Ritu Mishra, 26, decided to shift to an apartment where her friend stayed on rent. However, after an argument with her friend, Mishra wanted to shift from there. To her dismay, her friend refused to return her deposit.
Worse, there was no evidence on which she could claim her deposit — the original agreement was in the name of the former tenant. The landlord had allowed the two friends to share the apartment on an oral consent, without a fresh agreement.
Vinod Sampat, advocate and property expert, says landlords are ignorant when it comes to filing and registering lease agreements. “For instance, most landlords won’t bother to file a new agreement if there is an additional licensee (or tenant) to stay in his apartment.”
This is primarily due to two factors: First, they don’t want to disclose their rental incomes to evade tax and second, it is cumbersome to draft and register the agreement; it also involves costs (usually up to Rs 2,000).
Bheru Choudhary, partner, IC Legal Advocates & Solicitors, says, “Some landlords may also produce a leave & licence agreement as a service agreement in order to evade tax.” Therefore, a fresh agreement between the landlord and all tenants sharing the apartment is vital.
According to a Prabhudas Lilladher report on real estate report, lease registrations are seeing a rise. “Lease agreements in April 2013 increased six per cent compared to the corresponding period last year,” it said. These registrations were of leave & licence agreements of commercial and residential properties.
In case you don’t possess copy of a fair agreement, you wouldn’t be able to claim tax deductions by way of house rent — one has to submit copies of the rent agreement and receipts to avail of this deduction.
Anshuman Jagtap, advocate at Hariani & Company, says, “There are chances the landlord might not even take every tenant for police verification if he wants to evade tax and not disclose his rental income.”
Police verification is mandatory for every tenant. “Police verification indicates the tenant comes from a safe background. Police verify this from a criminal angle. Therefore, this will not only be good for the landlord, but also the tenant,” says Choudhary. Proof of the verification has to be provided to the housing society.
Apart from the likelihood of losing the deposit and tax benefits, the lack of an agreement could also lead to hurdles when it comes to sharing regular charges for an apartment. Therefore, ensure the do’s and don’ts related to the property are clearly mentioned in the final agreement. Clauses that can result in termination of the agreement, or penalties the tenants have to bear in case of any damage to the property, are vital.