Things to remember before you sign a rent agreement

When Kshitij Nadekarfinalised the house he wanted to rent in Pune a year ago, he thought he would stay there for 2-3 years till he bought his own house. “The place was in a reasonably good condition and was very close to my office. So, I immediately signed the agreement with the landlord,” says the 37-year-old management executive. Nadekar had agreed to pay a monthly rent of Rs 5,000 and furnished Rs50,000 as deposit money. However, six months later, the landlord wanted to increase the rent by Rs 500 as the rentals in the area had gone up.
“I had two choices—pay the extra money or hunt for another house. My landlord told me that such an increase was the norm, and since nothing was mentioned in the lease agreement, I had little option but to pay the additional money,” he adds. Nadekar could have avoided this hassle if he had scrutinised the rent agreement carefully and made changes that could have served his interests better. However, most tenants are not even aware of the points that should be included in the rent agreement. Here are the things you should check while sifting through the contract.
Is the lessor the actual owner? Before you sign the agreement, be sure that the person you are transacting with is the actual owner of the property. Often, NRIs or investors hand over their property to caretakers, who may lease it to a third party without the knowledge of the owner. So, you should verify the title documents, such as the sale deed and share certificate, besides obtaining a no-objection certificate (NOC) from the housing society where you want to lease the property.
These papers will help ascertain that you are dealing with the right person. Utility bills also come in handy as they specify the name of the owner. “If the apartment is mortgaged, the original sale deed will be in the custody of the bank. In such a case, an NOC should be obtained from the bank. This will mention the rightful owner’s name,” advises Om Ahuja, chief executive officer, residential services, Jones Lang LaSalle India.
Shveta Jain, executive director, residential services, Cushman & Wakefield, says that tenants should be wary of arbitrary eviction if they deal with an unsolicited party. “A case of trespassing can be filed against such a tenant if he refuses to vacate within a given time frame. The tenant cannot challenge eviction in this case,” she adds.
Consider that the person who offers the property for rent, say, Mr. A, has slyly inserted a clause stating, ‘The tenant has verified the title papers of the property and confirmed and satisfied that Mr. A is the rightful owner of the property’.
If you fail to check the agreement and sign it, you could be held liable for trespassing. “Of course, if such a clause is not mentioned, the tenant can hold the other party responsible for cheating and committing fraud,” adds Ahuja.
What does the rent agreement contain? A rent agreement includes the terms and conditions under which the property is given on rent. It specifies the rent value and the tenure for which the agreement is made, as well as the security amount that needs to be deposited with the landlord by the tenant.
The agreement should also clearly mention the day before which the rent is expected to be paid. For instance, it could be the 5th or 10th of every month. If the tenant fails to pay the rent before the predetermined period, the penal charges that he would be liable to pay should also be defined in the agreement. The rent agreement could also mention the facilities, such as parking space or the usage of society’s gym, included with the property.
There could also be additional monthly charges, such as the society maintenance charge and club fee. It’s best if the additional charges for using such facilities are clearly spelt out, along with the person who is supposed to bear them. If either party fails to honour the terms and conditions of the agreement, it will become void and the aggrieved party could claim penal charges. The tenure of a rent agreement is usually 11 months, unless otherwise specified in the contract. If it’s for more than a year, it’s mandatory for the owner to get the document registered. The agreement should also specify the notice period and penalty for cancelling the agreement without completing the specified period. Typically, a two-month notice is served in case of high rental properties, while one month’s notice is sufficient for low rental ones. What should you check? A tenant should verify whether the owner has included a rent escalation clause in the lease agreement, which could be used to increase the rent after a couple of months.
“The best way to safeguard yourself is to ensure that the agreement specifies the dates on which the rent escalation will be applicable and the percentage of increase,” says Ahuja. You should also make sure that there is a clause on the sale of the house. If the owner decides to sell the house during the term of the rent agreement, you should know how many months you will get to search for another suitable accommodation. It’s also important to check that all the appliances and the connections in the house are working properly before you sign the agreement.
Usually, minor repair work for installed electrical appliances is the responsibility of the tenant and he has to pay for them. However, if the property is damaged because of negligence on your part, the landlord can rightfully use the security money deposited with him for carrying out the necessary renovation. You also have the right to see the documents that prove all previous bills related to the house have been paid, especially the electricity, water and gas bills. While you are at it, make sure to peruse the papers that state the property tax has been paid by the landlord.
To avoid tenant problems, don’t just trust… Verify them.
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