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Essentials of Rent Agreement

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38 views2 pages

Essentials of Rent Agreement

Uploaded by

d4w4jv8tyr
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Essentials of Rental Agreement

letsgetlegal.in/essentials-of-rental-agreeement

ESSENTIALS

1. Name of the Parties:

In a lease two contracting parties are necessary. The parties are lessor and lessee. Every
lease is based on an agreement between two persons competent to contract. Lessor is
the person who transfers the right of enjoyment of his property to another person. Lessee
is the person to whom property is transferred to. Both lessor and lessee must be
competent to enter into contract – shall not be a minor and of unsound mind.

2. Right to enjoyment or demise:

Lease is a transfer of enjoyment and not ownership, it is transfer of partial interest. Lease
is therefore, transfer of limited estate. This right is right in rem.

3. Immovable property:

In a lease, the property must be immovable. Immovable property here means only land
but everything included in this term as defined under Section 3 of Transfer of Property of
Act. Thus, the property may be a house, minerals, benefits arising out of land such as
fisheries, ferries or right to collect rent from a market. However, the property being leased
out must be definite and ascertainable.

4. Duration of Lease:

Lease Agreement shall have a statement enumerating the duration for which the property
is to be leased. The duration can vary from a year to a longer period of time. The date of
commencement may also depend on some future event. The specific mention of date is
not necessary. All that is required is that duration of lease is ascertainable, it should not
be uncertain or ambiguous. The extent of the period during which the lease may remain
effective may be perpetuity.

5. Consideration:

Consideration is an essential element for a valid Lease Agreement. Consideration


depends upon the type of lease entered into for e.g., Agricultural Lease in such type of
lease the consideration may be provided in the form of goods or other services. Rent
payments are the usual form of consideration in Lease Agreements. It may be premium
or rent (paid periodically). Rent fixed for lease must be certain.

6. Sub-lease:

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Unless there’s a contract to the contrary the lessee can sub-let the whole or any part of
his interest in the property to another subject to Terms & Conditions mentioned in the
Agreement.

7. Security Deposit:

A pre-agreed sum of amount between the parties for a specified period of time is to be
given by the lessee and the same shall be held by the lessor as a security deposit.
Usually security deposits are refundable at the end of the term of the lease.

8. Notice Period & Terms of Renewal:

The said clause contains the period before which the landlord has to give a reasonable
notice to the tenant to vacate the property. Moreover, some lease Agreements also
contain provision of auto renewal or no renewal whatsoever. These terms of renewal
should be clearly mentioned. And at the end of the lease period it’s at lessee’s discretion
whether he wants to renew/terminate the lease or buy the asset.

9. Exit clause:

In case the lessee terminates the lease before the prescribed period then in such case
any loss suffered by the lessor shall be borne by the lessee. And the lessor shall be
entitled to such other compensation as may be required.

10. Signature and Date:

The Agreement must be read over and understood by both the parties then signed and
dated under their hand to make the Agreement valid and enforceable.

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