A lease agreement does not just document the rules that the landlords and tenants agree to follow in their rental relationship, it works as your address proof and also comes handy in case of any disputes. Make sure that you have not missed out any crucial point.
By Sangeeta Sinha
Whether you need to rent a place or you need to rent out your place, in both scenarios you need to be sure about the terms. So don’t forget to sign the lease agreement.
A lease or rental agreement sets out the rules landlords and tenants agree to follow in their rental relationship. There is no set format for it; it could be handwritten or printed, one page or multiple pages but it should cover the all the basic points of tenancy.
A LEASE AGREEMENT MUST INCLUDE THE FOLLOWING:
1. Name – The names of both the landlord and the tenant should be mentioned in the agreement.
2. Duration – Duration of the lease must be specified.
3. Rent – The agreement should specify the amount of rent, payment mode and date.
OTHER IMPORTANT POINTS
A lease agreement can have terms and conditions mutually agreeable to both the landlord and the tenant. The parties can mutually insert terms and conditions as may be desired by either of the parties to protect their own interest and to prevent them from any future misunderstanding that could potentially lead to disputes, financial losses or litigation.
Repair cost - There should be clarity as to who would be responsible for the expenses incurred during the significant repair work carried out inside the property during the period of the tenant’s stay. This often leads to lot of conflict between the two parties. There could be a clause saying that the tenant will have to return the property to the landlord in the same condition in which the tenant first received it.
Rent Increase - The lease agreement must specifically mention the rent increase clause which would restrict the landlord to increase the rent vaguely; this is in the interest of the tenant. As per the rental legislations, the standard increase in the rent may be 10 per cent every three years or as mutually agreed between the landlord and the tenant. There has to be a notice period mentioned in the agreement which both the landlord as well as the tenant need to follow.
Termination clause - It is essential to specify the termination clause in the lease agreement. The agreement has to clearly specify the circumstances under which the agreement can be terminated. Along with the termination clause it is vital to specify the notice period and the manner in which the termination notice shall be served and the duration of the notice period.
Sub-letting clause - This clause prohibits the tenant from sub-letting the property to a third person. The parties can mutually agree to add this clause.
Security Deposit - The amount that needs to be deposited with the landlord by the tenant as security must be mentioned. The amount of the security deposit is refundable at the time of the termination of the lease agreement. Upon mutually agreed terms and specifying the same in the agreement, the tenant may incur an interest on the deposit in the possession of the landlord.
Other facilities – The terms for usage of other facilities like parking, gym, club house etc. and also if any extra maintenance charges have to be paid should be clearly mentioned. Any other points like restriction on pets etc. may also be mentioned in the agreement.
Lock-in period means neither the landlord nor the tenant can terminate the agreement before the expiry of a certain period. It works for both the parties. The landlord is assured of fixed income for a definite period and the tenant can also have a peaceful possession for a definite time.
There are two kinds of agreements – a lease agreement and a license agreement.
|Lease Agreement||Leave and License Agreement|
|The lessee generally gets interest in the property.||The licensee does not get any interest in the property.|
|Lease is an inheritable right.||License is not an inheritable right. It is personal and exclusive to the licensee and on death it automatically comes to an end.|
|Lease holder/lessee can sub-let the premises to a third party, unless the rental agreement has a clause, not allowing such practice.||A licensee cannot give the premises on rent to a third party under any circumstances|
|Lease agreement is not easily terminable and the same requires notice of termination.||A license agreement is easier to terminate and the same can be done without serving the notice.|
|A lease agreement for 12 months or more has to be registered||In many states a license agreement needs no registration|