Real Estate

Lease and Rental Agreement – An Overview

A lease is where the owner of a property (lessor) agrees to rent their owned property to another person or tenant (lessee) for a particular duration of time. The lessee has to make a one-time payment or a series of periodic payments for the use of the property. The agreement that makes such an arrangement possible is known as a lease agreement. This agreement covers the terms of using the property and the time period for which such property is rented out.

A rental agreement is also similar where an owner of a property (landlord) gives temporary possession to another person (tenant). Unlike the lease agreement, a rental agreement is for shorter durations and the payment for possession is done on a monthly basis. The terms of the agreement, usage and payment details are decided by the landlord and the tenant.

It is very important to note that in either agreement the rights of the lessor-lessee and the landlord-tenant are not affected. The agreement should be such that both parties are satisfied with the terms and conditions. Thus it is advised to take help from professionals who will handle that for you.

Benefits of Rent and Lease Agreement

Lease Agreements

• A lease agreement means stability for the lessor as it provides income for a period of time.
• The lessee can use the leased property for business purposes with lesser investments in property.
• Through leasing, the lessor has the means to finance their properties without depending on banks and financial institutions for borrowing. Leasing is a considerable alternative if one does not want to mortgage their property.
• Lease agreements are time-saving compared to purchasing an actual property where there are so many requirements. Properties are available immediately through a lease.
• Lease agreements provide legal protection to the lessor and the lessee in case any party breaches the terms of the agreement.

Rent Agreements

• It becomes a means of monthly income for the landlord who is renting the property.
• The tenant has to avoid expenses such as maintenance and access to amenities.
• There is a legal relationship between the landlord and the tenant where both are obligated to carry out certain responsibilities.
• Similar to lease agreements, rent agreements provide legal protection to both the landlord and the tenants in case any party breaches the terms of the agreement.

Other than that, lease and rental agreements also act as proof of address and identity.

What Should a Rental and Lease Agreement Include?

• Names: Both the agreements should include the name of the tenants, landlord, lessors, lessee and authorised agents who were involved in the agreement.
• Property Description: This includes a brief overview of the property such as the size of the property, the number of rooms, etc. it is very important to include this in the agreement.
• Rent Amount: This is the amount decided by the lessor/landlord which the tenant/lessee has to pay in order to make use of the property. It can be upfront or periodic in the case of a lease agreement. In rent agreements, the amount is paid monthly. This also includes information about late charges, grace periods, etc.
• Mode of Payment: This clarifies the adopted mode of paying the rent/lease amount.
• Termination: This includes the procedure and the reasons where the agreement can be terminated before the actual expiry of the agreement.
• Security Deposits: A security deposit is where the tenant pays an amount, which is normally equal to the rent, to the landlord during the initial stages of the rent agreement. This amount is then returned after expiry/termination. The agreement must also include a clause related to the security deposit.
• Rules & Regulations: These are conditions that the tenant/lessee should abide by. These include noise rules, pet rules, etc. This also includes the penalties if the rules are violated.
• Facilities and Amenities: Parking facilities and amenities such as laundry, water supply, swimming, etc. are listed here.
• Repairs and Maintenance: This includes the procedure of requesting repair work and maintenance of the property.
• The agreement may include other requests and terms suggested by the landlord/lessor and the tenant/lessee.

Documents Required

By Landlord/Lessor

• Original copy of proof of ownership of the landlord’s property.
• Copy of 2 recently taken passport size photos.
• An Aadhar card or its receipt while applying for it is mandatory.
• Any government-issued ID proof- driving licence, voter’s ID, passport etc.
• The rental agreement that is printed on the stamp paper of the recommended value

By Tenant/Lessee

• 2 passport size photos.
• Aadhar card or the receipt received while applying for it. If the person is not Indian, then he/she has to submit the original passport.
• ID representing another person for the registration, then a Power of Attorney should be presented.

Process to Register Rental and Lease Agreement

• Step 1: The agreement has to be drafted. This should include all the required details enumerated above
• Step 2: The agreement has to be then printed on a stamp paper of specific value
• Step 3: The parties have to sign the agreement along with their thumbprint, photographs and identification details (PAN)
• Step 4: Two witnesses should be present at the time of registration of the agreement. The signature of the witness is also mandatory
• Step 5: Within 4 months of signing the agreement, the agreement has to be submitted to the office of the sub-registrar
• Step 6: Either party has to pay the stamp duty and registration fees
• Step 7: The Sub-registrar will confirm the agreement after verification.