After signing a rental agreement, the rental costs are set in stone until the end of the contract. In an emerging area where real estate values continue to grow, 12 months of fixed rents could cause you to miss a significant increase in market income. According to the Home Buying Institute, the average U.S. house price increased by 8.1% last year and prices are expected to rise by 6.5% over the next 12 months. This forecast was published in July 2018 and runs until the summer of 2019. If the agreement contains a security deposit, add Rs100 and Rs1.100 as a registration fee, bringing the total cost to Rs 6,240. The fees of lawyers or other intermediaries for all documents are not taken into account. While a tenancy agreement is more common, a short-term lease agreement between the landlord and the tenant may be preferred for a number of reasons. Before moving to a rented apartment, many landlords ask their tenants to sign rental agreements.
A tenancy agreement is a contract between the tenant and the lessor that gives a tenant the right to reside for a specified period of time in a property that usually includes a tenancy period of 6 or 12 months. A contract between the landlord and the tenant binds the parties to the tenancy agreement. “If the rental period is exceeded by an additional month, to say 12 months, several laws will come into force, which complicates the procedure for both the tenant and the landlord. To avoid such a situation, the duration of the tenancy is maintained at 11 months, regardless of the period for which the lessor intends to rent his property. This contract will be extended at a later date for a further term. In this way, several complications are avoided by both sides,” says Brajesh Mishra, a lawyer at Punjab-Haryana High Court. The Registration Act of 1908 requires the registration of a lease if the tenancy period is more than 11 months. In most cases, leases are considered “month to month” and automatically extend to the end of each period (month), unless the tenant or lessor has not noticed another. With a tenancy agreement, the landlord and tenant are free to change the terms of the contract at the end of each monthly period (if the corresponding termination procedures are followed). Most leases are signed for 11 months so they can avoid stamp duty and other fees.
Under the Registration Act of 1908, registration of a lease is mandatory if the tenancy period is more than 12 months. If an agreement is registered, stamp duty and registration tax must be paid. For example, in Delhi, for a lease of up to five years, stamp paper costs 2% of the total annual rent of one year. Add a flat fee of Rs100 if a security deposit is part of the agreement. For a lease of more than 5 years but less than 10 years, it represents 3% of the value of the average annual rent for a year. For 10 years and more, but less than 20 years, it is 6% of the value of the average annual rent of a year. The stamp paper may be in the name of the tenant or landlord. In addition, a flat-rate registration fee of EUR 1,100 million must be paid by the draft application (DD). If a property is rented for 24 months with a monthly rent of Rs20,000 for the first 12 months and 22,000 Rs. per month for the next 12 months.
The registration fee of this agreement would be: 2% of the average rent for 12 months: Rs5.040, (average monthly rent is Rs21,000, average annual rent is 21000 – 12 and 2% is Rs5,040). On the other hand, a lease is advantageous for a lessor because it offers the stability of long-term guaranteed income. It is advantageous for a tenant because it is stuck in the rent amount and length of the rent and cannot be changed, even if the real estate values or the rent increase.