Minding The Tenants You Keep

Property owners often worry that tenants will be like the camel that asked the Arab for shelter only to nudge him out of his tent by morning.
With various state rent control laws yet to be amended in order to be more equitable for property owners, an extra dose of caution is called for before handing over the keys. In the light of innumerable instances of tenants' sub-letting premises, using the pugree system or going to court to take advantage of long-winded litigation procedures, here are some pointers to make sure that rent income does not insidiously change to cost. Here, the rules of the game partially depend on who the other side is - a company lessor or individual tenant.

Vet the company. No point leasing to a company that is broke. Big names do not automatically imply a model tenant. Sniff around for a good track record of timely payments.

The company's nominee occupant should be named. If the employee quits during the lease period, the flat should revert promptly to the owner.

Push for a copy of the occupant's employment contract, which specifies the contract period.

The Company must give a corporate guarantee from its head office ensuring that the flat is handed over at the end of the lease. In case, the guarantee is not available take a letter of comfort from the concerned branch office, which will act as proof that the company has rented the house.

Sound legalese in drawing up the contract is a must.

Specify that subletting is prohibited irrespective of whether it is a company or individual lease.

While big corporates may prefer a three-five year lease, residence owners usually prefer the relative safety of a leave-and-license agreement, which ensures periodic renewal of the terms. The eleven-month agreement is usually popular as these pre-empt the rent control laws, which apply after 12 months. Rent control laws, as said earlier, weigh in favor of tenants.

Specify the notice period for either side.

Property, where rent is over Rs. 3,500 is subject to the Transfer of Property Act (TPA) and not the rent control laws of the various states and metros. The TPA comes under the civil court while the rent laws are heard by the Rent Controller at the district level. If you want to evict errant tenants the TPA is much better as it has a broad scope for eviction unlike the latter which sets out barely 12 causes.

There is a silver lining yet for harried landlords. If passed, Delhi's pending Rent Control Bill would enable house owners to remove tenants who have stayed for over 10 years without paying market rates. Section 13A2 was introduced in the Bombay Rent Act a couple of years ago which allows the landlord to double the rent if the tenant does not vacate or is ruining the property. Its advocates also say that if the Urban Land Ceiling Regulation Act is abolished, landlords would be on firmer ground. There's still hope for all property owners!

Courtesy: indiainfoline.com