Update Date : 19-Dec-2024

Created Date : 16-Mar-2024

Reference : The Economic Times

When a house is rented out, the landlord and the tenant sign a rent agreement. The agreement should clearly spell out the duties and responsibilities of the landlord and the tenant. Both parties will try to add clauses in the rent agreement to protect their interests. However, it may not be possible for the landlord and the tenant to add all the clauses that they want in their favour. However, certain clauses should be added to ensure that both parties' interests are protected and future disagreements are minimized.
 
Manmeet Kaur, Partner, Karanjawala & Co., says, "A rent agreement sets out the rights and duties of a tenant and a landlord. A rent agreement should contain all the essential clauses or details to avoid any disputes or ambiguity."
 
To avoid any future disagreements, here is how a landlord and tenant can get a rent agreement made while protecting their respective interests:
 
 
CLAUSES IN RENT AGREEMENT TO PROTECT LANDLORD

A landlord should ensure that the following clauses are added to the rent agreement.

1. Obligation to pay rent and utility charges on time: The rent agreement should mention the obligation of the tenant to pay rent and utility charges on time. Mani Gupta, Partner, Sarthak Associates and Solicitors, says, "The rent agreement should mention the consequences of default in paying rent and utility charges. This includes the landlord's ability to take the money from the security deposit or otherwise."
 
2. Defined use of property: The rent agreement should specify the terms and conditions for the usage of the property. Gupta says, "The landlord should mention in the agreement the prohibition on any improvements or renovations of a permanent nature to the property. Otherwise, the municipal authorities may take action against the owner. The landlord can ask for periodic right of inspection to ensure that no permanent renovations have been made in the rented property."
 
 
CLAUSES IN RENT AGREEMENT TO PROTECT TENANT

Tenants should also ensure that a rent agreement has certain clauses that protect them.

1. Financial obligations of the landlord: The landlord can add timely payment of rent and other utility charges as conditions in the rent agreement. Gupta says, "Similarly, the tenant should ensure that the financial obligations of the landlord are clearly specified in the rent agreement. This includes payment of property taxes, payment of house insurance, etc."

Kaur says, "The rent agreement should have an undertaking from the landlord that such charges have been paid off or that the landlord will be liable for paying all charges for the property including charges for electricity, water, and maintenance before the agreement comes into effect."

 
2. Security Deposit: Gupta says, "The tenant should ensure that on termination or expiry of rent agreement, how the refund of the security deposit will happen." Usually, the amount of security deposit is prescribed in the rent agreement. Kaur says, "Conditions under which the security deposit can be withheld or the timeline for return of deposit upon termination of the lease are often not provided. Such clauses may be added to ensure security cannot be withheld arbitrarily."
 
3. For furnished apartments: These days, landlords may offer semi-furnished or fully furnished apartments. It is important that a complete list and photographs of utilities or fixtures being provided by the landlord are made part of the agreement.
 
Kaur says, "This will reduce the possibility of a dispute regarding the number and condition of the utilities at the end of the lease period and consequent disagreement over deduction or withholding of security deposit for this reason. The rent agreement should provide that the utilities and fixtures being provided by the landlord are in working condition. It should also state that the tenant will only be liable for substantial loss or damage and not for normal wear and tear of such utilities and fixtures."
 
4. Renewal and increase in rent: The agreement must outline the procedure for renewal of the lease and specify the increase in rent amount. Kaur says, "Lease Agreement with respect to unspecified increases of rent clause may allow a landlord to increase the rent disproportionately."
 
5. Deduction of expenses from rent: Suresh Palav, Partner, IndiaLaw LLP, says, "Tenants must get a clause added in the rent agreement that if the landlord neglects any repair work, the cost borne by the tenant in getting the repair done will be deducted from rent."
 
6. Peaceful possession and usage of property: The tenant must ensure that the rent agreement mentions that he/she will be allowed peaceful possession of the house during the period.
 
 
RENT AGREEMENT CLAUSES THAT HELP BOTH LANDLORD, TENANTS

The following clauses in the rent agreement can help both the landlord and tenants avoid future disagreements during the lease period as well as at the time of termination/expiry of the rent agreement.

1. Tenure of the lease: The tenure of the lease must be clearly specified in the rent agreement.
 
2. Termination of rent agreement: The rent agreement must clearly mention the conditions under which the agreement can be terminated. The landlord and the tenant should mutually agree on the circumstances that can lead to the termination of the agreement. Further, Kaur says, "The agreement must clearly specify the notice period required for termination of lease. It must be ensured that the period is the same for both the landlord and the tenant."
 
3. Dispute resolution: The tenant and landlord should add a clause mentioning alternative dispute resolution mechanisms, including mediation and arbitration.
Gupta says, "Both the landlord and tenant must add a robust and quick mechanism for dispute resolution."

Kaur says, "Such a clause may also provide the place where such resolution of dispute must take place to ensure that the same is convenient for both the landlord and tenant."

 
WHAT A GOOD RENT AGREEMENT SHOULD HAVE

The rent agreement between the landlord and tenant must be a good agreement. Palav says, "A good agreement should accord a balance of rights between both the landlord and the tenant which simultaneously protects the right of the landlord to recover his possession and also the right of the tenant for a fair rent and recovery of his deposit."

A good rent agreement ideally should be based more on a mediation-oriented approach than a litigative approach, says Prashanth Shivadass, Partner, Shivadass & Shivadass Law Chambers. "Although the Supreme Court has said that tenancy agreements can be arbitrated, we still see many landlords and tenants unable to resolve disputes in a non-adversarial manner which end up putting pressure on the courts with cases," he adds.
 
Gupta from Sarthak Associates and Solicitors says, "A good rent agreement should be executed on a stamp paper of adequate value and registered, especially if the lease is for greater than 11 months or if the parties so desire. The key terms that a model agreement would cover include identification of the leased portion, rent and other charges payable for the lease, security deposit and conditions of return, the purpose for which the property is to be used, duration of the lease, conditions of termination and handing over, and dispute resolution."

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