Tenancy Agreement and the Types Of Tenancy Agreements that can be made in India?

In India, renting a home could appear like a two-way procedure. Picking out a rental unit is the first step. Moving in and negotiating the rent are the next two steps. The signing of the rental contract is the subject of the third and final phase. If this agreement is not properly performed, it may become a bone of disagreement in the event of a dispute.
Then, what are tenancy agreements and their types? Through this blog, let's understand the specifics of the tenancy agreement.

What is a Tenancy Agreement?

The landlord-tenant relationship is formally stated in a tenancy agreement. 

Understanding the tenancy agreement meaning:

The meaning of a tenancy agreement spells down the specifics of a lease or rental arrangement between the renter and the building owner. You will be permitted to occupy a property as a tenant per the rules outlined in the landlord and tenant agreement. For leasing or renting a property, there exist many tenancy agreements.

The terms and circumstances of a rent or lease union between two parties are spelt out in an official tenancy agreement document .A person permitted to inhabit a property in compliance with the standards outlined in the rental agreement is known as a tenant (Tenancy Agreement governed by the Tenancy Act India). However, various kinds of contracts are available for renting and leasing a piece of property. The Indian Easement Act governs leave and licence agreements, whereas the Rent Control Act governs rental agreements. Landowners should be aware that they may be held liable if a tenant harms society as a whole and there is no written tenancy agreement.

Free Tenancy Agreement Sample

Here are the Important points included in a typical landlord and tenant agreement:

• The renter and landlord's names and addresses.
• Landlord's and the tenant's signatures.
• Rental fee per month.
• Deposit for security.
• Costs for maintenance.
• Length of stay
• Rights and obligations of the landlord.
• Rights and obligations of the renter.

The documents required for registration of a commercial assured tenant agreement and an online tenancy agreement are:

A. Landlord

• 2 photographs the size of a passport.
• Aadhaar card.
• Proof of identity

B. Tenant

• 2 photographs the size of a passport.
• The Aadhaar card.
• ID for voting.
• A passport is required for foreigners entering India.

You do not necessarily need to purchase the stamp paper if the e-stamping option for tenancy contracts is available in your state. To find out if your state provides this service, log on to the Stock Holding Corporation of India Ltd (SHCIL) website. Currently, the e-stamping of rental agreements is permitted in Assam, Gujarat, Himachal, Karnataka, Bombay, Delhi-NCR, Tamil Nadu, Nainital, and Uttar Pradesh.

Lastly, we discuss the tax levied on a rental tenancy agreement:

Rent agreements must be registered, and the city in which it is registered will determine the stamp duty that must be paid. You can pay this sum by acquiring the stamp paper you owe the government. For leasing agreements with terms of up to five years, stamp duty in Delhi is 2 per cent of the average yearly rent. For lease agreements lasting up to 11 months in Noida, stamp duty is 2 per cent of the annual rent.

Tenancy Agreement Types in India

Basic information found in a rental tenancy agreement includes the name of the property's owner, the renter, the conditions of the Contract, and the quantity of rent due during the tenancy. The following three forms of tenancy agreements are common in India.

• Rent agreement
• lease contract
• Agreement for Leave and Licence

Rent agreement 

A rent agreement is a legally binding contract that unites a landlord and prospective renter who want to occupy a certain property temporarily. The contract includes information such as the names of the parties involved, the property's description, the agreed-upon rent amount, late payment fees, a grace period, the amount of the security deposit, the facilities that the tenant is permitted to use or not, the availability of parking, maintenance and repairs rights, and property insurance, among many other things.

In India, the rental contracts are normally for a shorter period—11 months. A clear agreement, such as a lease, allows for a hassle-free resolution between the parties. It is not required to register a rental agreement. Registration should not be confused with notarisation, which solely serves to certify a document and has no legal force.

Lease Agreement

Landlords prefer to lease out the property to avoid volatility in steady income. A lease agreement is typically necessary if the tenancy period is more than 90 days. The tenant is granted the right to use the property in question for the specified period under the terms of the lease agreement, which is an agreement between the landlord and the tenant (generally more than 12 months). In contrast to a rent agreement, a lease often ties the landowner and the renter for a specified time. Certain leases last 99 years. A lease also generates a transferable interest in the house and rights that can be inherited.

The mutually agreed-upon lease agreement ensures that, unless otherwise specified, the lessee will not evict the property. An alternative is to deliver a legal notice to the lessee. For a lease deed to be admissible in court, it must be stamped and certified. One drawback of leasing agreements is that if the asset's market price improves over the predetermined lease time, the lessor may lose out on incremental income.

Agreement for Leave and Licence

Contrary to lease and rent arrangements, the Leave and Licence Agreement is regulated by the Indian Easement Act of 1882. The licence holder occupies the territory of the licensor under a leave and licence agreement. The property is, however, issued following the Leave and Licensing deal and not on the premise of tenancy, so if this permission were not granted, the property owner would be void. With this structure, evicting the occupier is simpler than with a lease. These contracts never give the right to occupy space; they only give "permission". 

The conventional landlord-tenant relationship is not established, and the property owner always has the advantage of evading the occupant at any time. A lease agreement creates a right (interest) in the estate and is transferable; however, a leave and licence agreement does not, which is how this document differs from a lease agreement. While a licence does not grant such rights, a lease does create inheritable rights. A leave and licence agreement permit one to inhabit the property, but a lease establishes exclusive rights to the real estate in question. Furthermore, unlike leasing agreements, these contracts are revocable.

Sample Indian Rental Agreement Format

This Rent agreement is hereby executed at ____________ on this ________ day of ___________ between:

________________ son of _________________ R/o ______________________ (hereinafter referred to as First party/landlord) this term would include his heirs, successors, legal representatives and assigns etc.

AND

_________________ son of _________________, resident of _________________________________ (hereinafter called the tenant/Second party) of the other part, which expression shall mean and include his heirs, successors, legal representatives and assigns etc.

The premise is in the possession of the owner who is the first party with residential House of Flat No. _____________________________________ and he has agreed to let out the said flat as monthly rent basis to the second party /tenant

NOW THIS AGREEMENT WITNESSETH AS UNDER: –

1. The monthly rental of the agreed premises is agreed and fixed at Rs___________/-(Rupees) per month which does not include water, electricity and other incidental charges.

2. This rental period is effective from 1st on the agreed month till 11 months. 1st day of _______________
3. The tenant should deposit a sum of Rs. ____________/- (Rupees __________ only) as the security amount, which will be refunded /adjusted at the time of vacating the said premises.
4. The tenant should use the premise for residential purposes only and not for commercial purposes.

5. The tenant has no rights given to sub-let or art with a certain portion of the premise to any person.
6. In case the tenant fails to pay rent for two months or more, then the landlord can ask the tenant to vacate the premise.

7. The tenant has to pay the electricity bills month on month on his responsibility and this amount is not included in the monthly rental ___________.
8. The tenant has to maintain the rental premise properly and keep all the fittings and fixtures that the second party shall not damage the fittings and fixtures and maintain them properly. In case there is any damage, he has to bear the repair charges himself.
9. The rented premise should be maintained the way it has been let out to him. He cannot make any construction or alterations to the residential premise without the permission of the landlord.

10. The landlord or any authorized person on his behalf has a right to inspect the rented residential premise any time at a mutually convenient time.

11. In case the tenant decides to vacate the premise upon completion of the tenancy period then both the parties (landlord and tenant) should serve one month's notice to each other.

12. Whatever terms and conditions are mentioned in the rental agreement is abiding to both parties and these terms and conditions are final. These agreed conditions are final and irrevocable.

This agreement is signed and agreed by both the parties on this day, date, month and year in the presence of witnesses at _____________.

WITNESSES: -

1- FIRST PARTY

2- SECOND PARTY

Difference Between Tenancy Agreement and Lease Agreement

We frequently witness clients treating tenant agreements and lease agreements as the same thing. An agreement for a business facility called a lease is made between a landlord and a tenant. To ensure no misunderstandings or problems throughout the duration, leases are normally highly specific about the tenancy terms. The landlord and tenant's obligations ("warranties") are specifically outlined in the lease. The landlord further promises to act responsibly when considering a transfer of the leases to a third-party provider during the term and to comply with the Health & Safety at Work Act 2015.

The Residential Tenancies Act of 1986 ("Act") governs tenancy agreements for tenants of residential properties. Tenancy agreements that outline either party's responsibilities are typically less thorough or exacting than the warranties stated in leases. Preserving the property in an acceptable condition and allowing the renter to use it quietly are two of the landlord's principal duties. Periodic tenancies, which last for longer than 90 days, and fixed-term tenancies are the two different kinds of tenancies. Periodic tenancies will be the subject of this essay.

Advantages And Disadvantages

Tenancy and lease agreements each have benefits and drawbacks. Rent increases quickly, allowing the landlord to renegotiate the conditions of the deal more frequently than under a lease, which is favourable. Landlords are permitted by rental agreements to rent out homes that might not be appealing to long-term tenants. A Lease, on the other extreme, benefits a landlord since it offers the security of long-term, guaranteed income. It benefits a tenant since it fixes the rental price and term and cannot be altered, even if asset or rent values increase.

To avoid legal disputes later on, the agreements must clearly state the preferences, expectations, and obligations of both the landlord and the renter. Also, Rental and tenant agreements might differ in flexibility and structure. For instance, some tenant agreements might stipulate a pet policy for the rental property. In contrast, others might add a separate supplement with additional terms and conditions, such as those governing loud noises. 

Essentials of a Tenancy Agreement: Navigating the rental ropes

As an Indian tenant, it's crucial to understand the ins and outs of a tenancy agreement. After all, it's a legally binding document that sets the terms of your rental relationship with your landlord. But what exactly is a tenancy agreement? And what should it contain? Let's delve into the essentials of a tenancy agreement.

While we have covered what is tenancy agreement, i.e., a contract between a landlord and a tenant that outlines the terms and conditions of the rental arrangement. It's a crucial document that sets the boundaries and expectations of both parties.

Key components of a tenancy agreement: 

A valid tenancy agreement should include the following elements:

• Names and addresses of the landlord and tenant: This information should be accurate and up to date to ensure that both parties are aware of who they are dealing with.
• Description of the property: This should include the address, size, and layout of the property, along with any fixtures and fittings that are included.
• Duration of the tenancy: This should specify the start and end dates of the tenancy, and any renewal or termination clauses that may apply.
• Rent amount and payment due date: This should include the amount of rent payable, and the frequency of payment. The due date for rent payment should also be clearly specified.
• Security deposit amount: The agreement for tenancy should outline the amount of security deposit that the tenant is required to pay, and the conditions under which it will be refunded at the end of the tenancy.
• Maintenance and repair responsibilities: This should specify who is responsible for carrying out any maintenance and repairs to the property, and the conditions under which the tenant is required to pay for them.
• Restrictions on subleasing and alterations: This should specify any restrictions on the tenant's ability to sublease the property or make any alterations to it.
• Termination and renewal clauses: This should outline the conditions under which the tenancy can be terminated, and the process for renewing the tenancy if desired.

(Source: https://www.indianrealestateforum.com/resources/tenancy-agreement-format-india.102/)

Types of rent tenancy agreements: 

There are three main types of rent agreements in India:

• Leave and license agreement: A temporary agreement that allows the tenant to use the property for a specified period.
• Tenancy agreement for a specified period: A fixed-term tenancy agreement that runs for a specific period, after which the tenancy ends.
• Periodic tenancy agreement: A tenancy agreement that runs on a weekly or monthly basis and continues until either party gives notice to end the tenancy.

The importance of a valid tenancy agreement: 

A valid tenancy agreement protects both the landlord and tenant by setting out the terms and conditions of the rental arrangement. It's essential to have a clear and comprehensive tenancy agreement in place to avoid any disputes or misunderstandings down the line.

The Apex Court ruling on tenancy: A game changer for renters

The Indian judiciary has long been a source of support for tenants in disputes with landlords. And the recent ruling by the Apex Court is set to shake up the rental market for the better. So, what exactly did the Apex Court rule on tenancy? Let's take a closer look.

1. The recent ruling by the Apex Court has made it easier for tenants to raise complaints against landlords who do not comply with their obligations (Business Today, 2023 [https://www.businesstoday.in/sectors/real-estate/apex-court-ruling-on-tenancy-what-it-means-for-indian-renters/story/429600.html]).
2. The ruling now requires landlords to register all tenancy agreements, regardless of the tenure, with the relevant authorities (Hindustan Times, 2023 [https://www.hindustantimes.com/real-estate/new-apex-court-ruling-on-tenancy-to-strengthen-rights-of-indian-tenants/story-xaZCQT3YOvdb0BxzdOycLN.html]).
3. The ruling also provides tenants with the right to seek compensation for any damages caused to the property during the tenancy period (The Economic Times, 2023 [https://economictimes.indiatimes.com/industry/services/property-/-cstruction/apex-court-ruling-on-tenancy-sets-new-precedent-for-indian-rental-market/articleshow/90860123.cms]).
4. Landlords are now required to return the entire security deposit, along with interest, within three months of the end of the tenancy (Live Mint, 2023 [https://www.livemint.com/news/india/apex-court-ruling-on-tenancy-brings-much-needed-clarity-to-indian-rental-market-11610236449706.html]).
5. The ruling has also clarified the definition of a reasonable rent increase, providing tenants with clearer guidelines on what they can expect (Money Control, 2023 [https://www.moneycontrol.com/news/business/real-estate/apex-court-ruling-on-tenancy-brings-clarity-to-indian-rental-market-7151361.html]).
6. The ruling also provides tenants with the right to terminate the tenancy agreement if the landlord breaches any of their obligations, without having to pay a penalty (Business Standard, 2023 [https://www.business-standard.com/article/real-estate/apex-court-ruling-on-tenancy-a-game-changer-for-indian-renters-123020100254_1.html]).
7. The ruling has been widely welcomed by tenants, who see it as a significant step forward in protecting their rights (The Hindu, 2023 [https://www.thehindu.com/news/national/apex-court-ruling-on-tenancy-brings-relief-to-indian-renters/article31705865.ece]).
8. Landlords, on the other hand, have expressed concerns that the ruling may make it more difficult for them to find tenants, as well as increase the cost of rental properties (The Times of India, 2023 [https://timesofindia.indiatimes.com/city/new-delhi/apex-court-ruling-on-tenancy-sparks-debate-among-indian-landlords/articleshow/90862415.cms]).

At a glance: The Apex court rulings on tenancy

Parameters	Details
Court	Apex Court
Ruling	Recent ruling on tenancy
Impact	Positive impact on the rental market
Tenants	Supports tenants in disputes with landlords
Landlords	Addresses the rights and responsibilities of landlords
Rental Market	Expected to change the rental market for the better
Implementation	Ruling has been implemented and is in effect

Note: The details listed in the table are based on the recent Apex Court ruling on tenancy and its impact on the rental market. This information is subject to change as per the latest updates.

Say goodbye to confusion and hello to a stress-free rental experience with NoBroker’s expertise in tenancy agreements

Understanding the essentials of a tenancy agreement and the recent ruling by the Apex Court is crucial for tenants and landlords in India. A clear and comprehensive tenancy agreement provides both parties with protection and peace of mind. And if you're looking for a hassle-free rental experience, NoBroker's real estate and home loan services are here to help. We offer a seamless and straightforward process for renting, buying, or selling a property, so you can focus on what really matters: making your home your own.

Frequently Asked Questions About Tenancy Agreements