Disadvantages of not making a rent agreement

A rental agreement is a contract or document that is signed by the renter and the owner of the property; it must be registered with the sub-registrar’s office to be legally enforceable, and it serves as sufficient evidence in court in the event of a dispute between the parties.

Sometimes, in order to save money and avoid the hassles of paperwork, the parties decide to go in for a verbal agreement or create an agreement but do not get it registered. A rent agreement is an important document, a legal contract that lists all the mutually agreed terms and conditions between the landlord and the tenant. They must pay a registration charge and be present at the sub-registrar’s office to complete paperwork and get the agreement registered.

Issues faced by owners and tenants

It is imperative to create a rent agreement, as it serves to protect the interests of both the tenant and landlord. Failure to do so may result in various issues that can be detrimental to both parties. 

Challenges for tenants involve: 

• The landlord can ask them to vacate the property at any time or increase the rent at any point without prior notice. 
• The absence of a rent agreement can render a tenant ineligible for tax exemption via HRA.
• In the event of any dispute, a tenant may not have a legal basis to prove their case, as the rent agreement provides an admissible piece of evidence in court.

Similarly, landlords can also face various issues if a rent agreement is not created. 

• In the event of any property damage, the landlord cannot force the tenant to pay for it. 
• A tenant may vacate the property at any time, which can leave the landlord without a tenant until they find a new one. 
• In the absence of an agreement that specifies the penalty amount in case of a payment default, the landlord cannot impose any fine on a tenant who defaults on paying rent on time. 

In the event of a dispute between the landlord and the tenant, a rent agreement provides a legal basis for both parties to present their case in court. Therefore, both landlords and tenants should create a rent agreement to safeguard their interests.

Critical points to consider before signing a rent agreement

A rental agreement is a legally binding document that becomes effective once it is signed and registered. It is imperative to exercise caution while signing a rental agreement. Some crucial points to consider before signing a rental agreement are as follows:

• The tenant must visit the property and inspect it in person to ensure the construction quality and the state of the property.
• It is important to verify that the electrical appliances, wiring, switchboards, plumbing fixtures, and water connections are all in good working condition. Any damages or repairs that are needed should be reported to the owner and addressed before moving in.
• It is essential to thoroughly read and understand all the clauses listed in the rental agreement.
• It is important to check the lease duration, which is typically for 11 months since any lease period exceeding 11 months needs to be registered.
• The rental agreement should mention the due date for rent payment and the penalty in case of default. Additionally, it is important to verify whether the maintenance charges include the fees for the gym, parking, club, and swimming pool.
• The agreement must specify the security deposit amount and how it will be adjusted when the lease period ends. It should also mention who will be responsible for the maintenance and repair of the property.
• It is crucial to check whether the previous tenant has cleared all previous maintenance charges, utility bills, and other dues. It is also important to verify the sale deed and share certificate and obtain a no-objection certificate if the property is in a housing society.
• The agreement must include a termination clause.

Is a verbal rental agreement legally binding?

When it comes to renting property, it’s important to understand the legalities of verbal agreements. Generally speaking, if the rental tenure is 11 months or less, a verbal agreement is legally binding as long as all terms and conditions are agreed upon by both parties. However, if the rental period is longer than one year, a verbal agreement will not be recognized by law, and a written agreement that is registered becomes necessary for legal validity.

It’s worth noting that a verbal agreement can be breached at any time, with either party able to break the terms. In the event of any dispute between a landlord and tenant, a written and registered rental agreement serves as admissible proof in court. 

Are online rent agreements valid?

As for online rental agreements, they are just as valid as traditional written agreements. It’s important to note, however, that only a registered agreement is legally binding and can properly safeguard the rights of both landlord and tenant in the event of a dispute. An online rental agreement can be considered an authentic document, but it should either be printed on stamp paper or have an e-stamp affixed on the front page to ensure its legal validity.

How to create a rental agreement online? 

To create a rental agreement online, begin by downloading the agreement template from an online platform. Customize the template with the necessary information including the tenant’s and landlord’s details, property address, and other terms and conditions. You may choose a lease agreement or a leave and license agreement based on your preference.

After reviewing the details, preview the agreement and make online payments. The payment includes the stamp duty charge, which varies from state to state, convenience and delivery charges, and relevant Goods and Services Tax (GST). Within three to five working days, the agreement will be printed on stamp paper and delivered to your doorstep. Alternatively, the online rental agreement with the e-stamp can be sent to your email.

There is an option to sign the contract digitally. Section 5 of the Information Technology Act, 2000, provides legal recognition to digital signatures. After making the payment, share the agreement with both parties and sign digitally. The rental agreement can be downloaded after both parties have signed it.

What if the rental agreement is not registered?

According to Section 17 of the Registration Act, a rental agreement between the landlord and tenant must be registered if the tenure of the agreement is for one year. If the rental period is less than 12 months, registering the agreement is optional.

It is mandatory to have a registered written rental agreement according to Section 4 of the Delhi Rent Control Act, 1995. If the agreement is not registered, the consequences of non-registration of a document under the Registration Act, 1908 shall follow.

In the event of a dispute between the landlord and tenant, the unregistered document will not be admissible as evidence, and the authority will not have any power to evict the tenant. The landlord will have to follow a lengthy process for eviction or get their dues cleared.

On the contrary, having a registered rental agreement minimizes conflict between the landlord and tenant. The terms and conditions are mutually agreed upon and listed in the agreement. It also serves as an address proof required for school admissions, bank loans, vehicle registrations, and other facilities. Moreover, it acts as an identity proof required for making documents such as pan card, passport, and others. One can claim House Rent Allowance (HRA) by submitting rent receipts and the rent agreement.

Can you get out of a rental agreement on a house?

The rental agreement should mention the termination clause too. As per the legal obligation, both the tenant and the owner need to abide by it. They should stick to the notice period mentioned in the termination clause and serve a written notice in case of early eviction.

In case the tenant wants to leave the house before the end of the lease term, he should pay the rent for the notice period too even if he’s not living in the rented property.

If the owner and the tenant mutually agree to end the contract, both of them can break the agreement without facing any penalty.

conclusion

Neglecting to create and register a rental agreement can lead to numerous challenges for both landlords and tenants. The absence of a formal agreement can result in tenants facing sudden eviction or rent increases without notice, while landlords may encounter difficulties in recovering damages or enforcing payment defaults. A properly drafted and registered rent agreement serves as a legal safeguard, providing a basis for resolving disputes and protecting the interests of both parties.

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