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Saturday, Aug 24, 2019

Rental agreements are changing with changing CHS norms, lifestyles

As ownership patterns change and luxury facilities become more common, leave and licence agreements are seeing clauses added on aspects such as use of address, use of facilities and more.

real-estate Updated: Mar 23, 2019 18:25 IST
Vanessa Viegas
Vanessa Viegas
Hindustan Times
(HT Illustration: Sudhir Shetty)

The big shift at the turn of the century, in the rental markets space, was from rent agreements to leave and licence ones. The latter treats each fresh agreement as a new undertaking, with the agreement typically being renewed every 11 months; while the former allowed long-term tenants to claim occupancy rights under tenancy laws.

“From a regulatory point of view, this was a huge shift because the leave and licence (L&L) agreement operates in such a way as to give reasonable rights to both parties, allowing for hassle-free re-possession of a home upon the termination of each agreement,” says Gundeep Singh Uppal, founder of the property management firm SimpLease India. “Now, registration of leave and licence agreements is compulsory in states like Maharashtra, regardless of duration, which makes renting out a home easier and more transparent.”

One big advantage of the L&L format is that it is flexible and can be altered to suit the requirements of the two parties entering into the agreement. Over the past two decades, the terms of L&Ls have accordingly seen subtle changes, many of them reflecting how residency and ownership patterns are changing.

For instance, power of attorney has become a vital tool, with many realty investors living in different cities, states and countries. This means that the lessee must look carefully to ensure that the person signing the agreement is authorised to do so. Sometimes, this person may even be an entity, or an e-entity — as start-ups mushroom, offering professional real-estate management options to people living away from their investments.

“Today a slew of online establishments act on behalf of the owner to get into a secondary lease,” says Rahul Grover, president for sales and operations at Sai Estate Consultants. “This usually happens when the owner is an NRI.”


Another interesting change is new clauses that stipulate the lessee’s rights when it comes to the use of housing society infrastructure. With townships now offering pools, spas, clubs, gyms and sky parks, some at an extra cost and some free, it has become important to stipulate which facilities are included in the agreement, and who will pay for them.

As more Indians migrate, move around, and travel, some home owners are relaxing the rules when it comes to use of an address for official purposes. Many are still not comfortable with this. “One of my clients asked me to add a clause that explicitly states that no one can use her address as a temporary address on their Aadhaar card or to even buy a car,” says Surendra Gupta, a real-estate broker. “This is done to protect the owner from a legal trouble in case the tenant is involved in any illegal activities. However, these clauses change from lease to lease and from tenant to tenant depending upon the negotiations between the landlord and tenant.”

Young urban tenants are now also asked to furnish proof of employment. Many housing societies have rules that ask home owners to present their potential lessee for an interview so that the office-bearers can screen them too.

“A background check is desirable. While Mumbai Police had clarified last year that it was not required for tenants to procure an NOC from police, the society should take due care in assessing details like profession and ability to pay rent on time,” says Arvind Nandan, executive director for research at realty consultancy Knight Frank India. “Some housing societies have set up small committees that meet and screen potential tenants. In most cases, it is just a formality; however, some societies have a stringent screening criterion.”

First Published: Mar 23, 2019 18:25 IST

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