Explained: Why Are Most House Rent Agreements In India Only For 11 Months?

Many of us must be either currently living or have lived in a rented house, right? Even if not, then you might have come across your friends or relatives residing in rented houses at some point of their lives, isn't it? If yes, then one thing that you are likely to have heard, is that most rent agreements in India are only for 11 months. Have you ever wondered why this happens?

As 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 of duration can be made without registration. This enables the involved parties to avoid the process of getting the document registered before the office of sub registrar and making the payment of applicable registration charges, as per an ET report.

That is why, many landlords prefer the 11 month tenancy agreement.

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Moreover, not going for registration when tenancy is less than one year also saves the cost of stamp duty which 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, the report mentioned.

In case one decides otherwise to register the rent agreement, the quantum of stamp duty depends primarily on the rent and the period of stay. So, longer the tenure of tenancy, higher the stamp duty is, usually. Even if 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. That¡¯s why both parties usually try to remain on the same page as far as it helps them to avoid paying higher fee.

And that¡¯s not all. In the absence of registration, getting a rent agreement notarised is also an option many people go for, as per ET report. This helps in establishing the authenticity of the parties executing the rent agreement.

Also, it is reportedly considered easier to come out of a non-registered agreement which is notarised only. An 11-month lease agreement can be put to an end after the said period usually through a simple one-month notice. "An 11-month notarised lease allows the landlord greater flexibility because the rent can be set in accordance with market rate and can be renewed on a regular basis," says Bharat Chugh, former judge and lawyer, Supreme Court, as per ET report.

He added "If it has not been specifically agreed to in the lease agreement between the parties executing it, it is the responsibility of the lessee to pay the applicable stamp duty. Thereafter, from a monetary point of view, a tenant benefits more from an 11-month agreement as he can avoid the responsibility of paying the applicable stamp duty and registration fees."

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What¡¯s Advisable?

The report mentioned that it is advisable that parties must pay the requisite stamp duty on the rent agreements proposed to be executed by them, be it for an 11-month lease or a longer term. "It is advantageous for the parties to execute a residential rent agreement for at least 11 months so that the other party does not meddle with the rights and benefits of the counterparty and creates binding and enforceable obligations upon both the tenants and the owner," says Bharat Chugh, former judge and lawyer, Supreme Court.

Adding, he said "If the parties are desirous of a longer tenancy and relationship, they should get it registered. This ensures that both parties stick to the bargain and comply with the terms of the lease," the former judge and lawyer mentioned as per the report.

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