With the real estate industry booming all over the country and increasing price appreciation turnover value, it’s a buyer’s market. And if you are planning to invest in a property, now’s the time.
Many people, after they acquire properties, just forget the gold mine they are sitting on. While owning a secondary property is a big deal, it doesn’t bring you any cash flow. You would end up spending more money on maintenance and other bills. What you can do, instead, is rent or lease your property to gain a constant source of income and create an additional cash-flow. As a landlord, you also stand a chance to get tax benefits in India.
But before you take the plunge, here’s a list of legal aspects you’d need to look into.
Finding The Right Tenant
Unlike other businesses, where you have a fixed set of rules and regulations, your leasing agreement would differ with each tenant. You could hire a real estate agency or use one of the many realty portals online. Once you find the tenant, make sure that you do thorough identity verification. Take complete details of the to-be tenant which includes address, identity, and employment proof.
Drafting Your Lease Agreement
Make sure that your lease agreement is crisp, clear, and entails all legal formalities. Insist on preparing a rent deed for a tenancy period of more than 11 months.
The deed should cover the amount of rent, period of tenancy, the process for premature termination, proposed increase in rent, recent tenancy laws, and the use of the property. It should be specifically mentioned whether the property is to be leased out for residential or commercial purposes.
You can also mention other legal aspects involved in subletting, misusing, or damaging the property. It’s recommended that you approach a lawyer to help you draft your property’s deed.
Registering The Lease
You need to register the lease you drafted if the tenancy is more than 11 months. Section 17 of the Registration Act 1908 mandates this. You would have to pay for the stamp duty and registration fees. Once the lease is registered, you can use it as evidence, in a court of law, in a case of any dispute.
Police verification is one of the ways you can ensure the authenticity of the tenant. It helps in eliminating the probability of being involved with anyone with a criminal background. All you need to do is fill out an online verification form available in the State Police website and register your potential tenant’s identity details. Not doing a police verification is a punishable offense under Section 188 of the Indian Penal Code.
It is based upon the market price of the property, location and cost of construction, amenities, and other factors. It would also differ according to the type of property it is, for instance, if it’s a commercial property, you can demand a higher rent.
Grounds For Eviction
You can ask a tenant to vacate your property if they have completed the tenure mentioned in the lease. Refusals to pay the rent, unlawful or illegal activities by the tenant, or subletting the property are some of the reasons which are valid for evicting a tenant.
By taking care of these measures, it can be ensured that the tenant or the landlord do not end up taking undue advantage of each other. So if you have a property that isn’t giving you any quick returns, instead of selling it you can lease it out to create a constant cash-flow into your household.