Till a few years ago, one of the most dreaded things to do for many house owners was renting out their property. Most house owners preferred to lock up their property rather than renting them out to unknown people. This is because of their own bad experience, or what they heard or read about the bitter experiences of others, and the rent control laws favouring tenants. Now things are getting better thanks to the changing rent control laws.
Renting out your unoccupied property is a wise option. By renting out your property, you can generate a significant amount of income, which can help you in a number of ways, besides taking care of house maintenance expenditure.
Despite the changes in the rent control laws, you have to be careful, before renting out your property. Here are some tips that can come in handy, when you rent out your property.
- Check out the background of the tenant. Find out where he/she is working & what is his/her business and whether earning enough to pay the rental charges regularly. In case of companies, check their track record and reputation, what business they do, whether your society byelaws allow renting out for commercial purpose. If you happen to choose the wrong tenant, it will cost you a big fortune.
- If renting your place to a foreigner, you need to register with the Police Commissioner. In some areas, even for renting out to Indian citizens, you need police permission. Check it out.
- Generally, it is better to rent out properties for a short duration. The eleven-month agreement is chosen by people, as it pre-empts the rent control laws, which apply after 12 months. However, companies prefer a longer period of lease.
- Always go for a legal agreement and register it. Prepare a comprehensive agreement without any loophole. The agreement must be carefully drafted by a property lawyer. In the agreement, include:
1. Clauses specifying what are the charges, if not vacated when the contract ends.
2. Clearly mention that subletting is not permissible under any circumstance.
3. Mention the period of notice to be given, in case of termination of agreement.
- There are three types of agreements for renting out: a) Rental b), Lease, c) Leave and Licence. ‘Leave and Licence’ agreement is the best option. Under this type of agreement, property owner’s interest is better protected than others.
- Take advance rent and security deposit, it will be useful, in case the tenant fails to pay the dues on time.