this agreement, which details each party’s rights, responsibilities, and expectations. 
• One cannot stress the importance of a well-written rental agreement because it serves as a legal buffer against misunderstandings and limits how the property may be used.
• It is an important legal document that needs to be signed by both the parties; i.e., the Landlord and the Tenant.

What is a Rental Agreement?

A Rental Agreement is a detailed document that details the terms under which a tenant can occupy and use a landlord’s property. It addresses issues, such as rent amount, tenancy duration, maintenance, responsibilities, and other relevant conditions that define the Landlord-Tenant relationship. A Rental agreement is a legally binding document that details the terms and conditions of renting out a property. Rental Agreement contains all the information in detail about the parties and terms and conditions related to the tenancy of the property on rent and is binding upon both parties. Since the agreement is binding, both parties are advised to go through it carefully before signing and agreeing to the terms of the agreement. In addition to the above, the terms and conditions of the agreement cannot be amended unless and until the parties mutually agree to it.

Important Clauses of a Rental Agreement

1. Name of the Occupants: This includes all the people living in the property of the Landlord. The occupants must be capable enough to take responsibility for the property. The names are useful in cases when any dispute arises. For example, if any tenant suddenly vacates the house without giving notice, then the owner has the power to take legal action against him.

2. Duration of the Tenancy: The parties have to mention the fixed time period in the rent agreement. After the expiry of the duration, it can be renewed with the mutual consent of both parties. By mentioning the duration of tenancy in the agreement, it gives protection to the owner. It also protects the tenants as the owner cannot force them to vacate the property before the due date.

3. Rental Amount: The amount fixed for the rent must be specified clearly in the rent agreement. It should also contain the amending terms. The clause includes the mode of payment, date of payment, fines for late payment, etc. The clause protects the parties from unlawful holding of the money or payment of the money.

4. Cost of Maintenance: The cost of maintenance is paid either by the owner or the tenant. Such a sum of payment and the person paying the amount must be specifically mentioned in the agreement. Apart from maintenance, every other major or minor expense should be covered in the agreement. This gives clarity to both parties during the tenancy period.

5. Terms and Conditions: The agreement includes how the property and its surroundings will be treated. Factors such as sub-letting, allowing pets, alterations in the premise, etc., must be mentioned clearly in the agreement.

6. Renewal and Notice Period: The renewal and notice period should be explicitly mentioned in the agreement beforehand for the knowledge of both parties. It includes the date of renewal of the agreement, the notice period, and how it needs to be performed.

7. Amenities Attached to the Property: It includes all the amenities that are attached to the property. This needs to be mentioned for the security of the landlord and his property. This helps the landlord to eliminate any damage during the tenancy period.

8. Exit Clause: It includes clearance of any other penalties before the termination of the agreement that must be resolved before leaving the property.

9. Signature and Date: This is considered to be the most important clause of the 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. Further, it assures that failure to comply with the agreement leads to legal penalties by any of the parties. Before signing the agreement, it is important to read every clause of the agreement very carefully.

10. Police Verification: This is a major aspect that includes a background check of the tenant to avoid any kind of illegal activity. It ensures the safety and security of the property and the neighbourhood. Non-compliance with this clause is punishable under Section 188 of the Indian Penal Code.

Format of a Rent Agreement

This Rent Agreement is made on………(date) between……………..(name of the landlord) S/o…………..(father’s name of the landlord), Address…………………. (residential address of the landlord). Hereinafter referred to as the landlord or the first party.

AND

………………. (Name of tenant), hereinafter referred to as the tenant, or the second party, address…………………….(residential address of the tenant)

The term Landlord and the tenant shall mean and also include their legal heirs, successors, assigns, representatives, etc.

Whereas the first party is the owner and in possession of the property No:………………………. (address of the rented property) and has agreed to let out the said property to the second party for a monthly rent of ₹ ………../- (in words) per month.

Now this Rent Agreement is witnessed under:

1. The tenancy is according to the English calendar and the agreement is commencing from………..(date of commencement of agreement)

2. The rent agreement is granted for the period of 11 (eleven months) starting from……..(date of commencement), and the contract can be extended further with the mutual consent of the parties.

3. The purpose of the tenancy is purely for residential purposes and shall not be used for any other purpose.

4. The second party will have to pay ₹ ……../- (in words) as monthly rent, which should be paid between the x^th to y^th days of every month, and if the tenant continues to stay after 11 months from the commencing date, the rent will be increased.

5. The second shall pay the electricity and water charges separately according to their consumption to the first party.

6. The second party should not sublease the property to the sub-tenant under any circumstances without the consent of the landlord.

7. The second party shall adhere to all the rules and regulations, and by-laws set by the local authorities in respect of the leased property and will not get involved or do illegal activities on the leased property.

8. The second party shall not do any construction or make any alteration in the rented premises either major or minor without the permission of the landlord.

9. The second party will have to allow the landlord or his authorized agent to enter into rented premises for its inspection or general checking for any repair work if needed.

10. The second party shall bear the cost of day-to-day minor repairs.

11. This agreement could be revoked or terminated before the expiry of this tenancy period by serving a one-month prior notice.

12. Both parties have read and understood this agreement and have agreed to sign the same without any pressure from any side.

In WITNESS WHEREOF the landlord and the tenant have hereunto subscribed their hand at ______ (place) on this the _____________ (date of rent agreement) year first above mentioned in the presence of the following witnesses.

Witnesses:

1.

2.

___________ (Name of the landlord) _________________ (Name of the tenant)

Conclusion

In conclusion, a well-drafted Rental Agreement is fundamental in fostering a transparent and harmonious relationship between Landlords and Tenants. Beyond being a legal contract, it serves as a comprehensive guide, outlining the rights, responsibilities, and expectations of both parties throughout the tenancy period. As a dynamic document, the Rental Agreement adapts to the unique circumstances of each tenancy, promoting fair and open communication.

Frequently Asked Questions (FAQs)

1. Which stamp paper is required for the Rent Agreement?

Answer:

The renting must be either for residential or for commercial purpose. There must be a written agreement between the owner and the tenant. The agreement should be printed on a stamp paper with a minimum value of ₹100 or ₹200. Stamp duty is 1% of the total rent amount plus deposit paid annually, or ₹500 whichever is lower.

2. What should a Rent Agreement include?

Answer:

Rent Agreement must include the amount of rent, name of occupants, security deposit, notice period, etc.

3. Is a witness required for a Rent Agreement?

Answer:

If it is an 11 month agreement, then registration is not compulsory. The witness can be anyone as there is no strict rule about it.

4. What is the cost of registering a Rent Agreement?

Answer:

The registration for Rent Agreement is for ₹1100; however, the cost may vary depending on the state.

5. Is police verification mandatory for the Rent Agreement?

Answer:

For verifying the background of the tenant, it is important to get a police verification done. It is mandatory by law in some states to get a police verification done.

Also refer to Rental Agreements: Meaning, Importance, Procedure and Documents