4 Essentials to know before you sign a rent agreement

4 Essentials to know before you sign a rent agreement

28, Aug 2019

A rental / lease agreement is a legal document stating that owner and the tenant agree to follow the rental rules and the deal. Typically, a rent agreement is prepared by the real estate agent hired by the landlord and the tenant. To validate the agreement, both the landlord and the tenant ought to sign the agreement in the presence of two people who are non-beneficiaries of the property and will sign on the agreement as witnesses. In most cases the real estate agent doubles as one of the witnesses. A common mistake we usually make is not to read a rent agreement before we sign. Obtain a copy of the rent agreement and make sure you go through everything before you sign on the dotted line.

As you have finalized a home on rent, there are certain essential checks which certainly you might be aware of as a tenant. However, it is equally essential to check the rental agreement for some of the most important points before you sign it in order to avoid any disputes once you start living on rent in the desired house.
It may all start form petty issues like repairs and bills and go on to unexpected rental hike. So, settling it all in the rental agreement needs to be your primary concern when you are about to sign the agreement. Here are the essential things that tenants should be aware of before signing a rent agreement :-

1.  What does a rent agreement include

A rent agreement includes the terms and conditions under which the property is given on rent. The agreement includes the tenant’s name and landlord’s name and address of the property which is given on rent. A common mistake we usually make is not to read a contract before we sign. Obtain a copy of the rent agreement and make sure you go through everything before you sign it.

Make sure the person you are transacting with is the actual owner / landlord of the property. You also have the right to see the documents that prove all previous bills related to the house have been paid, especially the electricity, water and gas bills. 

A rent agreement includes the amount of rent paid and the tenure for which the rent agreement is made. The tenure of a rent agreement is usually 11 months. Also a clear mention of the terms and conditions under which the agreement can be renewed after it expires should be incorporated in it at the outset. If the rent agreement is for more than a year, it is compulsory for the owner to register the rent agreement by paying the necessary stamp duty. 

The rent agreement also mentions the security amount to be deposited with the landlord by the tenant. The deposit is usually held for the duration of the tenancy. The deposit is a safety net for the landlord to guard against the cost of replacing or repairing property damaged by the tenant.

The agreement also mentions the date before which the rent is expected to be paid. For instance, it could be the 5th or 10th of every month. In case the tenant fails to pay the rent before the predetermined date, the penalty charges that he would be liable to pay should also be defined in the agreement.

It may sound too basic and evident but the truth is that most of the tenants either do not read the above mentioned things in the whole agreement carefully or unable to understand the legal language used in the agreement. There may be times when you are simply staring at the agreement to decipher the meaning of your legal rental agreement. It is certainly not wise to interpret that the things promised are mentioned in the agreement by the landlord and you can trustfully sign on the dotted line. If you are not able to interpret what exactly the clauses mean, it is recommended that you consult a lawyer instead.


2. What is in the rent agreement?

  • Rent tenure
  • Rent amount
  • Security amount
  • Rent payment date
  • Any panel payment if rent is late
  • Facilities for tenant
  • Rent escalation clause
  • Renewal terms after the contract expires

Rent escalation clause - A tenant should verify whether the landlord has included a “rent escalation clause” in the agreement, which could be used to increase the rent after a certain period say after six months. Verify whether the agreement mentions the date after which rent charges would increase and the percentage of increase.


3. Check the Landlord Details

Before you sign on the dotted line, ensure that the person you are dealing with is the actual owner of the property. The details of the landlord does not only mean checking the background of the landlord. There have been instances, when NRIs (non-resident Indians) and investors hand over their properties to caretakers, who lease it to a third party without the knowledge of the owner. Before signing the agreement, you should verify the title documents, such as sale deed, besides obtaining an NOC from the housing society where you plan to lease the property. In case, the property is mortgaged, the original sale deed would be in the custody of the bank. In that scenario, you should take an NOC from the bank, too.
Even ensure that the person you have been talking to as the landlord signs on the agreement as a landlord with you.

4. Visit the place

Visit the place at least once—where you want to stay on rent—before signing the lease agreement. You not only need to check the condition of the house, but also make sure that all electricity and water connections are working properly. Check the windows to see if they open close and lock properly. Also inspect the walls. Also ensure that the all the appliances in the house are working appropriately. Normally, it is the owner’s responsibility to ensure that the property is handed over for possession in good shape. This would mean that all electrical and water connections are in working condition, the electricity meter and water motor are in running condition.


5. Overhead Charges

All new projects by reputed builders are facilitated with power backup, water tank and other utility services as the society maintenance charge. Rent agreement can also include mention the facilities like parking space included with the property.
However, tenants shouldn’t just be told about overhead charges verbally. These charges should be transparently mentioned in the rent agreement along with the person who is supposed to pay them. Tenants must check these before signing the agreement.