Why most agreements run for 11 months
Under Section 107 of the Transfer of Property Act, 1882, a lease from year to year, or for more than one year, or with a yearly rent, can be made only by a registered document. Section 17(1)(d) of the Registration Act, 1908 says the same.
A lease for 11 months is shorter than a year. So central law does not require it to be registered. That saves the registration fee and a visit to the Sub-Registrar.
If a lease that should have been registered is not, it cannot create the lease in law (Section 49 of the Registration Act). A court may still look at it for limited purposes, but you lose much of its protection.
Renewing an 11-month agreement every year is legal. Each renewal is a new agreement and needs fresh stamp duty.
Check your state's rent law
Rent law is a state subject. Some states have passed newer tenancy laws along the lines of the Model Tenancy Act, 2021, which the central government sent to the states as a template. Where such a law applies, owners and tenants may have to inform a Rent Authority within a fixed time, whatever the length of the lease.
Before you sign, check the rent law of the state where the property is.
Clauses to include
- Parties. Full names, ages and addresses of the owner and the tenant.
- Property. Door number, floor, address, and what is included, such as furniture, car parking or a meter.
- Period. Start date and end date.
- Rent. The amount, the due date each month, and how it is paid. Bank transfer leaves a record.
- Increase. If rent goes up on renewal, say by how much.
- Deposit. The amount, and when and how it is returned. Say what can be deducted, such as unpaid rent or damage beyond normal wear.
- Charges. Who pays electricity, water, maintenance and property tax.
- Use. Residential or commercial. Whether the tenant can sublet. Usually not.
- Repairs. Minor repairs by the tenant, structural repairs by the owner.
- Notice to leave. The notice period for either side. One month is common.
- Lock-in. If neither side can end the agreement early, say for how long.
- Handover. The condition of the property on return, and a joint inspection.
If the agreement says nothing about notice, Section 106 of the Transfer of Property Act treats a lease for a residential purpose as month to month, ending on 15 days' notice. It is better to write your own term.
Stamp paper and stamp duty
Every rental agreement must be stamped. The duty is set by the stamp law of each state and depends on the rent, the deposit and the period.
- Pay the duty before or at the time of signing. Many states sell stamp paper as an e-stamp certificate online or through authorised vendors.
- Buy the stamp paper in the name of one of the parties, usually the tenant or the owner.
- An unstamped or under-stamped agreement cannot be used as evidence until the duty and a penalty are paid (Section 35 of the Indian Stamp Act, 1899, and similar sections in state stamp laws).
Do not rely on a fixed figure you saw online. The rate differs from state to state and changes over time.
Signing
Both parties sign every page. Two witnesses sign at the end with their names and addresses. Each side keeps an original or a copy.