RENTAL AGREEMENTS

The registration of the rent agreement has become a quintessential provision in India. Hence it is
compulsory for both landlords and tenants to register their rental agreements (if more than one
year). On the contrary, if the rent agreement is set up for less than a year, then it is not necessary
to register the agreement. However, stamp duty is being levied in that case, which varies from
state to state.

REGISTERED RENTAL AGREEMENT

If the rent/lease agreement is prepared for a period of 12 months or more then this agreement is
called registered rental agreement. Such agreement needs to be registered at the registrar’s office
of that city. The registration fee of these agreements differs from state to state. The registered
rent/lease agreement is a legally binding on both the parties.

Now that we know what the registered rental agreement is, it is also important to know the
situations in which the rental agreement is required. Following are the various scenarios in which
the rental agreement is required

 While letting out or renting a house, apartment or commercial space for rent.
 To have a formal written agreement with your landlord or tenant.
 To document & enforce general and specific clauses.
 To register the agreement with local authorities.

When a person leases the property to the tenant, the time period of such lease may vary and the
stamp duty levied on such agreements also varies accordingly. Let us see, how much amount of
stamp duty is to be paid for different time periods:

Rent agreements between 1 to 5 years

In this scenario, the payable stamp duty is 2% of three times of the average annual rent.

Rent agreements between 6 to 10 years

In this scenario, the tenants are required to pay 2% of four times the average annual rent.
Rental agreements between 11 to 20 years

The stamp duty for such period is 2% of five times the average annual rent.

Rent agreements beyond 20 years

The payable stamp duty in this case is 2% of the six times the average annual rent.

Only the rent agreements of more than one year should be registered. For other agreements that
are of less than one year (for example 11 months), notarizing it with notary public and paying the
stamp duty is good enough and credible.

After discussing the meaning, importance and various facets related to the registered rental
agreements, let us see the step-by-step procedure for registering a rental agreement:

 Primarily, you need to outline a rental agreement with preferred clauses that incorporate
elements related to security deposit and the rent.
 After this, the tenant needs to get the rental agreement printed on a stamp paper of a
specific value.
 Both tenants and landlords need to sign at the designated places on the rental agreements.
 Along with this, it is necessary to get the signature of two witnesses, who are not related
to tenants or landlord in any way.
 After this, both the tenant and the landlord are required to be physically present at the
sub-registrar’s office of their sub-locality.
 Both tenants and the landlord along with two witnesses need to carry their two passport
size photos and ID cards for verification and validation.
 The registration of rental agreement is not permitted by any third person or any agent.
 As soon as the stamp duty is paid, the registration deed is done.

REGISTRATION CHARGES FOR RENTAL AGREEMENT

Typically the amount of 1100 Rs is needed to be paid for registering a rental agreement. This
registration fees is payable regardless of the rental amount or the property value. The stamp duty
charges are also applicable for this registration charges.
PENALTY FOR NOT REGISTERING THE RENT AGREEMENT

Anyone who fails to register the rental agreement with the authorities may end up paying a
penalty of upto 10 times the original amount plus other charges.

DOCUMENTS NEEDED FOR RENT AGREEMENT REGISTRATION

 Original copy of ownership proof or a copy of the title of the property.

 Two passport sized photographs (tenants, landlords and two witnesses).
 Aadhar card
 A government authorized ID proof (voter Id, passport, driving license etc.)
 If the tenant is a registered company, an authorization letter from the company validating
the right to register is needed.

RENT DEED

We have already discussed that a rental agreement is an official contract signed between the
owner of a property and the tenant who wishes to take temporary possession of the property for a
said period of time.

A rental agreement is also called a rent deed and lease deed, which contains basic details of the
residential property, the owner of the property, the renter (or tenant, as he is also called), the term
of the rental, and the amount of the rent for the said term.

Commonly the rental agreement includes the following contents:

 Names of the landlord and tenant and/or their agents.

 Description of the property.
 Amount of rent and due dates for payment, grace period, late charges.
 Mode of rent payment.
 Methods to terminate the agreement prior to the expiration date and charges if any.
 Amount of security deposit and the account where it is held.
 Utilities furnished by the landlord and, if the landlord charges for such utilities, how the
charge will be determined.
 Facilities in the premises which the tenant is entitled to use.
  How tenant repair requests are handled and procedures for emergency requests.

DIFFERENCE B/W REGISTERED AND NON-REGISTERED RENTAL

AGREEMENT

In the above paragraphs we have discussed that the agreements which are for more than one year
are required to be registered. Such agreements are called registered rental agreements.

However the rental agreements which are for a period of less than one year are not required to be
registered, hence such agreements are called Non-Registered rental agreements. Typically, non-
registered rent/lease agreement is prepared for a period of 11 months.

CHARGES FOR NON-REGISTERED RENTAL AGREEMENTS

A non registered agreement can be prepared on Rs 50 or Rs 100 Stamp paper issued by the state.
Once, the document is prepared, it is notarized by the local notary. In case there is an issue
between owner and the renter, the non-registered rent/lease agreement can also be presented in
court of law as a proof of agreement between an owner and renter.

Now that we know that the agreements spanning less than a year do not require registration.
Most of these agreements are usually for a period of 11 months. Let us find out why it’s so.

11 MONTH AGREEMENTS

Most rent agreements are signed for 11 months so that they can avoid stamp duty and other
charges. According to the Registration Act, 1908, the registration of a lease agreement is
mandatory if the leasing period is more than 12 months. If an agreement is registered, stamp duty
and registration fee needs to be paid for it. We have already discussed various charges levied for
different time periods. Let’s see why such agreements are for 11 months.

ILLUSTRATION

Suppose, a property is let out for 24 months at a monthly rent of Rs20,000 for the first 12 months
and Rs22,000 a month for the subsequent 12 months. The charges for registering this agreement
would be: 2% of the average rent for 12 months: Rs5,040, (average monthly rent is Rs21,000,
average annual rent is 21000*12 and 2% of that is Rs5,040).

Plus if the agreement includes security deposit, Rs100 for it and Rs1,100 as registration cost—
bringing the total to Rs 6,240. This is not counting the professional fees due to lawyers or other
intermediaries for all the paperwork.

In order to avoid paying these charges, many landlords and tenants mutually agree to not get the
agreements registered.

ONLINE RENTAL AGREEMENTS

In today’s world, whether it is about buying products or choosing services, most of the
individuals look at nowhere else but internet. The same situation can also be seen when it comes
to making a Rental Agreement. However, there are only a few states in India which allow online
rental agreements. Let’s find out how registering rent agreement online works.

DOCUMENTS NEEDED FOR ONLINE RENTAL AGREEMENT REGISTRATION

 PAN card and Aadhar number of tenant, landlord and two witnesses.
 A bio-metric scanner to scan thumb.

PROCESS OF ONLINE REGISTRATION

 Firstly visit the authorized government website.

 Find out online rent agreement option on the main page.
 Choose your jurisdiction from given list.
 Provide your details required in the form.
 Fill the details of other party.
 Submit the details of tenant, identifiers and landlord
 Now move to next step i.e. rental agreement information and fill the details.

It is important to note that if while registering online for the rent agreement, any issue arises,
there are several websites which provide online assistance to smoothen the registration process
and can help out the customers at very affordable price.