In this article, Trishtha Sharma pursuing M.A, in Business Law from NUJS, Kolkata discusses Key things to negotiate in a rental agreement.
Negotiate Rent Agreement Effectively
An agreement is a contract between the buyer and the seller or the landlord and the tenant, which on execution, becomes binding on both parties. Thus, it is of utmost importance that before entering into a contract, we look into the terms therein and negotiate up front as opposed to sign blindly and then face the prospect litigation. It has to be noted here that most contracts of such nature are drafted by lawyers representing the parties, who generally ensure that respective interests are well taken care of. However, it is still, and perhaps because of it, that it is important to negotiate the terms as ignorance of law or to say that the terms were neither read nor understood before the execution of the contract cannot be an excuse in law.
It goes without saying that approaching the issue in a rational manner is the best possible thing to be done and for the sake of simplicity, if not anything else, I have broken down the entire process in the following manner.
Identify the Property (based on your needs)
Before one decides to buy/rent a property there are some basic needs one should identify. Our needs differ from one another, depending on income, situation, family type, purpose for which the property is being sought to be bought/rented etc. There are some basic needs that are similar to all of us look for properties as well. For example, safety, food, the “quality” of the area etc. Since renting and buying are different so the points to be checked out in advance will be different as well. Knowing the WHAT & the WHEN are important for a successful search, one has to start, pre-armed with the knowledge of the need upfront.
Learn about the Macro Economic Factors
Macroeconomic factors play an important role in the determination of the price and the rental associated with any given property. When the economy is on the overdrive, for example, with surging stock market indices and an overall glut of money in the system, property prices and rental will naturally go up. Similar will be the case in a recession. Any smart investor should, therefore, keep in mind the overall economic conditions before entering into a negotiation. Even try to time out the purchase so as to derive the maximum benefit from the transaction. This becomes even more important as rental agreements are generally long term in nature and it makes little sense to jump into them at the height of a bull run.
Idea about Rent of Similar Properties
One should always do one’s homework. Before one finds a flat on rent it is important to check the market, especially what else is available within the resources one has in command. There are several kinds of similar properties that are normally available so it is always advisable to roam around a bit. Check the reference points. It is important to get as many relevant facts as possible. Check for similar deals offline and online. It is one’s responsibility to be aware of what the other tenants are paying. Always keep the options open. Before one finalises anything one should make sure and do the necessary research. Many a time one can opt for bigger flats, advantages of better security and swimming pool at the same price, only if one looks.
Landlord’s Rules
One should know who one is talking to – a background check of the landlord/seller is an absolute must. Perhaps the landlord has a history of defrauding his tenants? Perhaps he has a reputation of being a very hard bargainer? One has to do the homework as it is almost a rule that one has to respect the landlord’s rules. Listen to him and agree to whatever he has in store. In case one doesn’t agree with him one has to sweeten the deal. A sweet no won’t matter or cause danger. One might add on some terms and conditions in a manner that doesn’t harm the landlord and his policies. There are different types of landlords. Prior knowledge about them and their policies is always a big differentiator.
Negotiate “Just & Equitable”
Negotiating is not an easy task. Getting one’s part of a deal based on mutual understanding is always difficult. But obviously the landlord won’t agree to everything one day and one has to be prepared for a long drawn out give and take in which both the parties finally find a common high ground of acceptance. Here too, the main point that often comes out as the key is the dictum of just and equitable. If one makes it the basis of the negotiation and is able to convince the other party about one’s own intent, things normally fall in place. However, if one of the parties is prima-facie seen to be at a variance to the dictum, things become difficult and except in exceptional cases, such negotiations should not be continued as either way, it will only lead to the sleeping with the enemy.
Non-Monetised Benefits
Rent is not the only thing that should be the point of a negotiation. It is certainly the central issue of the negotiation but often, when parties get too bogged down dealing with it, one can ask for and get a variety of benefits/concessions that are non-monetary in nature. One should always keep one’s eyes and ears open while at the negotiating table so that such opportunities are not only spotted but also availed of.
Don’t be Greedy
Now for the cardinal rule. Don’t be greedy. Greed often turns out to be the proverbial last straw which leads to the breakdown in the negotiations, which would otherwise have reached their fruition. Each one has a breaking point at which they snap and all parties will do well to keep this in mind while they are on the negotiating table. The idea is not to push so far, or so hard that the very process of the negotiation snaps. And, in most cases, such a point of no return is arrived at by the greed of one of the parties, which should, therefore, be kept in mind during the process. Don’t lose the woods for the tree.
Look for Long Term Input.
Getting an agreement going is a tedious, even expensive process. Thus, it goes without saying that the longer that agreement remains in force, the better it is for both the parties. From another angle, as these contracts are meant to remain effective for a reasonably long period of time it makes sense to make them as inclusive as possible and have as many potential issues addressed up front as possible. This will not only obviate the need for legal interventions but are also required for the sake of mental peace. As a matter of fact, it is always advisable that one retains the service of a legal expert who is well versed with such contracts so as to keep all the provisions addressed and ensure that there is the least amount of schism between the parties. Talking of long term, the agreement should also look beyond the normal tenure and address issues of renewal and other concerns which too will crop up sooner than the later.
Sign on the Dotted Lines
A contract is only as good as the sign and the seal on it, they say. An agreement between the owner and the seller, the landlord and the tenant too will only become legally binding when all the parties to it sign and deliver the same. However, before one signs on the dotted line, one must always read (and read here means reading between the lines as well as reading the fine print) for the term that is used in the context is that of reading and understanding. Once signed it is taken that the documents were “read and understood” and therefore become binding with all the legal sanctity that such acts accord. Therefore, the signing on the dotted line is the logical conclusion of the negotiation process, which ends with the establishment of the contract between the parties – a contract that is not only binding but also actionable. Naturally, it goes without saying that before the pen is put on the paper all necessary diligence about the terms and conditions contained therein are properly vetted and that all the commercial aspects that such an agreement will give rise to are focussed on properly.
Negotiation for the rent or the purchase of a property, in which one party either allows the other to use his / her property for valuable consideration or transfers the ownership for money is particularly tricky. Thus caution in every stage is of utmost importance.
