Rent Agreement in India

If you are renting out your house or taking a house on rent, it is imperative to thoroughly go through the rent agreement before signing it. Read on to learn about the 15 key clauses that must be included in a rent agreement in India.

Security Deposit

The amount of security deposit varies depending upon the city. For example, the security money that you must deposit while renting a house in Mumbai is around 10 months of rent, while you would be fine with depositing 5-6 months of rent in Delhi NCR.

It is vital to check if the rent agreement states that the amount is refundable or not, as it can otherwise become a common ground for conflicts related to security deposit refunds.

The agreement should clearly state ‘Security Deposit is Refundable’ or ‘Security Deposit is Non-refundable’. Furthermore, a separate receipt can be executed for the security deposit that includes details such as cheque number, date and the owner’s signature.

Lock in Period

The lock in period refers to setting a minimum period for which the house shall be rented and during which neither the owner nor the tenant can serve a notice to vacate the rented premises. Nowadays, owners have been keeping the Lock In period as about 6-months.

However, ideally, there should not be any Lock In period and a one month notice should suffice to vacate the residence.

Penalty for Delay in Refund of Security Deposit

It becomes extensively tedious for tenants to get their security deposit refunded when they decide to move out. This amount is significantly large, as it is a deposit that has multiple months’ rent. Owners often delay returning the security deposit by saying they have invested the money and will return it next month. Besides, when they get to know that the tenant is moving to another city, the odds of this happening increases furthermore, as the tenant won’t be able to come back easily for the due amount.

• The rent agreement should clearly state that the security deposit shall be returned to the tenant when they decide to leave and give back the keys to the owner. If the owner fails to refund the security deposit, the tenant may retain the possession of the house without paying any rent.
• Besides, the owner shall be liable to pay INR 1000 per day till they refund the security deposit for causing inconvenience to the tenant.

If the Rent is Prepaid or Postpaid

Whether the rent will be prepaid or postpaid is another aspect that is often under dispute. There have been cases where the tenant is unclear about whether the payment being made is for the previous month or in advance for the upcoming month.

Numerous tenants forget this clause over time and end up being confused after a few months whether the payments are prepaid or postpaid. You must make sure to check if this clause is mentioned clearly and states whether the amount needs to be prepaid or postpaid.

List of Fittings and Fixtures

A rent agreement must include details of all the fittings and fixtures provided by the owner in working condition. These may include number of lights and fans, furniture, geysers, air-conditioners, refrigerator, etc. The tenant shall be responsible to return all these things in working condition when they decide to vacate the house and handover the keys to the owner. A list of all the things given by the owner should be mentioned in the rent agreement and checked by the tenant before they sign it.

Maintenance Charges

The rent agreement must clearly state who shall be paying the maintenance charges and whether it is included in the rent payable by the tenant or not. It can become a major reason of conflict between the owner and the tenant if it is not clarified before signing the rent agreement. For example, if the rent is INR 20,000 and the maintenance charge is INR 3,000, the owner may charge the overall rent as INR 20,000 and the tenant shall be responsible for the maintenance charges. However, if the owner asks for INR 23,000, an amount which is inclusive of the maintenance charges, the tenant shall not be liable to pay anything apart from that.

Non-Maintenance Charges

The property may undergo other improvements organized by the apartment associations such as painting the apartments, corpus fund, sinking fund, etc. Considering these heads add long-term value to the property, it would be reasonable for the owner to pay them.
The rent agreement should clearly state that the non-maintenance charges shall be paid by the owner and the tenant shall have no liability to pay it in any case.

Government Taxes

There can be a major dispute between the owner and the tenant about who shall be liable to pay the property tax and other Municipal/Government taxes for the property that has been rented. There is nothing fixed when it comes to this, and it depends entirely on the owner and the tenant. It usually is paid by the owner even though the tenant shall be the one occupying the property. There should be a clause in the Rent Agreement that clears out this aspect and states who shall be paying these taxes.

Wear, Tear and Damages

The rent agreement must include a clause that states that the tenant shall be liable to pay the cost of damages on the property that are not part of natural, reasonable and normal wear and tear. The property is prone to some wear and tear over the years, but damages caused due to other reasons must be compensated for.

Commonly, this topic majorly arises when the owner deducts the cost of painting the house from the security money. A clause clarifying such deductions must be mentioned in the rent agreement, where the maximum cost of painting that may be deducted is limited to INR 20,000.

Brokerage

Brokers and real estate agents don’t really want tenants to be staying at a home for long periods. They would try to add a clause according to which you may have to pay the brokerage amount every time you renew your agreement. In addition, the house owner might try to stay on the positive side of such individuals as they may need to their assistance again in the future. This makes it extremely important to make sure there is a clause in the rent agreement that states that brokerage shall only be paid one time.

It must be clear that when the agreement is renewed, nothing shall be paid to the broker or real estate agent. The homeowner may choose to pay a certain amount to such individuals in order to maintain good relations, but this would be of their own volition.

Renewal Terms

To avoid any potential conflicts in the future, clear terms of renewal if both parties agree should be mentioned in the rent agreement. Such terms should include the percentage increase in the rent amount, extension period, deposits, etc. that would be helpful in making renewal a quick and easy process.

Flexible Termination Rights

As mentioned before, there should not be any Lock In period in the rent agreement and the tenant should be allowed to leave the rented house after serving a one-month notice. However, tenants are usually given a Lock In period, during which they may not be allowed to vacate the house or use their right to terminate the agreement. If the tenant wishes to stay for a longer period and wants to safeguard them from being asked to vacate before the desired period, they may ask the owner for a longer Lock In period.

Assertion of Owner vis-à-vis Title of the Property

It is imperative for the tenant to make sure the landlord is the true owner of the property and they have complete ownership and possession of the premises. The rent agreement should have a clause from the landlord that states they are the owner of the property and that the house is free from any litigation.

Protection Against Sale of the Property

There have been numerous instances where the owner has sold the property while a tenant has been occupying it. This creates a lot of issues for the tenant, who is stuck looking for a new home out of the blue and must move out in a very short period. To protect them from such untimely demands, the rent agreement must have a clause that states that the right to use the premises should not be affected if the landlord transfers the property rights and, also, that the new owner shall be bound by the terms of this agreement.

Indemnity Clauses

The rent agreement should contain an indemnity provision wherein the landlord indemnifies the tenant for any loss or damage caused or suffered to the tenant on account of misrepresentation or breach of contract by the landlord or on account of defect in the title of the landlord to the premises.

At the same time, it is also pertinent to check if the landlord has obtained all requisite consents for leasing or licensing the premises such as permission from the society / association of apartment owners in which the premises is located.

Conclusion

Tenants must make sure that all the above-mentioned clauses are included in the rent agreement before they sign it and rent any property. Both the tenant and the owner must be on the same page before any rental deal is finalized to avoid any potential conflicts in the future.


We can address your concerns related to rent agreements in India. You can get in touch with us by submitting your query below.