In India, the governing law for the control of rent, protection of rights of landlords and the rights of tenants are governed by the Rent Control Act.
A central Rent Control Act was passed by the legislature in 1948. It regulates the rules of letting out a property and ensures that neither the landlords nor the tenants’ rights are exploited by the other. It should also be noted that currently, each state has its own Rent Control Act, though largely similar to each other, they carry some minor differences.
Due to the 1948 Act being extremely stringent and pro-tenant, the real estate market has had difficulty in growing in some areas. There are some properties that have been let out that are still paying the same amount of rent since 1948, disregarding inflation and increased property valuations.
In 1992 the Central Government tried to bring about amendments to the Act via a proposed model to ensure that the property is not devalued. Unfortunately, the changes were opposed by the sitting tenants and therefore failed to take effect.
In India, renting or letting out of any property for residential or commercial purposes is subjected to various rules and regulations, such as: – Under the law, it is a must to have a written agreement between the two parties enumerating all the terms and conditions of tenancy.
An agreement reached without being expressly put in writing will not be a valid contract in the following cases:
Therefore, it is always prudent to enlist the help of a legal practitioner in the making of such an agreement as many complexities entail, especially for commercial leasing.
The Rent Control Act is established not only to protect the landlord and their property but also to protect the tenant. Under the Act, the few important rights that are given to the tenant are:
The point of interest in a rental agreement is always the property, and the property has to be protected from unfair exploitation. The Rent Control Act entitles the landlord with the following rights:
There are certain cases where the Rent Control Act is not applicable when the property has been let out. They are:
The real estate industry in India faces cut-throat competition from within, and hence rent agreements have to be worked upon smartly. You need to know the right questions to ask and all the laws that are best suited for your business.
1. Title Ownership Validation
Always ensure that you have complete details of the ownership of the property and hence access to the title deed is a must to authenticate the rent. Investigate further to confirm there is no sub-rent or any other form of rent associated with the property before getting into an agreement with the landlord.
2. Sanctioned Plans and Power Of Attorney (PoA)
If the property you are renting is a building under construction, it is always advisable to verify the title deed and commencement certificate issued by the relevant authorities. For renting commercial space in a built-up property, ensure that you check the occupation certificate. It is also important to check and confirm if there is any form of power of attorney involved in the case of indirect rent.
3. Appropriate Renting Agreement
Before entering into any form of mutual commitment with the landlord, ensure that the renting agreement is appropriated based on operations. Be specific about the nature of the rent, whether it is a rental lease agreement or a co-working office space agreement.
4. Income Tax & Mortgage Verification
It is always advisable to verify the income tax background of the landlord in case of a commercial agreement to check if there are any pending disputes or illegal proceedings. This will also confirm to you if the said property is categorized under the Income Tax Act of 1961 as ‘commercial’ or ‘residential’ under the Development Control Regulations. If there is any ambiguity in this categorization you maybe levied a TDS in the future.
5. Background Check of the Property Agent
It is also important to run a background check on the real estate agent before engaging his services. Information on the agents can be assessed through past rent agreements or by word of mouth too. Insist on the agents sharing details of past clients handled by them. Their inhibition in doing so can be a clear indicator of fraudulent activities if any, from the past.
6. Validity of Rent Agreement
In addition to other clauses, a business leasing agreement must have the following fundamental information:
The completed document must be provided to all parties, which may also include the guarantor. Each party should be given the opportunity and may need some time to read the agreement to fix this given the length of the document.
1. The Commercial Rental Agreement would require to be printed on ‘non-judicial stamp paper’ or ‘e-stamp paper,’ which is accessible in each state. The value of the stamp paper would be contingent on the state in which it is implemented and the ‘duration’ of the Rent.
2. Both parties should sign the Rental Agreement after printing the document on stamp paper or e-stamp paper, as applicable. Moreover, each party should hold a copy of the Commercial Rental Agreement.
3. If the rental period is more than 11 months, then the Commercial Rental agreement would require to be registered. Both the lessor and lessee must go to the sub-registrar’s office for the objectives of registration.
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