In India, what are the types of tenancy agreements?

When a property is rented out, a Tenancy Agreement is necessary to spell out the terms and conditions agreed upon by both parties and to define the details of the landlord-tenant relationship. In the event of a disagreement, if the document is not performed properly, it can become a source of contention.

 


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A tenancy agreement is a legal document that spells out the terms & conditions of a lease and rent partnership between two people. A tenant is a person who is permitted to inhabit a property under the terms of a rental agreement (Tenancy Agreement). When it comes to renting and leasing a home, though, there are several distinct sorts of agreements. While the Rent Control Act governs a rental arrangement, the Indian Easement Act governs a Leave and License agreement. Landowners should be aware that if a tenant poses a threat to society as a whole and there is no Tenancy Agreement in place, the landowner may be held liable. A closer look at each document exposes its peculiarities and significance.

 

In India, there are various types of tenancy agreements.

The name of the property owner, the renter, the terms of the agreement and the amount of rent to be paid throughout the duration of tenancy are all included in a rental agreement. In India, there are three different forms of tenancy agreements.

  • Rent agreement
  • Lease agreement
  • Leave and License agreement

 

A rent agreement

A rent agreement is a legal contract between a property owner and a potential renter who wishes to rent a certain property for a set period of time. The agreement includes information such as the property owner’s and tenant’s names, a description of the property, the agreed-upon rent amount, late payment charges, grace period, security deposit amount, facilities that the tenant is entitled to use or not, parking provision and right, repairs and maintenance, and property insurance, among other things.

In India, rent agreements are usually for a shorter period of time, usually 11 months. A rent agreement is a succinct document that allows both parties to reach an amicable arrangement. A rent agreement might be registered or not. The registration, on the other hand, should not be confused with notarization, which is merely an attestation of the document and not legally binding.

“Rent agreement is vital because in case of breach, the parties can rely on the terms of agreement and it can approach the court to receive the necessary remedies,” says Rajesh Rai, Managing Partner, RR Legal Partners LLP & Advocate, and Supreme Court of India. A tenancy arrangement must be for at least 11 months. However, if the agreement is for more than 11 months, it must be registered otherwise it will not be admitted as evidence in a court of law. The Transfer of Property Act, Specific Relief Act, Evidence Act, and Registration Act are all key legislation that governs the tenancy arrangement.”

 

Lease Agreement

In the case of a prolonged period of occupancy, a lease agreement is usually required. Landlords that want to reduce long-term income volatility prefer to lease their homes. The lease agreement is a contract between the landlord and the tenant that grants the tenant the right to use the property for the specified period of time (generally more than 12 months). Unlike a rent agreement, a lease agreement often binds the landlord and the renter for the agreed-upon duration. Some leases have a 99-year term. A lease also creates an interest in the property, is transferable, & creates rights that can be passed down the generations.

The lease agreement assures that the lessee does not evict the premises unless it is specifically indicated in the agreement. A legal notice might also be served on the lessee. To be valid in a court of law, a lease deed must be stamped and registered (in case of disputes).

One of the downsides of leasing agreements is that if the market value of the property improves over the agreed-upon lease time, the lessor may lose out on incremental income.

“Sometimes the landlord finds it difficult to complete the lease deed because his dwelling is in one area of the country and the leased premises are in another.” In this case, they can execute a Power of Attorney (PoA) in the name of a friend who lives near the property and can receive the rent on his behalf. The person who receives the rent is the landlord, according to tenancy law.

 

What’s the Difference Between a Lease and a Leave and License Agreement?

Parameters

Lease Agreement   

Leave and License Agreement

Transferable 

Yes

No

Inheritable

Yes

No

Creates transfer of an interest in favour of the tenant

Yes

No

Affected by the sale of property

No

Yes

Compulsion to mention rent amount

Yes

No

Compulsion to serve a notice of termination

Yes

No

Permission of subletting

Yes

No

Revocable by the landlord

No

Yes

Power of Attorney

Yes

Yes

 

 

Agreement on Leave and License

The Leave and License Agreement is governed by the Indian Easement Act 1882, and it is different from lease & rent arrangements. Leave and License Agreement is a document by which the property of the Licensor is occupied by the license holder. However, the property is granted under the terms of a Leave and License agreement rather than a tenancy arrangement, therefore the property right would be invalid without it.

In comparison to a lease agreement, such an arrangement makes eviction of the occupier easier. These agreements always offer a ‘permission’ to occupy a premise and never the rights. It does not form a traditional landlord-tenant relationship, and also the property owner always has the upper hand when it comes to evicting the occupier.

This contract differs from a lease agreement in that the latter generates a transferable interest (right) in the property, but a Leave and License Agreement does not. A lease also gives rise to inheritable rights, whereas a license does not. A lease establishes exclusive rights to the property in question, whereas a Leave & License Agreement allows permission to inhabit it. Furthermore, unlike leasing agreements, these agreements are revocable.

To summarise, the agreements must clearly state the preferences, expectations, and obligations of both the landlord and the tenant in order to avoid legal wrangling later on.

 

 

 

 

 

 

 


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