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10 mistake to avoid while making Rent Agreement

Renting an unused property is very good idea for generating an additional income. It is inevitable to make a rent agreement before giving property on rent. Rent agreement or lease agreement is a legal proof that proves that you have given property on lease to the tenant. You need to be extremely careful while making a rent agreement. However, it is generally seen that the task of making Rent agreement is outsourced to a property agent. Property agent does copy paste from old available rent agreement. Any mistake made in a rent agreement makes a life of landlord miserable. There are known cases where It becomes very difficult by a landlord to sort out legal conflict or to deal with fraudulent tenants due to legal mistakes made in a rent agreement. If you are planning to rent your property here is 10 common mistake to avoid while making a rent agreement.

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What is Rent Agreement or Lease agreement?

A rent agreement is a document which allows property owner (landlord) to authorize a person (tenant) to temporarily occupy and use the immovable property for the residential or commercial purpose. The agreement should be made on stamp paper and should be registered with the registrar at the place of a jurisdiction where the property is located. There are legal contract management companies you can take help from them.

rent agreement

10 mistake to avoid while making Rent Agreement

Duration of Lease 

It is very important to specify a duration of the lease in the rent agreement. Any mistake in this regard can be very costly to the landlord. If you are renting a residential property you should enter in leave and license agreement with 11-month lease.  This lease period can be of longer duration in case of factory, office premise, mall or cinema hall.

Termination clause and Notice period

A Rent agreement should clearly specify termination clause and notice period. The termination clause should be two sided stating that either of the parties can terminate the contract for any reason. The notice period is kept as one month or three months.

Lock in clause

One common mistake observed in agreement is the absence of lock in clause. Lock-in clause says that tenant cannot leave rented property before specified period. In case tenant decide to leave the rented property before lock in period he/she needs to pay the rented amount for the lock-in period as specified in rent agreement.

Also Read – Should you buy or live on rent?

Security Deposit clause

The agreement should clearly specify security deposit amount and refund condition. It should also specify that under what condition deposit amount shall be deducted.

Payment Clause

The agreement should clearly specify rent amount and grace period applicable for the payment. You should also specify mode of payment like cash, cheque or internet transfer.

Payment Default Clause

The agreement should clearly specify payment default clause or payment delay clause. It should clearly mention applicable penalty amount and consequences of default.

Sub Letting Clause

Not specifying subletting clause in the agreement is dangerous. By not specifying subletting clause you are allowing nasty tenant to sublet the property. In absence of this clause the tenant may sub lease the property to undesirable people.

Repair work during Occupancy

The repair clause should be specified clearly in the rent agreement. It should say that who will be responsible for the repair. It should also specify under what time period occupant is accountable for reporting damage for repair.

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Dispute Resolution Clause

The dispute resolution jurisdiction should be clearly specified in the rent agreement. This will be helpful in case of disputes between landlord and tenant.

General nuisance clauses

The rent agreement should contain clause of prohibiting tenant from creating noise, unlawful act and nuisance for the neighbors. It should also say what action will be initiated under such condition.

Other Conditions

Apart from the above mention clause you should also consider following points before giving property on rent.

  • Never give property possession without rent agreement.
  • Don’t forget to register your rent agreement.
  • Proper Identification of property, landlord detail and tenant details should be specified in agreement.
  • If flat is furnished agreement must contain complete list of furniture/appliance etc and approximate cost.
  • It is good idea to specify enhancement of rent payable year on year in the rent agreement.
  • The rent agreement should be made in the local language applicable in the state.

I hope above post will help you in making your rent agreement. If you have any query related to renting your property do share it in the comment section.

Shitanshu Kapadia
Shitanshu Kapadia
Hi, I am Shitanshu founder of moneyexcel.com. I am engaged in blogging & Digital Marketing for 10 years. The purpose of this blog is to share my experience, knowledge and help people in managing money. Please note that the views expressed on this Blog are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment , tax, financial advice or legal opinion. Please consult a qualified financial planner and do your own due diligence before making any investment decision.