A rental agreement or lease agreement is an official contract signed between the owner of a property and the tenant who wishes to take temporary possession of the property for usually a predefined time. Further, it shall be drafted on a stamp paper.
In India, currently, there are two types of rental agreements. There is no established GST rental agreement format.
A lease agreement documents the arrangement of a lease, of any possible asset, including car, house etc. and is valid for such period as prescribed in the agreement. In the case of lease agreements, the right to the property gets transferred from the landlords (lessor) to the tenants (lessee). This protects the tenants from sudden or unfair eviction demands and prevents the landlords from overcharging the tenants. The rental control laws are currently favouring the interest of tenants.
On the other hand, rental agreements are generally for renting assets, usually for a short period, between the owner of the asset and the tenant. For example, rental agreements for residential properties are usually for 11 months. For a tenant, this agreement is a contract showing valid permission to occupy the premises of the owner. Unlike the lease agreement, in this, the ownership of the asset stays with the owner. In a case of tenant eviction from the property, this agreement allows the landlord to take legal measures.
The most common details included in a rental agreement are:
Security deposit is an advance payment of rent. It works as a backup/security for recovery of dues and losses. This has to be paid by the tenant to the landlord (if asked), at the time of signing the rental agreement. The landlord shall repay the amount after the termination of the contract subject to the conditions mentioned in the agreement. In case if the tenant damages the rented property, the amount can be deducted from the security deposit by the landlord. For instance, if a tenant breaks a window (causes damage to the infrastructure of the property), then, the landlord can use the security deposit towards making good the damage.
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