What are the types of tenancy agreements in India?

One of the most significant legal documents both parties—the landlord and the tenant—must sign is a rental agreement, which governs the lease. It includes information on the specifics of the property’s tenancy terms and conditions. The two parties have also agreed to a legally binding contract. A contract contains all pertinent information, including rent, a security deposit, details about the property, its dimensions, address, kind, and, most crucially, how long it will last. Both parties must thoroughly read the clause before signing it because it is legally binding. Until the two non-beneficiaries sign the document as witnesses, the agreement is void.

Through this type of agreement, the desired objectives can be procured

1. Non-verbal

A formal and legally binding arrangement between the parties would be a rent agreement. This kind of agreement would always be put in writing. As a result, it would serve as a declaration that either party may resort to in the future.

2. Contractual obligation

The parties can uphold compliance by engaging in an agreement. Given that the memorandum of understanding is in writing, the legal provisions would apply to both the lender and the borrower.

3. Collaboration between parties

By signing a leasing agreement, the parties establish an association with one another. Both parties have clear obligations to fulfill, and the connection will only be commercial.

4. Capitalization

For the landlord, the monthly rent provides a consistent source of cash funds. For the landlord, this would be lucrative. The house owner receives a monthly payment rather than selling the property in a single transaction. Additionally, the tenant wouldn’t be required to contribute a sizable sum toward the monthly rent.

Types of tenancy agreements in India

A rental agreement specifies the name of the landlord, the tenant, the rules of the arrangement, and the total rent to be paid for the duration of the tenancy. There are three basic types of tenancy agreements in India.

  1. Rent agreement
  2. Lease agreement
  3. Leave and license agreement

1. Rent Agreement

A rent agreement is a formal contract that unites a prospective tenant and a property owner who wishes to lease a specific property for a particular amount of time. The agreement contains details such as the names of the landlord and tenant, a specification of the premises, the consented monthly installment, delayed payments, a grace period, and the amount of the security deposit. Facilities, parking rights and provisions, repairs and upkeep, and property insurance are a few examples of things that the tenant may or may not be allowed to leverage.

Rent contracts in India are often shorter, lasting 11 months on average. An easy-to-understand document called a rent agreement enables both parties to come to a mutually agreeable settlement. The registration of a rental agreement is optional. Contrarily, the notarization, which is only an affirmation of the documentation and has no legal force, ought not to be confused with the registration.

The reason a rent agreement is important is so that, in the event of a breach, the parties may rely on its terms and go to court for the appropriate relief. A lease must span a minimum of 11 months. Moreover, if the agreement is longer than 11 months, it must be accredited for it to be acknowledged as testimony in a court of law. The Property Transfer Act, Arbitration Act, Evidence Act, and Enrollment Act are all significant pieces of legislation that regulate the tenancy agreement.

2. Lease Agreement

A lease agreement is typically required when there will be an extended term of occupancy. The preference of landlords who want to lessen the volatility of their long-term income is to lease their properties. The lease is an agreement between the lender and the borrower that gives the renter the right to use the property for a predetermined amount of time (generally more than 12 months). A lease arrangement, as opposed to a rent agreement, frequently ties the homeowner and the tenant together for the stipulated time. A 99-year term can be seen in several leases. In simple terms, a 99-year lease means that whoever purchases a piece of land with a 99-year leasehold will only own it for 99 years before it is returned to the original landowner. Additionally, a lease establishes a right to use the property, establishes an interest in it, and is transferable.

The lease agreement guarantees that, unless otherwise stated, the lessee would not evict the property. Furthermore, the lessee may receive legal notice. A lease agreement must be certified and recorded in the event of litigation to be considered by a court of law.

Since the leased property is located in a different region of the country than the landlord’s home, the landlord occasionally finds it challenging to finalize the lease deed. In this situation, they can sign a Power of Attorney in the name of an acquaintance who resides close by and can collect rent on his behalf. Tenancy law states that the landlord is the one who receives the rent.

3. Leave and License Agreement

The leave and license agreement is distinct from lease and rent agreements and is administered by the Indian Easement Act of 1882. The registered owner occupies the premises of the owner according to a leave and license agreement. The property right would be void without it because it is provided by the conditions of a Leave and License arrangement instead of a rental agreement.

Such a deal facilitates the removal of the occupier more easily than a lease agreement. These contracts never provide the rights to occupy space; they always provide the ‘license’ to do so. There is no traditional landlord-tenant relationship formed, and the property owner always has the power to evict the occupant.

In contrast to a lease agreement, this one does not create a transferable interest in the property. As opposed to a license, a lease also results in inheritable rights. A leave and license agreement grants permission to occupy the property, whereas a lease creates exclusive rights to it. Furthermore, these contracts are revocable, in contrast, to lease arrangements.

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