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Why is a rental agreement made for 11 months?

If you have ever let out a property on rent or have lived in a rented accommodation, you must be well-versed with what is a rent agreement. But do you know why is it only for eleven months? Or why at all is it essential to have a rent agreement?

Well, a rent agreement is a document which defines the legal relationship between a landlord and a tenant, along with clearly stating out the obligations of the parties. The terms and conditions, as mentioned in the agreement, are binding on both the parties.

Significance of a Rent Agreement

As stated earlier, a rent agreement specifies the entire terms and conditions on the basis of which a property is let out. This includes, the description of the property, the monthly rent as agreed upon between the parties, the security deposit, the purpose for which the said property can be used, the proposed term of the agreement, the notice period, and the circumstances under which the said agreement can be terminated along with other vital inclusions, if any.

Originally meant to safeguard the interest of the parties, the rent agreement can also be used as an evidence in case of a dispute surfacing out of the property.

“Rent Agreement is basically a documentation of the terms mutually agreed between the owner and the tenant, to avoid potential disputes in the future. It is a mandatory requirement by a majority of gated societies nowadays which enables the tenant to avail all the benefits that the society provides”, avers Mr Sandeep Tibrewal-a Noida based property dealer.

Why only eleven months?

As per the requirements of the Registration Act 1908, registration of a property, on lease for a year is obligatory. Therefore, to skip the tedious process of registration, the rent agreements are usually drafted for a period of eleven months. If it extends beyond that, it needs to be mandatorily registered under the Act, as mentioned here above and the repercussions of this would be many.

In case of an agreement being registered, payment of stamp duty and registration fee becomes imperative. It is to circumvent the payment of such hefty charges, the landlord and the tenant may mutually agree to not get the agreement registered. Further, a rental agreement of 11 months, gives more flexibility to the landlord as the rent can be set as per the prevalent market scenario and a periodic renewal of the same is possible.

However, it is not mandatory for the agreement to be for eleven months. Renewable/extendable agreements of three to five years can also be made as per the assent of the parties.

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