[ecis2016.org] Renting out a property can be a tedious process for a first-time landlord, where even a small mistake can have serious repercussions, in the absence of a proper agreement. Here’s how you can ensure that your property is safeguarded even when it’s rented out
When it comes to giving out their property on rent, owners’ concerns generally revolve around the quantum of rent to be charged, tenant’s ability to pay, queries pertaining to the lease agreement, lock-in period, security deposit, verification tasks and registrations, if any. “Without due diligence, it can become a serious headache and often a nightmare,” points out Santhosh Kumar, CEO – operations and international director, JLL India.
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“The most common problems that first-time landlords encounter, include finding the right tenant, delay in receiving rent, misuse of the property by the tenant, tenants refusing to vacate and tenants not paying the maintenance fees (if the rental agreement requires them to),” Kumar elaborates.
[ecis2016.org] A guide to renting out your property
Proper legal documentation is crucial while renting out a property. Infringement of property by illegal means, delay or absence in the receipt of rent and unlawful activities owing to lapse in tenants’ background checks, are some of the risks that owners expose themselves to, in the absence of legal documentation, cautions Krishna Gupta, founder and CEO, Popterry.com. “Moreover, without legal documentation there won’t be any means to solve disputes,” he points out.
Real estate experts opine that the amount to be charged as rent, is directly related to the home’s value. Generally, the rental amount is 0.8 % to 1.1 % of the home’s total value. Other factors that can be considered are, the location of the property (upmarket locations will have higher rentals) and amenities being provided (semi-furnished, fully furnished property). Other external charges, such as maintenance charges, may also be included in the rent.
“Every rental agreement should be in writing and registered. The rental agreement should specify the terms and conditions of the lease, the monthly rental amount and security deposit. It should also specify who will pay for the utilities, water, electricity and maintenance charges. The purpose of tenancy should be clearly mentioned – whether the property is being used for commercial or residential purposes. If the rental agreement is set to expire and you and the tenant agree to extend the term of the lease for a specific period, then, the extension should be in writing,” says Kumar.
Registration of the lease agreement
Expert suggests that it is important to register the lease agreement, under the Registration Act, to make it legally valid. According to the Transfer of Property Act, lease deeds, with a tenure of more than one year, should be registered. The general practice that is followed in the market, is to enter into a lease deed for 11 months, with the option to renew it when the period lapses, by another 11 months, provided certain conditions are fulfilled. Such leases should also be properly stamped.
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