When taking a house on rent, it is important that you read the rental agreement carefully before you sign on the dotted line. Not only do you have to read the rental agreement carefully, but you also have to make sure that vital clauses are included that will protect your rights as a tenant. Here is a look at 11 key clauses that should be covered in the rent agreement.

REFUND OF SECURITY DEPOSIT

The sum of the security deposit differs from city to city. In metros, the amount is more than in tier-II cities. Although refundable, often disputes occur on the payment of the security deposit. "The rent agreement should clearly set out that the security deposit, if any, paid by the tenant should be refunded by the landlord on termination or expiry of the license," says Arnav Nagalia, counsel, Trilegal.

You may ask for a separate payment receipt of the security deposit with details of cheque number, date and signature of the owner, says Soumee Bhatt, general counsel, bankbazaar.com.

PENALTY FOR DELAY IN REFUND OF SECURITY DEPOSIT

Getting a refundable security deposit out of the landlord's pocket is any tenant's nightmare. In the rent agreement, it should be clearly mentioned that if the owner fails to refund the security deposit, then the tenant can retain possession of the flat without paying any rent, says real estate expert, Nitin Bhatia.

Nagalia adds that the rental agreement may provide for, firstly, the payment of interest by the landlord to the tenant if the security deposit is not refunded by the landlord in time. He adds that another clause should be added that the tenant is within his right to set off the rent against the security deposit for the last month of the term. Usually, a tenant gets his refund as soon as he vacates the premises, but many landlords intentionally dilly-dally in returning the lump sum to the tenant. "A necessary clause should be included in the agreement to ensure that the security deposit is refunded immediately upon termination of the agreement and handing over possession of the premises back to the landlord," says Mitali Naik, Associate Partner, DSK Legal.

TIMELINE TO PAY RENT

One should always mention in the rent agreement whether the rent will be paid in advance or after the month is over. "One of my clients vacated the flat and the owner demanded the rent for the last month. My client was under the impression that he was paying advance rent as he had paid a month's rent before shifting to the new house. Finally, after so much hassle and pulling out all bank statements, he proved that rent was paid in advance," says Bhatia. Hence, it is important to state in the agreement that rent will be paid on or before a certain date every month.
 

FLEXIBLE TERMINATION RIGHTS

Ideally, there should be no lock-in period in the rent agreement and the tenant should be able to vacate the premises after serving a one-month notice. However, landlords typically impose a lock-in period during which the licensee's or tenant's ability to terminate the agreement is restricted. "It is worth considering carving out breach by the landlord and extenuating circumstances such as damage to the property making it uninhabitable, force majeure events such as the pandemic, etc. as exceptions to the lock-in period," says Nagalia. In the event the tenant is desirous of occupying the premises for a longer period, he should demand a longer lock-in period, says Naik.
 

ASSERTION OF THE OWNER HAVING THE TITLE OF THE PROPERTY

It is critical for the tenant to ensure that the landlord is the true owner of the property. "The tenant should ensure that the ownership and possession of the premises are with the landlord," says Naik. "The rent agreement should also contain a representation from the landlord that he is the owner of the premises, and that the premises are free from encumbrances and litigation," adds Nagalia.

MAINTENANCE AND NON-MAINTENANCE CHARGES

Another area that could emerge as a bone of contention between the landlord and the tenant is the inclusion of maintenance and non-maintenance charges in the rent agreement. "It should be settled between the two parties as to who will bear the monthly maintenance but for non-maintenance charges, such as in the case of apartment associations who keep charging additional amounts for corpus fund, sinking fund, painting of apartment etc, these should be borne by the owner of the property as they don't fall under the purview of maintenance charges," says Bhatia. Reason: payment under these heads adds long-term value to the property. Thus, it should be clearly mentioned that non-maintenance charges will fall into the kitty of the landlord.

Nagalia suggests that another line should also be included that the landlord is responsible for settling the utility bills, maintenance charges and any other dues incurred with respect to the property prior to the commencement of the license. "If the tenant pays any of these amounts, he should be able to adjust subsequent rent payments against such amounts," he adds.
 

GOVERNMENT TAXES AND OTHER LEVIES

Often a dispute emerges between the landlord and tenant on payment of sundry government taxes. "The rent agreement should provide that the property taxes and other such taxes, cesses, and amounts payable in respect of the premises should be the responsibility of the landlord," says Nagalia. (It should be clearly mentioned in the agreement as to which taxes and levies have to be borne by which party, including property tax, municipality tax, sewer and drainage charges and water bills, among other charges.)

LIST OF FITTINGS AND FIXTURES; WEAR AND TEAR OF PROPERTY

A clause should be inserted in the rent agreement stating that fittings and fixtures provided by the owner should be in working condition. "With the aging of property, natural wear and tear are obvious. Include a clause that the tenant is only liable to bear the cost for damages which are not part of natural, reasonable and normal wear and tear of the property," says Bhatia

He warns that in many cases owners include a clause to deduct the cost of painting the flat from the security deposit. "The terms and conditions should be clarified and mentioned in the rent agreement," he adds.
 

TERMS FOR RENEWAL AND BROKERAGE

To avoid any dispute in the future, there should be a clause in the rent agreement regarding the renewal of the agreement if both parties mutually agree. "This clause should be about the percentage increase in rent, deposit among other things in the event the tenure is renewed," says Bhatia. On the issue of brokerage, a tenant should insert a clause that the brokerage would be one-time. "Many brokers insist on getting brokerage at the time of renewal of the contract. This issue should be discussed with the landlord," says Bhatia.

PROTECTION AGAINST THE SALE OF THE PROPERTY BY THE LANDLORD

There have been cases where landlords sell off their properties while tenants are still occupying the premises. This leads to undue hassle for a tenant. "To safeguard his interest, the rental agreement should provide that the tenant's right to use the premises should not be affected by the landlord transferring the premises and that the new owner should be bound by the terms of the rent agreement, including refunding the security deposit, if any, to the tenant," says Nagalia.

INDEMNITY CLAUSE

The rent agreement should contain an indemnity provision wherein the landlord indemnifies the tenant for any loss or damage caused or suffered to the tenant on account of misrepresentation or breach of contract by the landlord or on account of a defect in the title of the landlord to the premises, says Nagalia. At the same time, it is also pertinent to check if the landlord has obtained all requisite consents for leasing or licensing the premises such as permission from the society/association of apartment owners in which the premises is located.

All these clauses should clearly mention charges and property-related rules and regulations. The landlord and tenant should mutually agree on the contract to avoid disputes, says Bhatt