This article is written by Abanti Bose, from Amity University Kolkata, India. This article provides a detailed understanding of tenancy agreements and states all the essential clauses of a tenancy agreement.
It has been published by Rachit Garg.
What is a tenancy agreement
A tenancy agreement is a legally binding agreement between the landlord and the tenant. It specifies all the details of the tenancy agreed upon by the landlord and the tenant. A tenancy agreement should be in writing and a copy of such agreement must be handed to the tenant before the speculated tenancy period. Although in the absence of a written agreement the Residential Tenancies Act, 1986 will be applicable. The tenancy agreement must be in conformity with the statutory law.
Tenancy agreements give rights to both parties; for example, it gives the tenant the right to occupy the accommodation and the landlord the right to collect the rent. It is the duty of the tenant to read the agreement before signing it and in case of not being able to understand any terms and conditions they must seek legal advice.
Essentials of tenancy agreements
The essential elements of a tenancy agreement are listed below:
- The tenancy agreement must contain the legal names of both the tenant and the landlord.
- It must also contain the start and end dates of the tenancy period.
- The amount of rent agreed upon by the landlord and the tenant and on the date of each month, it must be honoured. The mode of payment of the rent should also be specified in the tenancy agreement.
- The agreement can further include utility charges such as electricity bills, gas bills, etc. It might contain miscellaneous charges like club membership fees, maintenance charges and parking charges.
- A tenancy agreement often contains a clause for security deposit which can be refunded at the end of the stipulated tenancy period. And in case of any damages, the landlord can deduct the amount from your deposit in accordance with the terms mentioned in the tenancy agreement.
- Tenancy agreements must specify the reasons which could lead to eviction such as damage to the building, disturbance to the neighbours, failure to make payments, etc.
- It is essential for the tenancy agreement to specify the notice period and penalty clause, in case of a situation of eviction due to default.
- A tenancy agreement must be registered. In order to register one needs to pay stamp duty and registration fee. Stamp duty varies from state to state and is also dependent on the duration of the tenancy agreement.
Documents required for a tenancy agreement
The documents required for the tenancy agreement are:
- Proof of the ownership of the property.
- Property papers such as tax receipts.
- Two passport photographs of each of the parties and one copy of each of the witnesses.
- Documents of the address of both parties and the witnesses.
- Route map of the property which will be rented.
Express terms of a tenancy agreement
Written tenancy agreement
Most of the tenancy agreements are written agreements between the landlord and the tenant. A written agreement specifies the terms and conditions of the tenancy in a written form and it must be signed by both the landlord and the tenant in the presence of two witnesses. A copy of the tenancy agreement must be given to the tenant and in cases of a joint tenancy, a copy of the tenancy agreement must be given to each tenant.
Verbal tenancy agreement
A verbal tenancy agreement is when there is just a verbal agreement between the tenant and the landlord. A verbal agreement decides the basic terms of the tenancy such as the amount of rent, term of the tenancy, etc. However, all the rights and obligations of the tenant and landlord must be implied and in accordance with the law due to the absence of any written agreement.
Various types of tenancy agreements in India
A rent agreement is a legally binding contract between the property owner and the tenant who wishes to occupy the property for a temporary period. The agreement contains details, such as the name of the property owner and the tenant, description of the property, amount of rent, late payment charges, grace period, amount of security deposits and other facilities to which the tenant is entitled.
A rent agreement is of a short duration that is, in India it is for 11 months. The registration of rent agreement is not mandatory however if the rental period exceeds 11 months it needs to be compulsorily registered under the Registration Act, 1908 or else it would not be admissible as evidence in the court of law.
A lease agreement is for a longer duration than a rent agreement. It is an agreement between the landlord and the tenant for a period longer than twelve months. When the landlord wants to avoid the changes in the sustainable income, they prefer to put the property on lease. A lease agreement must be stamped and registered so that it can be provided before a court of law.
The parties to a lease agreement are known as lessor and lessee. Unlike a rent agreement, a lease agreement can continue for a much longer period. Furthermore, a lease agreement also creates inheritable rights.
Leave and licence agreement
The leave and licence agreement is governed by the Indian Easement Act, 1882. In this agreement, the property of the licensor is occupied by the licence holder. The agreement grants permission to occupy the property and not rights to the licence holder. And the property owner that is the licensor always has an upper hand in the eviction of the occupier.
Important clauses of a tenancy agreement
Name of the parties
The tenancy agreement must state the names of the landlord and the tenant. The names mentioned in the agreement will be legally obligated to one another and in case of any breach in the agreement, one party can hold the other accountable.
Duration of tenancy
The tenancy agreement must specify the agreed-upon time for the tenant to occupy the property. After the expiry of the specified term of the tenancy, it can be renewed with the prescribed formality by mutual consent of both parties. It is crucial to mention the fixed time as it not only protects the landlord but also the tenant as the landlord cannot force the tenant to vacate the premises before the due date.
The amount of rent fixed for the specified period of tenancy must be mentioned in the tenancy agreement. The date of every month when it is payable and the mode of payment of the rent must also be mentioned in the agreement. This clause protects the parties from the unlawful holding of the money or payment of the money.
Cost of maintenance
Some tenancy agreements mention a clause for the cost of maintenance. Furthermore, apart from the cost of maintenance other expenses such as electricity bills, water bills, etc. must be stated under this clause.
A tenancy agreement often contains a clause for security deposit which can be refunded at the end of the stipulated tenancy period. And in case of any damages, the landlord can deduct the amount from your deposit in accordance with the terms mentioned in the tenancy agreement.
Amenities attached with the property
All the amenities attached to the property must be mentioned in the tenancy agreement. This must be done as a security to protect both the landlord and his property from any damages or financial settlement of any repairs during the tenancy period. This clause must also mention the latest condition of the property.
It is the most important part of the tenancy agreement. After reading and understanding the terms and conditions of the tenancy agreement both the landlord and the tenant need to sign the agreement in front of two witnesses. It assures that negligence in compliance with the agreement will lead to legal penalties by either party.
The exit clause states clearance of any other penalties or resolving any dispute between the landlord and the tenant before the termination of the tenancy agreement or before leaving the property.
A tenancy agreement helps in protecting both parties in case of any dispute or any breach caused by either party. It provides security to the property of the owner and also protects tenants from unlawful demands of the owner. A well-drafted tenancy agreement consists of all the essential clauses such as the name of the parties, duration of the tenancy, rental amount, security deposit, etc. Therefore, it is important to understand the tenancy before signing it and one must always seek legal advice in case of failure to understand a clause or in order to negotiate a clause in the tenancy agreement.
Sample tenancy agreement
This tenancy agreement is made on this__________(date of the tenancy agreement) by________________(name of the landlord). Son of_______________ (father’s name of the landlord), Address:_________________________________________________(residential address of the landlord). Hereinafter called the landlord, party of the first part.
_____________________________ (name of the tenant), son of_______________ (father’s name of the tenant), Address:_________________________________________(residential address of the tenant). Hereinafter called the tenant, party of the second part
The term landlord and the tenant shall mean and also include their legal heirs, successors, assigns, representatives, etc.
Whereas the first party is the owner and in the possession of the property No:………………………. (address of the rented property) and has agreed to let out the said property to the second party for a monthly rent of Rs. ………../- (in words) per month.
Now this rent agreement witness as under:
- That the tenant will have to pay Rs. ______/- (in words) as monthly rent, which does not include electricity and water charges.
- That the tenant shall not lease or rent the property to a subtenant under any circumstances without the consent of the landlord.
- That the tenant shall follow all the rules and regulations, by-laws set by the local authorities in respect of the leased property and will not get involved or do illegal activities in the leased property.
- That this tenancy agreement is granted for a period of eleven (11) months starting from ___________ (date of rent commencing from) and this contract can be extended further with the mutual consent of both the parties as per the current rental value in the market.
- That the tenant shall pay the water and electricity charges on the basis of the consumption to the landlord/owner.
- That the tenant shall not be permitted to do construction in the rented premises. Besides, he/she could do the installation of temporary decoration, wooden partition/cabin, air conditioners etc. without seeking the permission of the landlord.
- That the tenant is not allowed to make any changes in the rented property without the written consent of the owner.
- That the tenant will have to allow the landlord or his authorised agent to enter into rented premises for its inspection or general checking for any repair work if needed.
- That the tenant shall keep the premises clean and shall not involve in any activity that causes problems to neighbours.
- That the tenant shall himself/herself bear the cost of day to day minor repairs.
- That this contract/agreement could be revoked before the expiry of this tenancy period by serving one-month prior notice.
- That the tenant shall not involve in illegal activities and will not keep any offensive, dangerous or explosive articles on the premises.
- That the tenant shall pay one month’s rent in advance to the landlord that would be further adjusted in the monthly rent.
- That both the parties, landlord and the tenant, have read and understood this agreement and have agreed to sign the same without any pressure from any side.
In WITNESS WHEREOF the lessor/owner and the tenant/lessee have hereunto subscribed their hand at ______ (place) on this the _____________ (date of rent agreement) year first above mentioned in presence of the following witnesses.
___________ (name of the landlord) _________________ (name of the tenant)
(It must be noted that it is just a sample agreement for reference. Legally binding tenancy agreements are drafted and notarized by advocates focusing on specific needs of the tenant and the landlord.)
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