Why Are Rent Agreements Made For 11 Months In India

Have you ever let out a property on rent or lived in a rented accommodation? If yes, then you must be well-versed in what is a lease agreement. You must also have also noticed that rent agreements are only for eleven months. Have you ever wondered why it is essential to have a rent agreement?

Here is everything you need to know about short-term rent agreements:

What exactly is a rent agreement?

A document that defines the legal relationship between a landlord and a tenant, stating out clearly the obligations of the respective parties is called a rent agreement. The terms and conditions that are mentioned in the document are binding on both parties.

Importance of a rent agreement

A rent agreement states the terms and conditions on the basis of which a property is being let out. It includes:

• The monthly rent as agreed upon by the parties to the contract
• The description of the property to be let out
• The security deposit
• The purpose for which the said property will be used
• The  proposed term of the agreement
• The notice period
• The circumstances which may lead to the termination of the said agreement along with other vital inclusions if any

It is made to safeguard the interest of the parties. The rent agreement can also be produced as evidence in case of a dispute arising out of the property.

In the words of Mr. Sandeep Tibrewal, a Noida-based property dealer:

“Rent Agreement is basically a documentation of the terms mutually agreed between the owner and the tenant, to avoid potential disputes in the future. It is a mandatory requirement by a majority of gated societies nowadays which enables the tenant to avail all the benefits that the society provides”

Why rent agreement is for eleven months?

As per the requirements of the Registration Act 1908, it is obligatory to register a property let out on lease for a year. Therefore in order to skip the hectic process of registration, the rental agreements are usually drafted for a period of eleven months. Any extension beyond that will need the property to be mandatorily registered under the Act.

In the case of a registered agreement, the payment of stamp duty and registration fee becomes essential. To circumvent the payment of such bulky charges, the landlord and the tenant usually agree mutually not to get the agreement registered. Moreover, a rental agreement of 11 months, gives much more flexibility to the landlord as the rent can be set on the basis of the prevalent market scenario and periodic renewal of the same is also possible.

However, it is not mandatory for the agreement to be for eleven months. Renewable or Extendable rental contracts can also be made for three to five years as per the assent of the parties.

Will the 11-month rent agreement be valid in court?

Yes, an 11-month rent agreement is definitely permissible in a court of law as a piece of evidence. These rent agreements are made on Rs 100 stamp paper and are to be notarized.

There is no need to register the rental agreement by the landlords or tenants if the lease duration is less than 12 months. So there is no stamp duty payable on such lease agreements. But for rental agreements that are for more than one year, it is compulsory to stamp them and pay the charges accordingly. These stamp duty charges vary from state to state.