Why Majority of Rental Agreements are usually of 11 months
only?
only?
Lease agreement or the rent
agreement is a written contract between the owner of a property (the landlord)
and the tenant who takes it on rent. The agreement specifies the terms and
conditions based on which the property is let-out, such as: description of the
property (address, type and size), monthly rent, security deposit, purpose for
which property can be used (residential or commercial), and duration of the
agreement.
agreement is a written contract between the owner of a property (the landlord)
and the tenant who takes it on rent. The agreement specifies the terms and
conditions based on which the property is let-out, such as: description of the
property (address, type and size), monthly rent, security deposit, purpose for
which property can be used (residential or commercial), and duration of the
agreement.
Its terms and the conditions
can be negotiated but after it is signed, it is binding on both the landlord
and tenant. It also specifies the conditions under which the agreement can be
terminated.
can be negotiated but after it is signed, it is binding on both the landlord
and tenant. It also specifies the conditions under which the agreement can be
terminated.
To
Avoid Stamp Duty
Avoid Stamp Duty
Most rent agreements are
signed for 11 months so that they can avoid stamp duty and other charges.
signed for 11 months so that they can avoid stamp duty and other charges.
According to the Registration Act, 1908,
the registration of a lease agreement is
mandatory if the leasing period is more than 12 months. If an agreement is
registered, stamp duty and registration fee needs to be paid for it. For
instance, in Delhi, for a lease of up to five years, the stamp paper cost is 2%
of the total average annual rent of a year. Add a flat fee of Rs100, if a
security deposit is part of the agreement. For a lease of more than 5 years but
less than 10 years, it is 3% of the value of the average annual rent of a year.
For 10 years and more but less than 20 years, it is 6% of the value of average
annual rent of a year. The stamp paper can be in the name of the tenant or the
landlord. In addition, a flat registration charge of Rs1,100 is also to be paid
by demand draft (DD).
mandatory if the leasing period is more than 12 months. If an agreement is
registered, stamp duty and registration fee needs to be paid for it. For
instance, in Delhi, for a lease of up to five years, the stamp paper cost is 2%
of the total average annual rent of a year. Add a flat fee of Rs100, if a
security deposit is part of the agreement. For a lease of more than 5 years but
less than 10 years, it is 3% of the value of the average annual rent of a year.
For 10 years and more but less than 20 years, it is 6% of the value of average
annual rent of a year. The stamp paper can be in the name of the tenant or the
landlord. In addition, a flat registration charge of Rs1,100 is also to be paid
by demand draft (DD).
Beware Landlords about 11
months rental agreement
months rental agreement
When a rental agreement is
made for a period beyond 11 months in tenure, it is mandatory to register the
agreement as per the Registration Act of India. And the registration
formalities with the local authorities is a lengthy process. So, to avoid these
lengthy legal formalities, the Landlords insist upon making the agreement for
11 month rather than making it for an year.
made for a period beyond 11 months in tenure, it is mandatory to register the
agreement as per the Registration Act of India. And the registration
formalities with the local authorities is a lengthy process. So, to avoid these
lengthy legal formalities, the Landlords insist upon making the agreement for
11 month rather than making it for an year.
11
months rental agreement-No Sanctity – Say Karnataka High Court
months rental agreement-No Sanctity – Say Karnataka High Court
An year agreement is required
to be registered to make it executable under the Registration Act.
to be registered to make it executable under the Registration Act.
“In a recent 2014 judgment, it
was declared by the
was declared by the
Karnataka High Court that 11-month agreements can
no longer be produced as an evidence in the courts as any transaction affecting
the property. So, if a dispute arises regarding a rental property and that
particular dispute is governed by a 11-month agreement, then the agreement
cannot be used as an evidence in the court for all purposes.”
no longer be produced as an evidence in the courts as any transaction affecting
the property. So, if a dispute arises regarding a rental property and that
particular dispute is governed by a 11-month agreement, then the agreement
cannot be used as an evidence in the court for all purposes.”
SIGNING ON AN 11 MONTH
AGREEMNT CAN BE A RISK. THINK BEFORE YOU MOVE AHEAD!!
AGREEMNT CAN BE A RISK. THINK BEFORE YOU MOVE AHEAD!!
Case Law: Abdul Rasheed v.
Srinivas:
Srinivas:
Justice HG Ramesh in this case
probed a question “Whether a lease deed, where the term of lease stated therein
does not exceed one year, requires to be registered under the Registration Act,
1908.”
probed a question “Whether a lease deed, where the term of lease stated therein
does not exceed one year, requires to be registered under the Registration Act,
1908.”
In an order that debunks the
myth regarding the validity of the 11-month agreement, the court held, “In law,
the lease deeds need to be registered and therefore, such unregistered lease
deeds cannot be received as an evidence of an transaction affecting the
property”.
myth regarding the validity of the 11-month agreement, the court held, “In law,
the lease deeds need to be registered and therefore, such unregistered lease
deeds cannot be received as an evidence of an transaction affecting the
property”.
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#Why Majority of Rental Agreements are usually of 11 months only?#
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