Thursday, February 2
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Tenancy Agreement- Types & Its Legalities in India

Introduction

 “Tenancy Agreement” refers to an official document that states terms and conditions which are agreed upon by the landlord and the tenant. The said terms and conditions govern the lease or rent partnership that has been, hence are enforceable by law. 

Generally, there are three types of Tenancy Agreements, namely, Rent Agreement, Lease Agreement, and Leave and License agreement. Let’s delve into different types of Tenancy Agreements:

  1. Rent Agreement: It is a legal contract which is entered between an owner of a property and a tenant who wants to take temporary possession of a specified property. The agreement contains various details, such as the name of the property owner and the tenant, description of the property, amount of rent to be paid by the tenant, grace period for delayed payments, security deposits to be paid, amenities provided, maintenance and property insurance, among others. The rent agreements are generally for 11 months in India
  • As per the Sub-clause (d) of clause (1) of Section 17 of The Registration Act, 1908, a Rent Agreement is required to be mandatorily registered, in case the duration of the said Agreement is more than 12 months. Where the duration of the Rent Agreement is below 12 months, there is no need to register the agreement. In such a case, the agreement is drafted and signed on the Stamp paper which stands valid as per law.
  •  Rent control laws differ from state to state, depending upon where the property is situated.

 

  1. Lease Agreement: As per the Section 105 of the Transfer of Property Act, 1882, the lease is defined as a transfer in which the lessor grants the lessee a right to enjoy the property for a certain period which may extend to perpetuity for a consideration to be paid periodically or on specific occasions. 

Essential Requirements: –

  1. There should be transfer of the right to make use of a property by the lessor to the lessee. 
  2. The arrangement between the lessor and the lessee has to be for a specific time period or for perpetuity. 
  3. The lessor has to receive a monthly rent in exchange for transferring his right to enjoy his property. 
  • Generally, in commercial transactions, a high-value property is involved, thus, Leasing is more prevalent in the commercial real estate segment. Lease Deeds need to be stamped and registered if the period is more than 11 months and are not easy to terminate.
  1. Leave and License Agreement: As per the Section 52 of the Indian Easement Act of 1882, a License is a mode by which the owner grants the right to another to do something upon the immovable property which in absence of such authority would be illegal.  The right so granted is not an easement or any interest in the immovable property.
  • The duration of the Leave and License Agreements are generally for 11 months to avoid stamp duty.

Read More: Landlord tenant disputes in India

Conclusion:

There are three types of Tenancy Agreements prevalent in India that people can choose from depending upon their preferences and legal obligations involved.  We hope this article will help our viewers to make an informed decision. 

Summary:

  • Various types of Tenancy Agreements are made on the basis of time, rights given, and legal requirements, etc.
  • Rent Agreement is a written contract which is executed between the owner of a property and a tenant, who wants to take temporary possession, defining terms and conditions which will govern the Landlord-tenant relationship.
  • Lease Agreement is generally a formal contract involving high-valued commercial real estate property, the term of such agreement can even extend to perpetuity.
  • Leave and License Agreement is an agreement in which a right is granted to use the property without transferring the possession, it is generally for 11 months period to avoid registration.