What is Rental Agreement and Its Types?

A rental agreement contains all the terms related to the rent of a House. It is an official agreement between the tenant and owner of a property. It is a legally binding contract outlining the terms and conditions of renting a property.

It is drafted on stamp paper. It establishes perfect mutual expectations.

It can be called a rent deed, or lease deed. It is essential for both tenants and owners. This rental agreement is prepared with all the terms of the rent. The rent agreement is mandatory if the agreement is 12 months or more.

The tenant can live in the property for the time mentioned in the agreement. House owners and tenants must follow the terms mentioned in the agreement. The contents of this agreement vary from place to place.

The Contents of the Rental Agreement

This agreement contains basic details of the residential property, like

Name of the landlord – The owner of the property and contact information.
Name of the renter (or tenant, as he is also called) and contact information.
Name of the agents. Description (Address) of the property. It includes the address of the property and any specific details about the rental unit.
The term of the rental period. The term of Tenancy indicates whether it is a month-to-month agreement or for a fixed term (e.g., six months or one year).
The amount of the rent agreed to be paid for the said term. And also, the due dates for payment, grace period, and late charges with acceptable payment methods.
The security deposit amount and the account where it is held. The conditions for its return and any deductions that may apply are also indicated.
Define who is responsible for maintenance responsibilities. Indicates who will take care of repairs and maintenance tasks during the tenancy.
The name of the person responsible for any other amount such as property tax, property repair changes, etc.
Mode of rent payment.
Methods to be applied to terminate the agreement before the expiration date.
The information regarding the utilities by the landlord. And details of how the charge will be determined if the landlord charges for such utilities.
The details of the facilities in the house premises. The tenant is entitled to use such as a swimming pool, security systems, etc.
The details of to-be-followed rules and regulations like pet rules, noise rules, and the penalty for violation.
Any restrictions on behavior (e.g., noise levels, smoking policies) and guidelines for property use (e.g., pet policies).
Available parking space details, including designated parking spaces, if the house owner provided.
Method of handling tenant repair requests and the procedures for emergency requests.

The above standards are entered to protect tenants’ rights to safe and habitable living conditions. It ensures that landlords maintain their properties adequately throughout the tenancy.

Security Deposit In Rental Agreement

Security deposit is the amount collected from the tenant signing the contract. The landlord can use part of the security deposit to recover losses/damages. Mainly damages caused to the furniture, appliances, electrical, or property by the tenant. And return the remainder of the deposit to the tenant at the time of cancellation or termination of the contract.

Types of Rental Agreements

The following are the important types of this agreement, each with its unique characteristics and purposes

Lease Agreement

This agreement grants the tenant exclusive possession of the rental property for a specified period. These leases last 11 months and can be extended further. It provides excellent stability and sets out the terms and conditions of the tenancy. It includes rent, duration, maintenance responsibilities, and other provisions agreed upon by both parties.

This type of long-term lease is often used for stable, permanent, or semi-permanent living situations. They receive more tax benefits. The long-term rentals have lower tenant turnover. In the lease agreement, the right to ownership of the property gets transferred from the landlord to the tenants. So, it becomes harder for the landlord to vacate a tenant. Hence, most of the landlords are avoiding this type of rental agreement.

Sublease Agreement

This sublease agreement is separate from the original tenancy agreement. It is between the original and a new tenant and it is separate from the original tenancy agreement. The original tenant becomes the sublessor. That means the subtenant enters into a new with the sublessor.

Rental Agreement (Month-to-Month Agreement)

This agreement is also known as a month-to-month agreement. It is a flexible tenancy agreement. It operates every month. It is the best option for short-term or temporary rentals. It is a license for the tenant to occupy the premises for a short duration. Short-term rentals are often used for vacations, business trips, or temporary work assignments. These agreements are renewed every month and terminated by either party.

License Agreement

This type of rental agreement allows the licensee to use and occupy the property for a specified period. However, it does not create a landlord-tenant relationship. It is different from a tenancy agreement. It is commonly used for commercial spaces, co-working spaces, or when the property owner intends to retain control. The terms and conditions of a license agreement differ from those of a typical tenancy agreement.

Leave and license agreement

It is a popular type of tenancy agreement. It allows the licensee to occupy the property for a specific period, usually up to 11 months. It is for residential as well as commercial properties. It offers greater flexibility to both the licensor and the licensee. It allows for easy termination at the end of the agreed period.

Advantages Of Rental Agreement

The advantages of a well-drafted rental agreement are

It clearly defines the rights and obligations of both parties, minimizing potential disputes and misunderstandings. It ensures perfect clarity.
It offers 100% legal protection to both parties in case of disagreements or violations of the agreed-upon terms.
It clearly defines the expectations and obligations. A clear definition of expectations, responsibilities, and procedures can mitigate potential conflicts between parties.
It serves as a reference document throughout the tenancy.
Rental agreement allows the parties to refer to the terms and conditions whenever needed and protects their interests.
It lays the foundation for successful interactions between them and highlights the responsibilities to be maintained throughout the tenancy. It minimizes the potential for disputes.
It serves as crucial evidence to support a party’s claims. Particularly in legal proceedings. It serves as evidence in legal situations where one party may need to enforce their rights
It fosters a smooth rental experience for both the landlords and tenants.

Common Responsibilities of Tenant

Complying and Adhering to Tenancy Terms

Tenants must comply with all special terms and conditions in the rental agreement. It may be an oral one or a written one.

Following Rules

Tenants need to obey the rules in the residential tenancy agreement. They have to follow the Residential Tenancies Act (RTA) and the specific terms of the agreement). Include any restrictions on behavior (e.g., noise levels, smoking policies) and guidelines for property use (e.g., pet policies).

Paying Rent on Time

Tenants are committed to paying their rent in full and on time. It clearly states the monthly rent amount, due date, and acceptable payment methods.

They have to follow the payment schedule outlined in the rental agreement.

Abreast of information on occupants to the Landlord

Tenants must properly inform the landlord about all occupants residing on the property.

Maintaining the perfect condition of the property

Tenants must keep the rental property intact. They should be in good condition. They should be free from damage beyond normal wear and tear.

Reporting Repair Details

Tenants should promptly inform the landlord of the details of repairs to be rectified then and there. And allow the timely landlord access to the property to conduct necessary repairs.

Granting Access to Landlord

Routine inspections and care for repairs of the landlord are necessary.

Tenants should cooperate with the landlord and provide proper access to the property for routine inspections and repairs. Landlords should usually maintain a schedule and need to arrange this in advance unless it’s an emergency.

Refraining from illegal activities and Avoiding Damage or Nuisance

Refraining from illegal activities on the premises is a must. Tenants must retain the condition and avoid causing damage to the property. Care for other tenants. And also, neighbors on the premises.

Care for the landlord and other tenants

Proper consideration for the landlord and other neighboring tenants is necessary.

Termination Procedure – Providing Proper Notice

The tenants must give the landlord proper notice as required by law or the rental agreement at the end of the tenancy.

Termination indicates the agreement ends. The termination may be due to notice by one party to the other. Either party can terminate. They have to inform well in advance of the required notice periods.

At the final settlement of dues between the parties regarding the property, such as the return of advance amount, payment for damages, etc., will be made.

Tenants have to meet these responsibilities. In case of deviance, the landlords have the right to take action. They can issue warnings or start eviction proceedings. At the same time, landlords must ensure the rental premises are habitable. Tenants have the right to demand the quiet enjoyment of their home.

How to Negotiate a Fair Rent Price for A Rental Agreement?

The following are the best ways to get the best deal possible.

Doing Proper Market Research

The local rental market was analyzed thoroughly to determine a fair rent price. Here amenities and services of the area are considered.

Familiarization with local tenant laws and regulations – Know Your Rights.

As a renter, familiarize yourself with local tenant laws and regulations

for Rental agreement. It will help to understand renter rights and responsibilities.

Being Respectful and Being Professional

Being respectful and professional in negotiations is essential. It will build a positive relationship with the landlord.

Ready To Quit – Being Willing to Walk Away.

If the terms of the agreement are not in favor, then be ready to walk away and look for a different property.

Conclusion

A perfect rental agreement is essential in establishing a positive landlord-tenant relationship.
It clearly defines the expectations, procedures, and responsibilities of both parties. It can mitigate potential conflicts.
Rental agreement enhances successful interactions between landlords and tenants and protect their interests.