Finding a good tenant is as important as finding a good house. In case you plan to let your property out on rent, it is essential to draft a proper tenancy agreement. A well-drafted tenancy agreement leaves little chance of dispute between the parties. Care needs to be taken by both the parties while drafting the tenancy agreement. A lease agreement should cover the rights and obligations of both the lessor and lessee.
The lessor can either be the owner of the property or may have a power of attorney (POA) to lease out the property from the owner. The lease agreement may be signed by the owner of the house or his duly authorised POA holder. There are some basics that need to be included in a lease agreement.
– Names and addresses of lessor and lessee
– Details of the property leased out
– Effective date of commencement of rent agreement
– Duration of lease
– Rent amount
– Frequency and dates of payment
– Security deposit and advance rent
– Notice period in case of termination of lease
– Grounds for termination Conditions for renewal of lease
– Rent escalation clause
Another critical issue relates to repair and maintenance – what type of repairs need to be undertaken by the lessor and what should be taken up by the lessee. An important clause that needs to be in the agreement is regarding the charges incurred at the time of termination of the lease – other than the usual wear and tear, the tenant may be required to pay for any damages to the property or fixtures. The fixtures and fittings to be provided by the lessor should also be clearly specified. In case there is any dedicated parking space, it should also be clearly mentioned.
Supreme Court ruling
The Supreme Court has drafted a model landlord-tenant agreement, giving tenants five years’ stay in the premises if they give rent at the market rate, increase it by 10 percent every three years and pay the property tax of the house. Further, it has asked tenants to bear the charges accruing on the house to enable the landlord to get the rentals without any deduction.
According to the Supreme Court, in case the present and prevalent market rent, assessed and fixed between the parties, is paid by the tenant, the landlord is not entitled to bring any action for his eviction at least for a period of five years. Thus, for five years, the tenant gets immunity from being evicted from the premises.
The tenant must enhance the rent according to the terms of the agreement or at least by 10 percent every three years. If the rent is too low in comparison to the market rent, having been fixed many years ago, the present market rate should be worked out. It should be determined either on the basis of a valuation report or reliable estimates of building rentals in surrounding areas.
The rent should be just, proper and adequate, and should be fixed keeping in mind the location of the property, type of construction, accessibility from the main road, availability of parking space etc.
Apart from the rentals, property tax, water and maintenance charges, electricity charges for the actual consumption of the tenanted premises and common area, are payable by the tenant so that the landlord gets the actual rent out of which nothing is deductible. In case there is enhancement in property tax, water or maintenance charges, electricity charges etc, it should also be borne by the tenant.
Minor repairs of the premises should be carried out by the tenant out of his own pocket. He cannot undertake any major repairs requiring reimbursement without prior permission from the landlord. In case any major repairs are carried out by the tenant to be reimbursed by the landlord, it should be done after obtaining permission from the landlord in writing.
Source: The Times of India, Times Property, Bangalore