Real estate has always been a strong market in Kerala where everyone is keen about adding as many properties to their names as possible. With the IT sector booming in the state, the demand for rental has only skyrocketed.
Being one of the popular trade centre and tourist attraction, Cochin to this date remains as a high demanding area. The capital city Trivandrum and Kakkanadu are popular IT hubs that employ lakhs of people. For those of you wanting to know about creating rental agreements in Kerala, this article is a must read.

Below are the checklists for making a rental agreement.

  • Decide on clauses that should go into your rental agreement
  • Draft the deed, review it and get it printed on stamp paper of recommended value
  • Place signatures of landlord, tenant and two witnesses at designated places
  • Register the rental agreement at local Sub-Registrar office

Preparing The Rental Agreement

Normally, the job of creating the rental agreement was outsourced to lawyers. Tenants and landlords simply put forth their clauses to the lawyer who in turn handles the stamp paper and registration requirements. While this method is still favoured by many, fact is that people of today have no time to prepare an agreement this way. It is also complicated by the fact that the lawyer is going to charge a fee that he/she sees fit. For those of you who wish to do all of this themselves, please check the points below and ensure the prepared document is verified by a lawyer.

Stamp Duty Requirements

Tax levied on any document for making it legally valid is called Stamp Duty. In Kerala, the Stamp Duty for leases is charged at 7.5% of the rent amount although people generally stick to INR 100 Stamp paper commonly.

Stamp Papers

Even though e-Stamping was announced, people still use the traditional Stamp paper for all intents and purposes. They are widely available with many stamp vendors throughout main cities.

Registration of Rental Agreement

Registering a document is a way of scare off potential frauds and forgeries. It also stands as proof that the people mentioned in the document are the ones who indeed signed the document. In other words, all details regarding the property in the document is revealed if a document is registered. Property become a matter of public record when a rental agreement is registered.

Types Of Rental Agreements

Commercial Leases: Such leases are signed for business/ commercial purposes alone and is mostly among business or a business and an individual and they rarely have a standard format as the agreement. Since large sums of money are involved, they’re signed for short period of time.

Long Term Lease: These are typically for residential purposes with long spanning years of lease. Such leases rarely involve monthly rent payments as a huge lump sum is often paid in advance.

11-Month Rental Agreement: This is the most commonly used agreement format in the country. The term of this lease is 11 months at the end of which both parties have the freedom to renew/ terminate the contract.

IMPORTANT CLAUSES TO INCLUDE IN YOUR RENTAL AGREEMENT

A well-prepared rental agreement is not only the basis of a landlord-tenant relationship, it is also a preventive measure to avoid future legal disputes. So that clauses cannot be removed from the rental agreement.

  • Monthly rent, security deposit & maintenance charges: Amount to be paid as rent, security deposit and maintenance charges (if any) must be clearly mentioned in the contract to avoid conflicts. Also determine the frequency of payment.
  • Lock-in period: Minimum duration during which neither party cannot terminate the rental agreement is called the Lock-in period. This is to ensure that neither the tenant/ landlord backs out soon. If any f the party back out, they’ll have to face the losses. Duration of lock-in period must be specified in the agreement.
  • Pets: Some landlords don’t like having animals inside their property. If the landlord in wishes the same they have to put that down in the contract.
  • Overstay:  If the tenant continues to occupy the leasing property even after the term of the lease is expired, the owner may charge a penalty, the value for which was agreed upon in writing.
  • Consequences of late payment:  If the tenant fails to pay rent before the agreed date, the penalty can be imposed on the tenant only if the same clearly mentioned in the contract.
  • Food habits:  If the landlord is particular about the nature of food being consumed in his property or is against the idea of alcohol/ substance abuse within his property, it should be mentioned in the agreement.

THINGS TO KEEP IN MIND WHILE RENTING

Although it is uncommon, people, could be tricked while taking part in a rental transaction. Sometimes real estate agents pose as the landlord and try to pocket the rent for themselves. To avoid potential tricksters, here are some things you could do-

OWNER’S AUTHENTICITY:

Always ask for documents that can prove that the guy posing as the owner is indeed the property owner.

PAYMENT RECEIPTS:

Always ask for receipts for every payment you make. Even if it is rent, maintenance, security deposit or even the token advance.

DEDUCTIONS FROM SECURITY DEPOSIT:

When the tenant vacates, the security deposit of tenant to be returned to them after making necessary deductions. It is the tenant’s job to ask for a detailed description about how much was deducted for what.

AGREEMENT REGISTRATION:

If your rental agreement is not registered and when a legal issue arises on that property, the court shall never consider your rental agreement as primary evidence.

SECURITY DEPOSIT

This is a certain amount of money collected by the owner from the tenant as a precautionary measure. If the tenant fails to pay rent or causes damages to the premises, the compensation for it shall be collected from the security deposit. Most of owners collect rent for 3-6 months as security deposit. This amount is refundable after valid deductions.

TOKEN ADVANCE

A small amount of money collected towards blocking the property for a potential tenant is called the token advance. This amount is non-refundable and if either party backs out after this payment is made, that party is responsible for compensating the losses incurred by the other party.

LEGAL VALIDITY OF RENT AGREEMENT

To save registration costs, tenants and owners sometimes reach a verbal agreement about the tenancy and avoid executing a rent agreement. Some may also document the arrangement and put terms and conditions with respect to the tenancy but decide not to register the document. However, entering into a rental agreement without registration is illegal.

It is in the favour of both the parties, to draft an agreement with specific terms and conditions and to get it registered. After drafting the rent agreement, the landlord should print it on stamp paper. Once the tenant and the landlord sign the documents in the presence of two witnesses, they should register it at the sub-registrar’s office, after paying the required fee.

RENT AGREEMENT FORMAT

Here is a basic rent agreement format. Note that this rent agreement format is an rent agreement format.