Rent agreement is a document that defines the legal relationship between a tenant and a landlord. It set out liabilities and obligations of both the parties towards each other and also acts as evidence, in case of any dispute. The Rental Agreement is also known as “Lease Agreement”. The rental agreement is a written contract between the owner of a property (the landlord) and the tenant who takes it on rent. But have you ever wondered why most rent agreements are for the duration of 11 months? Often, neither landlords nor tenants and not even the real estate agents know the reason for this.
REASONS FOR 11-MONTH CONTRACT
One of the main reasons behind the 11 months agreement is to skip out the registration process. According to the clause (d) sub section (1) of section 17 of the Registration Act, 1908, the registration of the immovable property that is on lease for a year or more is compulsory.
Therefore, most of the rental agreements are signed for 11 months duration to avoid the stamp duty and ancillary charges. According to Registration Act 1908, the registration of a lease agreement is mandatory if the leasing period is more than 12 months.
It is to avoid paying these charges that many landlords and tenants mutually agree to not get the agreements registered. In case you want to register a lease, tenant and landlord can agree to share its cost.
DISADVANTAGES OF SIGNING AN 11-MONTH RENTAL AGREEMENT
In Abdul Rasheed v Srinivas, court has tried to answer the murky question “Whether a lease deed, where the term of lease stated therein does not exceed one year, required to be registered under the Registration Act, 1908.”
The court has held that if a document is something that administers the agreement only for a period of one year, but it is a written document instead of an oral agreement then that document needs to be registered in the sub-registrar’s office after paying the stamp duty on it. Therefore, under Section 49, they become inadmissible in court if not registered.
In order to deflate the myth regarding the validity of the 11-month agreement, the court held, “In law, the lease deeds need to be registered and therefore, such unregistered lease deeds cannot be received as evidence of any transaction affecting the property.”