The trend of a rented living has flourished at its zenith in the urban areas of India. With a surge in educational and employment opportunities, more and more people are now pursuing rented accommodations than ever. So, while you seek or live in a rented house or a flat, do you know about the registration of the rent agreement? Have you done it? What are the conditions? And the most important; is it essential to register a rental agreement?
RENTAL AGREEMENT REGISTRATION
As per Section 17 in the Registration Act 1908, it is quintessential to register for leases and rent of immovable property from year to year or for any term beyond one year.
If the rental agreement is drafted for 12 months or more, then a rental agreement registration becomes essential. You can register a rental agreement at the registrar’s office in that city. The registration fee of a registered rental agreement differs from state to state. The registered rental agreement is legally binding on both the parties and is admissible as proof in a court of law.
A landlord may rent out his property for differing periods. Stamp duty on the rented property depends upon the time for which the property is rented:
|Time||Payable Stamp Duty|
|Rental agreements between 1 to 5 years||2% of thrice the average annual rent.|
|Rental agreements between 6 to 10 years||2% of four times the average annual rent.|
|Rental agreements between 11 to 20 years||2% of five times the average annual rent|
|Rental agreements beyond 20 years||2% of the six times the average annual rent.|
Only the rental agreements of more than one year should be registered. For other rental agreements that are of less than one year (for example, 11 months), notarizing it with the notary public and paying the stamp duty is good enough and credible.
Now that we have understood the basics of rental agreement registration, let us understand the procedure for registration of a rental agreement:
- Get a rental agreement drafted by a lawyer.
- If you are the tenant, you need to get the rental agreement printed on a specific value stamp paper.
- Both tenants and landlords need to sign at the designated places on the rental agreements.
- Get the signature of two witnesses who are not related to either the landlord or the tenant.
- After this, both the tenant and the landlord must be physically present at the sub-registrar’s office of their sub-locality.
- Both tenants and the landlord, and two witnesses need to carry their two passport-sized photos and ID cards for verification and validation.
- Any third person or any agent cannot carry out the registration of the rental agreement.
- As soon as you pay the stamp duty, the registration is complete.
The registration fee for a rental deed agreement is typically around INR 1100. The rental agreement registration fee is payable regardless of the rental amount or the property value. The stamp duty charges are also applicable to the registration fee for the rent agreement.
Documents Required for Rent Agreement Registration
Following documents are required for a registered rent agreement:
- Original ownership documents or title deed.
- Two passport-sized photographs (tenants, landlords, and two witnesses).
- Aadhar card
- A government authorized identity proof (voter Id, passport, driving license, etc.)
- If the tenant is a company, then an authorization letter from the company is required. This authorization would validate the tenant’s right to register.
DIFFERENCE BETWEEN A REGISTERED AND A NON-REGISTERED RENTAL AGREEMENT
The differences between a Registered and a Non-Registered Rental Agreement are as follows:
|Registered Rental Agreement||Non-Registered Rental Agreement|
|Rental agreements for 12 months or more.||Rental agreements for a period of less than 12 months.|
|Can be admitted as proof in a court of law.||Difficult to present as evidence in a court of law.|
A notary may notarize a non-registered rental agreement. However, even then, it may be admissible only as proof of address and may not be sufficient to protect the parties’ rights. You can prepare a non-registered rental agreement on Stamp paper issued by the state.
Hence, in an 11-month rental agreement, registration is not mandatory. You would have noticed that typically, tenancy agreements are for 11 months. You may choose to enter into an 11-month rental agreement to avoid the compulsory registration requirement.
Is there any penalty for not registering the rental agreement?
If somehow you do not register the rent agreement with the authorities, you may end up paying 10 times the original amount (Plus the outstanding registration charges and stamp duty charges) as a penalty