Friday 12 October, 2012

Rental agreement or lease agreement- a discussion

A rent agreement is an agreement between a lessor and lessess for hiring a residential or commercial property. The rent agreement should contain the terms, conditions and obligations subject to which the property is being leased by the lessor to the lessee.

A rent agreement is signed between the lessor and lessee themselves or by their duly authorised power of attorney holder. It is expected usually expected from the lessee that he should inspect the lessors title to the property. The lessor should either be the owner of the property or should have been conferred a proper power of attorney from the owner.

The terms and conditions agreed in the negotiations between the parties should be specifically stated. There is no prohibition under any statute on the number of years a lease can be given for by the lessor to the lessee.

Contents of the lease agreement.

  1. Details of the lessor and lessee and their adresses, the lessee should give his permanent address or the address that he is residing in before he moves into the present property.

  2. The lease agreement should contain the details of property leased.

  3. Location and identification of property should be clearly given and the 'Schedule' should be shown clearly.

  4. There should be a declaration by the lessor that he is the owner of the property or that he has been duly authorised by the owner to give the property on lease

  5. Effective date of commencement of agreement and duration.

  6. Terms of the lease.

The lease agreeent should mention the lease rent, advance and mode of payment of monthly rent and security deposit. The lease agreement should specifically mention whether the security deposit is interest-free or not and when it is refundable . Further the advance rent payable, if any and the mode of its adjustment should be specified.

The rent escalation clause as to when the rent can be increased and at what percentage of rates. The facilities that are to be included in the rent should also be mentioned. It should be clearly mentioned who has access to the common area and garden, if any who pays the municipal dues, the property and house taxes, who bears the maintenance charges to be paid to the society etc. Are they to be paid separately from rent and who will bear the routine repair and maintenance expenses of the house – both for minor and major repairs should be spelt our. In case any fixtures and fittings would be provided by the lessor or the lessee needs to organis these should be specified.

The agreement should also mention the grounds of termination of the agreement and the notice period required for termination of the lease.

The lessee should ensure that the details regarding parking spaces, terrace rights etc are also clearly specified. In case the lease deed needs to get registered, it should be mentioned as to who will bear the registration expenses. The circumstances under which the lease may be renewed may also be mentioned. The agreement should also mention the respective righs and dities of both lessor and the lessee.

Under the Registration Act lease of property of more than one year need to be registered. The stamp duty payable depends on the rate of prevailing in the respective states. Normally residential leases are entered into for a period of eleven months with the option of renewal