From ET Realty
Renting properties for extra income or to pay the home loans off is a now becoming a fad. Apart from that there are home owners who live out of town and prefer utilising their space until they come back and start living in their houses. With this as a background, such people mostly knock the doors of professional real estate servicing agents to take care of their properties and paper work involved. Paper work here primarily means a rental agreement, which both the parties along with the third party agree upon.
Despite the assistance that one may receive from the real estate agents, it is always good to know the technicalities or the frame work of a comprehensive and all inclusive rental contract. For a better understanding, listed below are the ingredients of a good rental contract.
1) Stamp Duty And Registration Fees
Stamp duty is the tax that you pay the local government in order to make your rental agreement legally valid. This tax charge varies from state to state and if you’re a resident of Bengaluru, then the stamp duty charge is 1% of the annual rent and deposit amount, but cannot be more than INR 500.
However, the stamp duty charges are calculated based on the tenure of the rental agreement. If the tenure is more than 10 years, then you’ve to pay 2% of the annual rent and deposit charges.
It’s also important that you pay the registration fees along with the stamp duty. Sometimes, tenants and landlords avoid paying registration charges, which can have dire consequences should a legal dispute arise. An unregistered document will not be considered as legal evidence in an Indian court.
2) Important Terms And Clauses
Before you sign along the dotted lines, it’s imperative to make sure that all important clauses are included in the rental agreement.
- Tenancy Term
Every good rental contract should state the tenure for which the property is being rented out. This prohibits the tenant from extending their stay and also stops them from claiming ownership of the property. Generally in Karnataka, the rental term is limited to 11 months, after which the terms and conditions are renewed.
- Names Of All Occupants
When you’re drawing the rental agreement, you’ve to make sure that names of all the tenants have been included in the contract. This is the safest way of making all the occupants legally responsible for their actions. For example, if one tenant has failed to pay the rent, then you can seek the entire rental amount from the other tenants.
- Security Deposit
The security deposit is usually perceived as a loss of money by the tenant. To avoid this, you can draw a clear agreement which states all the terms and conditions, failure to comply with which will result in deductions from the security deposit. This will give the tenant a clear idea of what not to do when occupying your property.
- Discipline And Maintenance
Since it’s your property, you’ve the liberty to decide the rules of occupancy. If you don’t want the occupant to entire the premises late in the night or you want them to be held responsible for damages to the property, then you’ve to mention it in the agreement. For example, if the tenant makes serious damage to the property or ruins the surrounding area, they’ll be liable to pay the maintenance charges quoted by you.
Getting all of these mentioned in a legal agreement will protect you from financial losses in the future.
3) Lease Agreement
You’ve to remember that a lease agreement is different from a rental agreement. A rental agreement can be renewed after the completion of 11 months or a year, but a lease agreement usually stretches up to 3 or 5 years. The stamp duty and registration charges will vary depending on the tenure of the lease agreement. So, make sure that you understand the legalities properly before getting into an agreement.
A good rental agreement is one which protects the rights of both the tenant and the landlord. Hence, it’s your responsibility to make sure that the right terms and conditions are set in the agreement and that the contract is deemed legal by the local court.