Why are Rent Agreements for 11 Months?

Most of you must have experienced living in a rented house while pursuing education or during the job. While some might have put a property on rent. In both cases, you must have signed a rent agreement. So, have you ever wondered why the majority of these rent agreements are for 11 months only? Most of the time, neither the landlord nor tenants and real estate agents know the reason behind this. If you are interested in knowing why this is so, continue reading this blog.

Let’s begin by understanding what is a Rent Agreement?

Rent agreement (also known as lease agreement) is a legal document signed between the property owner and the tenant. This contract binds both parties and safeguards their interests. It mentions the terms and conditions on which property is let out on rent and includes the information of landlord, tenant, and property. It also includes monthly rent, duration, the purpose of using property whether residential or commercial, etc.

What is the Significance of a Rent Agreement?

As stated before, a rent agreement specifies the number of clauses such as the description of the property, amount of rent, security deposit and so on. This also mentions the circumstances under which the agreement can be terminated. It can be said that a contract, which was originally made to safeguard the interest of both parties, can also be used as evidence in case of any dispute later on.

Therefore, a rent agreement is documentation of mutually agreed terms and conditions by the owner and renter. This is the reason why it acts as a piece of evidence when a dispute arises between the owner and tenant with respect to the property. Nowadays, the majority of societies in Delhi and Noida mandatorily require a rent agreement to be signed.

Why are Rent Agreements only for 11 months?

As per the Registration Act 1908, registration of lease agreement is mandatory if the rental period is 12 months or more. So, to skip the long and tiresome process of registration, rent agreements are usually drafted for 11 months only. To make your agreement get registered, you will need to pay for stamp duty and registration fee.

To avoid such hefty charges, renter and owner mutually agree to not get the agreement registered. Hence, most of the rent agreements are signed for a duration of 11 months. Also, creating a rental contract for 11 months gives flexibility to the landlord in setting the rent as the prevailing market scenario.

So, if the duration is extended beyond this duration, there would be many repercussions. From the monetary perspective, stretching it more than 11 months span would be uneconomical and from a legal perspective, the whole process will be slow.

What is the Consequence of Extending the Rent Agreement Beyond 11 Months?

Following are the consequences that you will need to face if the rental agreement is extended for more than 11 months:

• Monetary Impact

Under Section 17 of the Registration Act, 1908, rent agreements of more than one year are required to be registered with the local authorities. This makes both parties pay for the stamp duty and registration fees. Generally, it is the tenant who has to pay for the additional charges of renting.

• Legal Repercussion

If your rental document of more than a year’s validity is unregistered, it won’t act as a proof of evidence in the court, in case any dispute arises. Together with this, a fat penalty is also imposed if the registration of the rental document is not done.

Is a Rental Agreement of 11 Months Valid?

Many people doubt whether an 11-month rental contract is valid or not. Undoubtedly, your document is legal and valid. It is also accepted in the eyes of law and hence, can be used as a piece of evidence.

Now, the reason behind the legal rental documents being made of 11 months span is clearly understood to you. It helps the landlord as well as a tenant in avoiding additional costs of registration charges and stamp duty and eliminates the process of registration. Thus, it makes contracting economical and faster.