Preparing a Rent Agreement for your Business? Read this first!

Lawyers at VakilSearch guide you

As an entrepreneur, you often have to enter into a Rental Agreement. Very few entrepreneurs have the luxury of buying property, and therefore it is vital that your rental agreement is comprehensive and protects you completely.

At the outset, it can be stated that most problems arising out of a tenancy / rental agreement occur due to the tenant failing to comprehend the implications and meaning of certain terms or clauses in the agreement. While most people use the words “Tenant”, “Landlord” & “Property”, being lawyers, we may be referring to them as “Lessee”, “Lessor” & “Scheduled Property” respectively).

We have compiled a list of clauses which you as an entrepreneur should watch out for while preparing your Rental Agreement. By following these clauses, you can avoid making common mistakes many people (and not just entrepreneurs) make.

Responsibilities of both the parties:

There are various acts that the parties agree to perform.

Every agreement has to guarantee that the tenant will have free and unrestricted access to the property. If it is for a commercial purpose, also make sure that you can put up sign boards or name boards outside the property.

Every tenant should also demand a guarantee that he / she will have access to water, electricity and sewerage (although you may have to pay for it). Typically, every city has a sewerage board (like the BWSSB in Bengaluru), so insert a clause which says that the landlord should make sure the property has the necessary facilities provided by the appropriate boards.

Likewise, the landlord will demand that the tenant maintains the property in good condition, and that it should be returned in the same condition that it was received in.

If you are the tenant, make sure that the agreement is subject to normal wear and tear and something called “force majeure”. “Force Majeure” basically means that if there is a flood, earthquake, natural calamity or any other such eventuality, and the property is damaged, you as the tenant will not be held liable. Many agreements do not contain this clause, so this is a very common mistake: watch out for it.

It is a healthy practice to allow the landlord to inspect the property at a mutually agreeable time; The landlord will expect the tenant to be responsible for prompt payment of utility bills (water, electricity, etc) and rent payment as per the agreement, so if you want the landlord to pay those bills, make sure you specify that as well.

Which Court will be responsible for hearing disputes?

This may not seem like a very important clause, but do not underestimate its importance. If you are originally from Hyderabad and living temporarily in Bangalore, you can insist that jurisdiction will be with Courts in Hyderabad. Very often, people do not expect anything to go wrong, so the other side may agree. If something does indeed go wrong, it will save you the trouble of travelling to Bangalore each time.

Choose the place of jurisdiction intelligently. If you expect to be in Bangalore for a long time, then make it Bangalore only, and not Hyderabad.

Description of the property:

This is key. Every property must be clearly defined and details like the Door no, Floor, Street no, Road name, Area and Pin Code along with boundaries and in the case of an independent house, information regarding the surrounding properties must be mentioned. Typically, the property schedule looks something like this:

“An Apartment, situated at Plot No 13, G2, ABC Apartments, DEF Housing Society, Nagarbhavi, Bangalore - 560024

We will be writing on other clauses in the next part, which will follow shortly. We will be focusing there on tax payment, your security deposit and repairs. So keep reading!

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About VakilSearch

VakilSearch is India’s leading online legal services provider for businesses and individuals. As the official partner of the Confederation of Indian Industry (CII) and knowledge contributor to Sulekha.com, the Hindu Business Line, Entrepreneur Magazine and the All India Rubber Association, VakilSearch reaches out to thousands of businesses, entrepreneurs and individuals on a regular basis. So when you visit vakilsearch.com, you can be assured of quality legal guidance and comprehensive documentation for your business and personal needs, at affordable prices.