17 October, 2022    

A rent agreement is a document that is signed between a Landlord and a Tenant to initiate and govern a tenancy. The rent agreement should mention every detail about the two parties, i.e., the landlord and the renter, and the terms and conditions of the tenancy. Both parties have to follow the rules mentioned in the rent agreement.

Here are six points to double-check before signing the legal document that will make your tenancy run smoothly as well as ensure that your association with the landlord is maintained.

1. Termination Clause and Notice Period

A notice period is the period of time that begins after you notify the landlord, or vice versa, of your intention to end the tenancy. This allows the landlord enough time to find a new tenant to substitute for you. A typical rent agreement has a 30-days’ notice period.

Carefully read and understand the termination clause and notice period to ensure that your notice can be served to the Landlord on any date of the calendar month. It is always recommended to serve the notice in writing to your landlord mentioning the start and end date of the notice period.

For instance, if you send a written notice to vacate the property on November 10th, your tenancy will end on December 9th, calculated as 30 days from the start of the notice period. In this case, your notice period begins on the day of serving the notice, which is November 10th, and you are not required to give notice only on the first day of the corresponding month, which is December 1st.

You can absolutely dispute the clause where the agreement asks you that your notice period starts from the 1st day of the next month and continues until the end of the month. We have found the below clause in rental agreements which you can dispute: “Notice will be considered from Calendar Month. For example, if the notice is given on 12th September 2022, this will be considered from 1st October 2022.” Be aware of such clauses!

2. Rent Hike Percentage

The Rent Hike Percentage is an increase in your rental amount usually between 5-7% after the term of your rental agreement expires (typically 11 months). This is negotiable and depends on the landlord and tenant reaching an agreement. While this is not a mandatory element in the rental agreement but is usually mentioned in the agreement to match the rental value of the new term of tenancy as per the market prices. If your rental amount already corresponds to the property's market value, you can contact the Landlord to negotiate the same based on your payment history and discuss rental values in the neighbourhood to reach a mutual agreement.

3. Deductions from your Security Deposit (One Month Rent vs Actuals)

The security deposit is a substantial and negotiable amount paid upfront by the tenant to the landlord at the time of moving into the rented property to protect the landlord's interest in the event of property damage or non-payment of rent, with the remainder paid back at the end of the tenancy.

In most rental agreements, one month's rent is deducted instead of the deductions for actual property damage.

To make your deal more equitable, read the deductions-related clause carefully and negotiate for actual payables such as painting, cleaning, maintenance, damage repair, and so on to be deducted from the deposit amount rather than one month's rental amount.

Our Pro-Tip: You should absolutely refuse to accept any clause that requires you to pay for damages caused by normal wear and tear or that requires you to pay the middleman/broker service fee once more when vacating the property.

4. Time to Refund Security Deposit –

A Security Deposit is an interest-free payment made to the landlord that should be refunded back to the tenant (after actual deductions as per the terms and conditions of the rent agreement). In the rental agreement, there should be a clearly defined timeline for when the Landlord should refund the full and final amount of the Security Deposit amount to the tenant, as well as the penalties involved in case of breach of this clause.

Based on the market practice, you can expect a refund of approximately 75% of your total security deposit amount at the time when you hand over the house keys back to the landlord. You can expect some delays and deductions based on any pending maintenance/association charges, painting and cleaning charges, and so on, as well as other dues based on actual bills generated - such as electricity, water, and so on.

The remaining Security Deposit is usually refunded within 7-21 days of the end of your tenancy.

5. Rent Amount and Additional Charges –

Your rent is not the only payment you make on a monthly basis. Check to see if the rent includes or excludes the association's maintenance fees. The other additional charges that should be clearly stated in the rent agreement as to who is responsible for them, such as water, electricity, gas, and other utility bills.

For Instance, if your rent amount is Rs.50,000 per month; make sure that it is mentioned in the agreement if this is including or excluding the community maintenance charges, utility bills, parking, clubhouse fees, etc.

6. PAN Card of Landlord –

Collect the soft copy of the PAN Card of the Landlord at the time of signing your rental agreement. You would require the same to claim your HRA exemption while filing your Income Tax Returns. The Landlord is bound by the Taxation Laws to share this document with you, failing which the landlord may get into complications of taxation laws.

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