How to draft a lease agreement?
Normally only advocates and licensed deed writers are permitted to draft deeds. However on many occasions general public draft common deeds relying on the models they have. A lease agreement or a rental agreement is a very common document used by the public. In many cases the real estate agents themselves take upon the role of a deed writer. However, let us see the essential requirements of a lease agreement.
The person who lets out a premise for lease is known as Lessor. The person who takes the premises for his use is known as the Lessee. The premise which is the subject matter of the lease is the Leased premise.
A lease agreement shall contain the time period of the lease. A lease agreement for a period of more than 1 year need to be registered in the state of Karnataka. Hence the usual practice is to go for a lease of 11 months and then renew the same for further periods. The lease agreement shall be properly stamped.
The lease agreement shall mention the rent reserved for the premises as well as the date of payment of the same. Similarly it shall contain the details of the security deposit paid. Normally the security deposit shall not bear any interest.
There should be a proper description of the premises leased. Further the responsibility of payments of electricity bills, water bills, telephone bills etc, is on the Lessee. However, it is the duty of the Lessor to pay the land and building taxes.
The mode of termination of the lease shall be clearly spelt out in the lease agreement. Similarly there should be a provision for the issuance of notices to each party.
The terms Lessor and Lessee shall be deemed to include their successors, executors, legal representatives and permitted assigns. In the schedule, the leased premises should be described properly including the municipal number, the area and floor of the leased premises.
It shall contain the mention of the nature of activity permitted in the premises. Further there should be a mention that the Lessee is not permitted to sub-let or sub-lease the premises.
Normally, there is one clause to the effect the Lessor will have the right to inspect the leased premises after giving sufficient notice to the Lessee. Few agreements provide for a ‘Lock-in-period’ where neither of the parties can terminate the agreement.
Usually, late payment of the rent attracts interest at 18% per annum. It is a duty cast upon the lessee to deduct TDS if applicable and to furnish TDS certificate to the Lessor in time.
In case of apartments and shopping complexes a separate maintenance charge is also demanded for the maintenance of the common areas. There should be an understanding as to whether this is included in the rent or not.