Why rent agreements are mostly made for 11 months only? LEGAL / WILL

LEGAL / WILL
https://m.economictimes.com/wealth/legal/will/why-rent-agreements-are-mostly-made-for-11-months-only/amp_articleshow/93638011.cmsShow more

Synopsis
With the large-scale migration of people for better opportunities, most of us have either lived on rent or given houses for rent. Living on rent means signing a rent agreement with the landlord for a specified time. A rent agreement is a contract encaps...
By Shaveta Dua, ET Online
Last Updated: Aug 19, 2022, 03:24 PM IST
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To live on rent tenants have to enter into a rent agreement with the landlord for a specified time. The most common period used by a good number of landlords is typically 11 months. Have you ever wondered why such rent agreements are for 11 months only? Here's why.

No need to register if the tenancy is less than a year per the requirements of section 17 of the Registration Act, 1908, a lease agreement for a term not exceeding one year is not compulsorily registrable. This means that rent agreements for less than 12 months duration can be made without registration. "The said option enables the parties to avoid the arduous process of getting the document registered before the office of the sub-registrar and making payment of the registration charges," says Niraj Kumar, partner, DSK Legal.

In order to avoid legal trouble, landlords prefer the 11-month tenancy. "In a lease where tenure is for a longer duration, often terms such as rent, tenant and tenure are used which invokes the possibility of tenancy by the other party (tenant) under rent control laws which are tenant-friendly. This can eventually lead to a protracted court battle in case of a dispute," says Soumee Bhatt, general counsel, BankBazaar.com.

Keeps the initial cost under check

Not going for registration, when the tenancy is less than one year, also saves the cost of stamp duty one has to pay in case they opt to go for registration of rent agreement. Usually, the landlord and the tenant mutually decide not to register the lease to avoid paying such high fees.

If one decides to register the rent agreement, the quantum of stamp duty depends on the rent and the period of stay. Longer the tenure of tenancy, the higher the stamp duty. So, even when one goes for registration of rent agreement, having a shorter period helps in lowering the big lump sum payable as stamp duty if the period is shorter. So both parties usually remain on the same page as far as it helps them to avoid paying a higher fee.

Notarising rent agreement is used as an alternative
In absence of registration, getting a rent agreement notarised is also an option many people go for. "Although the requirement of notarizing a rent agreement has not been provided for, the same helps in establishing the authenticity of the parties executing the agreement," says Kumar. This is why many people simply notarise the rent agreement.

Who benefits more from an 11-month agreement -- landlord or tenant?

An 11-month rent agreement favours the landlord when it comes to the termination of the agreement within a short span of time. "The landlord gets the opportunity to increase the amount of rent charged. Also, to avoid potential disputes and hassles, landlords prefer rent agreements which are for a shorter tenure," says Kumar.
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