Dos and don’ts for renting out your house
Dos and don’ts for renting out your house
Although it may be relatively easy to rent out one’s house and earn regular income, there are a few things that one should be careful about before finalising a deal
The rental housing market has evolved over the years, with new legislations and registration procedures that help to protect landlords against the potential risk of tenants violating terms and conditions of the rental agreement.
The first step for landlord, is to identify the prevailing rental rates in the micro-market where the property is located.
“It is important to understand how much rent you can expect from the asset. Market your property through advertisements in local papers, online advertisements, property agents, etc. Do not compromise on giving basic amenities and make sure that your house is free from any major repairs and leakage problems. In short, make the house completely tenantable and create a value for your home,” suggests Kanchan Krishnan, director- Chennai, Knight Frank (India) Pvt Ltd.
Documentation required for renting out an apartment
Landlords should also have all the necessary documents in place, to ensure that their property remains in safe hands. Tenants, on their part, should check the title documents, to ascertain that the person renting out the house is the owner of the house.
“If the place that is being rented out, is a part of a cooperative society or colony, then, the share certificates also need to checked. A no-objection certificate from the association, which specifies the conditions on which the house would be rented, may also be needed. Documents, like electricity bill, PAN card, Aadhar Card, etc., should also be kept handy, as they are used as ID proofs,” adds Amit Wadwhani, director of Sai Estate Consultant.
Type of rent agreements
Always take a security deposit from the tenant, which is between one to six months’ rent, to ensure that you have a backup if the tenant does not pay the rent. A rent agreement, which is a legal document that binds the landlord and the tenant to comply with the conditions, is then made. The agreement should be drafted after consultation with a lawyer, to avoid any future issues.
“The landlord should carefully select the type of agreement that needs to be drafted with the tenant. It can either be a ‘tenancy agreement’ or a ‘leave and license’ agreement. In states where the Rent Control Act is prevalent, such as Maharashtra, Gujarat, etc., landlords prefer a leave and license agreement, as it curbs the rights and liabilities of tenants,” explains Shubika Bilkha, business head at the Real Estate Management Institute (REMI).
Registration of the agreement
“The agreement should be registered and stamp duty paid. In Maharashtra, the stamp duty on a leave and license agreement is 0.25% of the entire rent amount, whereas, for a lease agreement, it is like a sale deed (5% of the entire rent amount),” states Wadhwani.
“The agreement should include details about the rent/license fee and the frequency of the rental increase, security deposit details including its refund, common area maintenance charges, the tenants’ responsibilities, repairs and details on who bears the associated costs. Also, the responsibility of utilities charges, such as electricity and gas, must also mentioned, in addition to the termination clause and notice period before termination,” says Bilkha.
Tenure of rental lease
Normally the rental tenure is of 11 months which is ideal for smooth transactions. Leave and license agreements should not be more than 3 years, adds Wadhwani. “Some agreements have a lock-in clause, which states that a tenant cannot leave the rented property or terminate the agreement for a specified period. If the tenant leaves the rented property, he/she would be required to continue to pay the rent until the lock-in period is over. To deal with unwanted situations the landlord should safeguard himself by a clause, wherein, he has the right to give a notice to the tenant to vacate the place, even in lock in period,” Wadhwani advises.
Prashant Golecha, a Mumbai-based public relations professional, who has been renting out his house in Malad says, “Rent is a good source of monthly income. Always hire a trustworthy broker for your deals. Also, police verification of the tenant helps and most housing societies now insist on this. In the last 8 years, I faced a problem only once.”
Things that landlords should keep in mind, while renting one’s house:
- Always do a background check of the tenant, his family, marital status, profession and workplace.
- Try to verify the tenant’s income and check their debt ratio.
- After the agreement is ready, a police verification should be done, which requires both the parties to be present.