Which Is Better: A Notarized or Registered Rent Agreement?

Which Is Better: A Notarized or Registered Rent Agreement?

For many Indians, renting out a house is a substantial source of income, particularly for the elderly, who invest their life savings in purchasing a home and live off the rental income throughout their retirement. However, letting (renting) a property requires the utmost care and prudence in order to avoid future headaches. Executing a Leave & License agreement (or just a rent agreement) while renting property is one such point of concern. If the lease is for longer than 11 months, a rent agreement must be either registered or notarized. If the home is rented for fewer than 11 months, however, the agreement can be ignored.

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A rent agreement is a legal contract that specifies the property information, the cash consideration, and other terms & conditions related to the property renting transaction.

The terms & conditions of this rental agreement bind both the renter and the landlord (owner).

There are various ways to carry out a rental agreement.

1. A notarized agreement is just a rent agreement printed on stamp paper and signed by a Public Notary. Lawyers and attorneys are the majority of public notaries in India.

In a notarized agreement, the notary validates the parties' identity and documentation before endorsing the contract by signing it. This process requires both parties (the owner and the tenant) to appear before the notary.

A notarized agreement is significantly easier to execute than a registered agreement because it may be completed by just visiting a lawyer's office and does not involve the payment of stamp duty or registration fees. The lawyer only charges a notary fee, which typically varies from Rs 200 to Rs 500 depending on the location.

It should be emphasized, however, that in the event of legal action, the notarized agreement will not be acceptable in court because it does not validate the rental transaction. It only checks the paperwork that came with the deal.

In India, however, there is no legal necessity to have a rent agreement notarized. Various utility connections, such as cooking gas, telephone, and mobile, require a notarized agreement in the absence of a registered agreement.

The Benefits of a Notarized Agreement The following are some of the benefits of a notarized agreement:    

It's simple to put the notarized agreement into effect; all you have to do is go to the lawyer's office.

There are no stamp fees to pay: On a notarized agreement, stamp fees are not charged. There is a notary fee that ranges from Rs 200 to Rs 500.

The notarized document also serves as a witness to the agreement.

Theft and fraud are reduced: Theft and fraud of documents are reduced.

Genuineness: The stamped document is a true and authentic document.

2. Registered Rent Agreement: A registered rent agreement is one that is printed on stamp paper and filed with the area's sub-registrar. It's similar to registering a real estate sale deed. Online or in person at the sub-office, you can finish the registration process.

Registrar’s some cities/states provide the option of registering such documents online.

The registered rent agreement, unlike a notarized agreement, is admissible in court in the event of any legal procedures. If the rent agreement is not registered, the provisions of the central government's Rent Control Acts, as well as those of various state governments, are not applicable.

A rent agreement must be filed if the rental period is more than 11 months. It is mandatory to register the rent agreement in various states, including Maharashtra, Telangana, & Andhra Pradesh, among others, regardless of the renting length.

When you register a rent agreement, you must pay stamp duty & registration fees based on the amount of rent stated in the contract. These fees vary by state, and some states provide stamp duty exemptions for women.

Registered Rent Agreement Benefits The following are some of the benefits of a registered rent agreement:-

 

Verified: The Registrar or Sub Registrar of the office thoroughly verifies the registered rent agreement.

Admissible in court: A registered agreement is admissible in a court of law, according to the Registration Act of 1908. It also gives the owners a sense of security.

What Information Should Be Included in a Lease Agreement?

In a rental agreement, the following basic information should be included:        

Tenant’s name, address, contact details Landlords name, address, contact details Property address which is leased Security deposit amount, maintenance charges and monthly rent Annual increase in rent, both the parties should agree to renew the contract Penalty amount, if rent is paid late or disruptive behavior Lock in period Term of contract Grounds for contract termination

Rent Agreement Sample (Registered)

Agreements That Need to Be Notarized The following documents should be notarized:   

Partnership Deed Power of Attorney General Will

Agreement Which Should Be Registered The following are the documents that need to be registered:   

Sale deed of land or building Rent Agreement Other real estate document

Stamp duties and registration fees differ by state.

As of June 2022, the following states in India are charging stamp duty & registration fees: State

Rental Period

Maharashtra (Mumbai)*

Up to 60 months

Stamp Duty (% of the Consideration Value) 5-6%

Karnataka

< 1 year

2%-5%

Rs 30,000 for properties above Rs 30 lakh and 1% below Rs 30 lakh 1% of property value

Delhi

< 5 years

3-6%

1% of property value

≥ 5 < 10 years < 1 year

5%-6% 0.02% of market value of the property 0.1% of market value of the property 0.5% of market 20% of the Stamp value of the property Duty amount 1% of market value of the property 2% of market value of the property 4% of market value of the property 6% of market value 1% of the market of the property value of the property

≥ 1 < 5 years ≥ 5 < 10 years Rajasthan

≥ 10 < 15 years ≥ 15 < 20 years ≥ 20 < 30 years > 30 years

Registration Charges

(3-5% for females as per category) The annual rent payable is referred to as the Consideration Value. The advance/deposit obtained by the landlord may also be included in the Consideration Value in some states.

Maharashtra: the Consideration Value is the amount of the total rent due for the rental period plus the landlord's non-refundable deposit. The term "urban area" refers to places within the jurisdiction of a municipal corporation. All other places are classified as rural.

Karnataka: The Consideration Value for leases longer than 30 years is determined by the location, property area, on-site amenities, and other criteria. The stamp duty cost indicated is an estimate for a mid-range 1,000 sqft house in Bengaluru's Electronic City neighbourhood.

Despite the fact that a registered agreement provides a great deal of protection to both the tenant and the landlord, it is typical practice in India to just provide a notarized agreement rather than a registered agreement because it saves money, time, and headaches. However, it is strongly recommended that a documented rent agreement be signed to protect both parties' interests against any legal violations or malpractice by the tenant or the owner.

Registered vs. notarized agreement The following are the main distinctions between a notarized and a registered agreement: Factor Legal status Cost

Notarized Agreement Not admissible in Court Lower than registered agreement

Efforts required

Minimal efforts required for procuring Not compulsory

Mandate

Registered Agreement Admissible in Court High. Stamp duty and registration charges are applicable More efforts required to execute, as it requires visiting the Sub-registrar Compulsory for rental period above 11 months

Finally, a Notarized and Registered Rent Agreement is required.

It is recommended that you have a rent agreement while renting a property. A rent agreement can be created in two ways: a notarized agreement and a registered rent agreement. It is simple to obtain these agreements; you can do so by visiting a lawyer or the SRO's office. A registered rent agreement, on the other hand, is extremely important because it is thoroughly checked by the Registrar and is also admissible in court.

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