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Signing a lease agreement? Important facts to know

September 02, 2009 12:35 IST

If you have moved into a new city and are in search of a rented accommodation or planning to sign a lease or leave and license agreement with your landlord, here's what you must know.

1. What is the difference between a lease agreement and a leave and license agreement?

A lease, defined under Section 105 of The Transfer of Property Act, 1882, is a transfer of the right to enjoy the concerned property for a pre-defined time period or in perpetuity. The lessor (owner of the property) gives the lessee (the one leasing the property) such consideration periodically, usually at the beginning or end of a lease agreement.

License is defined in Section 52 of the Indian Easements Act,1882. License does not allow any interest in the premises on the licensee's part. It merely gives the licensee the right to use and occupy the premises for a limited duration.

A lease deed needs to be stamped and registered. The amount payable towards the lease deed's stamp duty is more than that payable towards the leave and license's. For a period exceeding three years, the stamp duty is same for both agreements.

2. What are the implications of entering into a lease agreement?

There are various implications of entering into a lease agreement.

Here is a list of implications for you:

  • You have to pay the stamp duty.
  • The lease agreement has to be registered.
  • You have to pay the additional municipal taxes.
  • You have to pay income tax on any income derived from sub letting the lease property.

3. Why is it considered necessary to register a property? What is the purpose of registration?

  • By registering the transaction of an immovable property, it becomes permanent public record. This is a notice to the general public. Those getting transfer of property should verify whether such property has been previously encumbered.
  • According to the Transfer of Property Act, 1882 right title or interest can be acquired only if the deed is registered.

4. Is one required to register existing tenancies?

Yes. It is required that an individual registers existing tenancies.

5. Is there a provision that binds the landlord to spend a certain percentage towards the maintenance of his property?

No, there is no such provision that binds the landlord to spend a certain percentage towards the maintenance of his property.

6. If a property is kept vacant for a period of twelve months, can it be rented out at market rent?

Yes, a property can be rented out at market rent.

 7. How many months rent can the landlord take as deposit?

A land lord can take a maximum of three months rent as a deposit.

8. How is the market rent determined?

There is no prescribed norm for determining the market rent rate though it can be easily found out by approaching individuals such as brokers, registration authority, etc...


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