Why Are Most Lease Agreements In India Only For 11 Months?

Rent Agreement
Rent Agreement

A rent agreement is a written document that outlines the rights and obligations of the parties as well as the legal relationship between a landlord and a tenant.

What are Rent Agreement?

Have you ever rented a house? If so, your landlord may have instructed you to sign the lease for a period of 11 months. In India, this is usually the norm. Although the agreement can be renewed multiple times, have you ever wondered why most rental agreements are only for 11 months?

A rent agreement is a written document that outlines the rights and obligations of the parties as well as the legal relationship between a landlord and a tenant. The terms and conditions of the agreement must be adhered to by both the parties.

Legal experts say that due to complex procedures and laws that favor tenants, it is extremely difficult to vacate a leased property in India. It often takes years for the landlord to get justice due to procedural delays, during which time the tenant will still be using the property.

According to a report in Economic Times, if the tenancy is less than one year, there is no need to register. A lease agreement of less than one year duration is not required to be registered under Section 17 of the Registration Act of 1908. This implies that leases of less than one year can be signed without registration.

When the lease is less than one year, paying stamp duty can be avoided by opting not to register the lease, saving money in the process.

The amount of stamp duty is determined by the rent and the period of stay if one chooses to register the rental agreement.

The longer the tenancy, the higher the stamp duty. So, even if a rent agreement is registered, a shorter tenure will help reduce the large lump sum amount to be paid in stamp duty.

Therefore, while it helps the landlord and tenant avoid paying a large sum of money, the two parties are often on the same page. Many people choose to have their rental agreement notarized rather than registered.

According to a report in Financial Express, in the state of Maharashtra, there is a concept known as leave and license agreement, which can only be for a maximum of five years. Under this arrangement, the owner, or licensor, gives the licensee permission to occupy the property only for the specific purposes set forth in the agreement.

In Maharashtra, leave and license agreements are more common than lease agreements as the licensee is given the right to occupy the property only for a certain period of time, while the lessee is given rights that are more protected by law.

A similar practice is prevalent in Delhi, where 11-month leases are more common than long-term rentals.