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The rental housing market has evolved over the years with new registration procedures that help to protect landlords against the risk of tenants violating terms and conditions of the rental agreement.
The first step for the landlord is to identify the prevailing rental rates in the micro-market where the property is located. It is important to understand how much rent you can expect from the asset. We should market our property through advertisements in local papers, online advertisements, property agents, etc. We should make sure that our house is free from any major repairs and leakage problems and should not hesitate in providing basic amenities.
Documentation required for renting out an apartment
Landlords should also have all the necessary documents to ensure that their property remains in safe hands. Tenants, on the other hand, should check the title documents, to make sure that the person renting out the house is the owner of the house. If the place that is being rented out is a part of a cooperative society or colony, then, the share certificates also need to check. A no-objection certificate which specifies the conditions, on which the house would be rented, may also be needed. Documents, like PAN card, Aadhar Card, etc., should be kept as these are used as ID proofs.
Type of rent agreements
The landlord should always take a security deposit from the tenant, which is between one to six months’ to make sure that they have a backup if the tenant does not pay the rent. A rent agreement is a legal document that binds the landlord and the tenant to comply with the conditions is then made. The agreement should be drafted after consultation with a lawyer, to avoid any future issues. The landlord should carefully select the type of agreement that needs to be drafted by the tenant. It can either be a ‘tenancy agreement’ or a ‘leave and license’ agreement. In states where the Rent Control Act is prevalent, such as Maharashtra, Gujarat, etc., landlords prefer a leave and license agreement, as it curbs the rights and liabilities of tenants.
Registration of the agreement
The agreement should be registered and stamp duty paid. In Maharashtra, the stamp duty on a leave and license agreement is 0.25% of the entire rent amount, whereas, for a lease agreement, it is like a sale deed (5% of the entire rent amount). The agreement should include details about the rental fee and the possibility of the rental increase, security deposit details including its refund, maintenance charges, repairs and details on who bears the associated costs. Also, the responsibility of utility charges, such as electricity and gas, must also be mentioned, in addition to the termination clause and notice period before termination.
Tenure of rental lease
Normally the rental tenure is of 11 months which is ideal for smooth transactions. Leave and license agreements should not be for more than 3 years. Some agreements have a lock-in clause, which states that a tenant cannot leave the rented property or terminate the agreement for a specified period. If the tenant leaves the rented property, he/she would be required to continue to pay the rent until the lock-in period is over. To deal with these situations the landlord should safeguard himself by a clause where he has the right to give a notice to the tenant to evacuate the place.
Things that landlords should consider while renting his/her house:
• Always do a background check of the tenant, his family, marital status, profession and workplace.
• Try to verify the tenant’s income and check if they are liable to anyone.
• After the agreement is ready, police verification should be done, which requires both the parties to be present.