A Beginner’s Guide to Types of Rent Agreements in India

When renting a property, various agreements, such as rent agreement, lease agreement and license agreement are signed to highlight the nuances of the relationship between the landlord and the tenant. If not managed adequately, the document may become the focus of controversy in the case of differences of opinion. To know more about the rent agreement types keep scrolling!

All About Rent Agreement Types

A rent agreement process is a legal binding procedure between a landlord and a potential tenant who temporarily wishes to own a specific property. The information incorporated in the contract includes the name of the owner & tenant, property description, rental amount, interest in arrears, grace period, deposit amount, items that the tenant has the right to use or not, parking spaces, parking rights, repairs and maintenance, and property insurance.

The rent agreement process is usually of a duration of 11 months in India. A lease is a concise contract that allows both parties to make a deal quickly. The registration of the rent agreement is optional. However, the registry should not be confused with the registration of the rent agreement. 

The rent agreement process is necessary as both parties can rely on the contract terms and apply for the required compensation in court in case a breach occurs. The lease contract must be signed at least for 11 months. However, the agreement must be registered in case it is signed for more than 11 months otherwise, it cannot be used as a piece of court evidence. The primary laws regulating leases include the “Ownership Transfer Law”, the “Special Judicial Methods Law”, the “Evidence Law”, and the “Registration Law”.

Types of Rent Agreement – Lease Agreement

Usually, the lease term is longer than the rent period. A lease is an agreement between the landlord and the tenant, which gives the tenant the right to use the relevant property for a certain period of time, which is usually for more than a period of 12 months. Generally, unlike a lease, a lease is binding on the landlord and tenant for the agreed period. In addition, a lease generates interest in the property, which can be transferred and generate inheritance rights.

The mutually agreed lease agreement ensures that the tenant will not leave the house unless clearly stated in the lease agreement. In the event of a dispute, one of the disadvantages of a lease contract is that if the market price of the property increases during the agreed lease term, the landlord may lose additional income.

Not all lease agreements are the same, but they share some standard features such as the amount of rent, the due date of rent payment, the lease agreement’s commencement, and expiry date. Most lease agreements are standardized, and all tenants have the same terms. On the other hand, commercial lease agreements are often negotiated on a tenant basis, which usually lasts for one to ten years, and some tenants have more extended and complex contracts.

Rent Agreement Types – Leave and License Agreement

Leave and license agreements are controlled by the Indian Easement Act of 1882 and are different from leases and rent agreement types. A Leave and license agreement is a contract that transfers the ownership of the licensor to the licensee. However, the property is granted under the leave and license agreement and not based on tenancy, i.e., in the absence of such permission, the property right would be illegal.

This arrangement makes it easier to terminate a tenant than to rent a house. These agreements always grant permission to occupy the place but never grant rights. This does not create a typical landlord-tenant relationship, and the landlord always has the upper hand.

This document is different from a lease agreement because it establishes the rights to the property and is transferable, while the leave and license agreement are non-transferable. Although the lease creates exclusive rights to the property, the leave and license agreement grant permission to own the property. The lease also makes inheritable rights, while the request does not present such rights. In addition, unlike lease agreements, these contracts are revocable.

Wrapping Up

Conclusively, the agreement should clearly define the landlord and tenants’ preferences, expectations, and responsibilities to avoid future litigation.

Generally, the terms “lease” and “rent agreement” can be used interchangeably as they mean the same thing. However, these terms include two different types of rent agreement. Both the lease and the rent agreement process are legally binding but serve another purpose. 

Whether you choose a lease or a rental agreement, you must know who your tenants are. A thorough screening of rental candidates can help you ensure that the right person is placed in the rental property.

Although the main difference between leasing and renting lies in who performs maintenance and services. Though both are different for the layman, they are similar. Therefore, it is essential to figure out the difference and understand it clearly. 

Even if there are two parties in the contract/arrangement, the roles of each party are different. For example, in a lease agreement, both parties have the same rights. But through a rent agreement, the landlord has more power than the tenant. However, both can decide to opt-out of the deal whenever they want.