What are the types of tenancy agreements in India?
February 11, 2022|Posted in: real estate
Renting out flats in Kerala can be a tedious process if you are not familiar with the nuances! Check out the different types of tenancy agreements in India. These agreements, if not executed responsibly, can give rise to disputes in future.
There are three different arrangements like:
Rent agreement
A legal contract between a property owner and the potential tenant who wants to take temporary possession of a specified property. It contains details like of the property owner and the tenant, property, rent amount, late payment charges, grace period, security deposits, facilities, repairs and maintenance charges.
Generally of a shorter duration, for 11 months in India, rent agreements need registration if the tenure period is more than 11 months. In case of breach, the parties can approach the court to get the necessary relief based on the terms of agreement. Only a registered rent agreement is legally bound by the Transfer of Property Act, Specific Relief Act, Evidence Act and Registration Act etc.
Lease Agreement
A lease agreement is a contract between the landlord and the tenant, generally signed for a longer period than the rent period (more than 12 months). A property on lease means the tenant gets the right to use the property for the enumerated time frame & landlords can avoid the fluctuations in sustainable income.
The agreement binds the landlord and the tenant for the tenure, unlike a rent agreement and the lessee does not evict the premises unless stated explicitly in the agreement. A lease deed must be stamped and registered legally. It creates interest in the property, is transferable and creates inheritable rights.
The main disadvantage of lease agreement is that the lessor might lose on incremental income if the market value of the property increases during the lease period. If the landlord stays far, he/she can execute a Power of Attorney (PoA) in favour of an acquaintance residing in the vicinity of the property to receive the rent & do other legal measures.
Leave and Licence Agreement
The licence holder can occupy the property of the Licensor through this agreement which comes under the Indian Easement Act 1882. It always grants a ‘permission’ to occupy a premise but never rights. This makes the eviction of the occupier easier as it is revocable than a lease agreement.
The lease agreement creates an interest (right) in the property, inheritable rights and is transferable, whereas a Leave and Licence Agreement is not.
Differences between Lease & Leave and Licence Agreement
| Parameters | Lease Agreement | Leave and Licence Agreement |
| Transferable | Yes | No |
| Inheritable | Yes | No |
| Creates transfer of an interest in favour of the tenant | Yes | No |
| Affected by the sale of property | No | Yes |
| Compulsion to mention rent amount | Yes | No |
| Compulsion to serve a notice of termination | Yes | No |
| Permission of subletting | Yes | No |
| Revocable by the landlord | No | Yes |
| Power of Attorney | Yes | No |
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