What is a Rent Agreement?
A rent agreement is a legally binding document that outlines the terms and conditions of the rental arrangement between the landlord and the tenant. Tenant details, property address, mode of payment, security deposit etc., are some key contents of the agreement. A rental agreement is drafted on a stamp paper and can be prepared for residential and commercial property. These agreements are also called rent deeds or lease deeds. Typically, they are drafted for 11 months to avoid the legal registration. A rent agreement for 12 months or more is mandated to be registered with the government as per the Registration Act of 1908.
The Rent Agreement plays a critical role in safeguard the rights and responsibilities of the landlord and the tenant. It ensures a clear understanding of what is expected from each party. It includes clauses on rent increase, notice period, restrictions, conditions under which the security deposit can be forfeited and others. By adhering to the terms, both parties can ensure a smooth and amicable rental experience.
The process of manually framing a rent agreement can be tedious and time-consuming. Hence, Square Yards offers an online rent agreement service that helps draft a digital agreement within minutes at your comfort.
Why is a Rent Agreement Necessary?
It is always a wise decision to document any arrangement between two parties. Mere verbal contract has no legal value. However, a written rent agreement is admissible in court and can be used in case of any possible disputes. In essence, it is a form of establishing transparency and accountability in the landlord-tenant relationship. It plays a critical role in ensuring that no party is exploited in any form by the other.
Registered Rent Agreement
Property is a precious asset, and every step should be taken to safeguard it. Formally registering an agreement provides legal validation for the setup. Moreover, a registered rent agreement is often required for various official and financial transactions, making it an essential document for both parties involved in the rental transaction.
The Registration Act, 1908, mandates the lease out of all properties for more than 11 months to be legally registered. Properties rented for less than 11 months may not require registration, but can be notarised. Once the draft agreement is prepared, the landlord and the tenant must be present at the sub-registrar’s office. If the two can’t be present simultaneously, the present party can sign a Power of Attorney. This grants the attorney the right to close the agreement.
Terms & Conditions for Rent Agreement
An online rent agreement consists of the various terms and conditions that govern the tenant's occupancy of the property during the specified period of time. Some of the key elements of the rent agreement format are listed below:
Rent Amount: The monthly amount to be paid by the tenant to the landlord.
Time Period: The duration for which the existing agreement applies.
Deposits: Any and every form of deposit required, or made, is clearly highlighted in this section.
Usage: The agreement also highlights the purpose for which the property should be used (residential, commercial, etc.)
Insurance: Commercial properties typically elaborate on the tenant’s contribution to the property’s insurance, if any.
Other terms: These include the manner in which any monetary returns or adjustments shall be made. It also highlights how repairs, maintenance, bill payments, parking space use, and other details will be dealt with.
Termination policy: All possible termination scenarios, such as the completion of the contract and premature termination, should be duly elaborated upon in the document.
Signature Clause: The agreement should be signed by the landlord and the tenant to indicate mutual acceptance.
Types of Rent Agreements
While renting out a residential or commercial property, its usage and duration primarily determine the nature of the agreement. Here are the three different kinds of rental agreements used in India:
Rent Agreement
A Rent Agreement is a simpler form of agreement that is used for tenancy duration of 11 months or less. The agreement can be renewed at the end of the duration and the registration depends on the discretion of the parties. A straightforward document, it includes details like rent, duration, and maintenance responsibilities.
Lease Agreement
A Lease Agreement is a more formal version and is used for longer durations. This document gives tenants the right to use the property for 12 months or more. The agreed-upon duration can go up to 99 years. Moreover, this document can be extended, transferred or inherited. It also ensures that no uninformed termination takes place and gives legal authority to the person receiving the right to take action in case of any disputes. A Lease Agreement creates interest in the property and has to be mandatorily registered.
Leave and License Agreement
The leave and license agreement comes under the Indian Easement Act 1882. It is a legal instrument that gives the permission, and not the rights, to occupy a property. It differs from a Lease Agreement as it does not create an interest in the property. A Leave and License Agreement features no landlord-tenant relationship and can be revoked at any time by the landlord.
What are the Details that are Mentioned in a Rent Agreement?
A number of details are mentioned in an online rent agreement. These details are present in the various clauses of the document, as discussed above in the rent agreement format. Some of the key contents are:
Tenant’s Details
Property’s Address
Security Deposit
Rent Amount
Mode of Payment
Utilities allowed for use by the tenant
Number of tenants allowed in the property
Ways of Termination
What are the Documents Required for Rent Agreement?
While registering an online rent agreement, the following documents must be submitted:
Title deeds of the property showcasing ownership by the landlord
Documents and tax receipts of the concerned property.
Identity Proofs and address proofs of both the parties.
The property’s route map
Two passport-size photographs of each party
Other specified documents
What is the Format of the Rent Agreement?
Take a look at the rent agreement format widely followed in India below. The various clauses and components discussed above can be fitted into a hole using this format. View Sample Report
What is the Stamp Duty on Rent Agreement?
Stamp duty is a charge mandated by the state government in property transactions. It helps legalise the rent agreement, and the rate varies from state to state. Generally, it ranges between 1% and 3% for rental properties. However, it might change with changes in states and laws.
The responsibility to pay the stamp duty charges is not fixed on any party. Ideally, both parties should divide the charge. However, the tenant generally bears these charges.
Advantages of Rent Agreement for Owners
Rent Agreement offers multiple advantages for landlords. Some of the top benefits are:
It safeguards the landlord’s property from unauthorised takeover by the tenants in any unforeseen circumstances.
The agreement clearly outlines the rent amount and payment intervals, ensuring financial security for the landlord.
It also plays an important role in clearly communicating the terms to the tenant.
The rent agreement simplifies showcasing rental income clearly and accurately.
Advantages of Rent Agreement for Tenants
From the tenants’ perspective, a rental agreement offers the following benefits:
A rental agreement gives tenants the security of having the property for a specified period of time with them.
It ensures there is no exploitation in terms of rental increments and other ways by the owner.
The agreement gives tenants a legal basis to resolve any disputes.
For various official purposes, this document can be used as legal proof of address.
The Benefits of Creating a Rent Agreement Online With Square Yards
Preparing a rent agreement online with Square Yards helps:
Draft Agreements Within Minutes
Get a digital copy of the agreement in your mail
Go quick with e-signing
Solve every query with a dedicated Relationship Manager.
Stamp Duty Charges of Rental Agreement
The applicable stamp duty charges in some of India’s top cities are listed below:
| States |
Time Span |
Price (INR) |
| Delhi |
Up to or equal to 5 years |
2% |
| Noida |
Up to or equal to 11 months |
2% |
| Karnataka |
Up to or equal to 11 months |
1% of the total rent plus deposit paid each year, or Rs 500, whichever is less |
| Tamil Nadu |
Up to or equal to 11 months |
1 per cent of rent with deposit Amount |
| Uttar Pradesh |
Less than 1 year |
4 Percent of the yearly rent paid with the deposited amount |
| Maharashtra |
Up to 5 years |
0.25% of the total rent |
| Gurgaon |
5-10 years |
1.5-3% of the average yearly rent |
