Whenever, you seek for a property on rent, mostly the Landlord prefers an 11- month Rental Agreement than for a year or more. Ever thought why? What is the secret behind only an 11-month rental period and not of an year. Why is this one month in a year left out?
Discover the answer in this article.
IMPORTANCE OF A RENTAL AGREEMENT:
A rental agreement is a document that defines the legal relationship between a landlord and a tenant. The agreement basically sets out certain obligations, duties and responsibilities of each party and also acts as an evidence, in case any dispute arises between both the parties concerning the property.
Formation Of Rental Agreement: Important Points:
- It is important to specify in the rental agreement the names of the parties living in the building and clearly specify the date of the rental period, that is, contain the tenure of tenancy.
- Mention specific dates from which date to which the lease of the agreement would be valid.
- In some agreements the common duties of all the tenants towards each other and the landlord too are specified, which is an additional strong point.
- In order to have a more stronger legal backing, it is better for a rental agreement to be more detailed as it can lead to better chances of reducing liability of the parties.
PRIME REASON FOR MAKING A RENTAL AGREEMENT FOR A PERIOD OF 11-MONTH AND NOT AN YEAR:
When a rental agreement is made for a period beyond 11 months in tenure, it is mandatory to register the agreement as per the Registration Act of India. And the registration formalities with the local authorities is a lengthy process. So, to avoid these lengthy legal formalities, the Landlords insist upon making the agreement for 11 month rather than making it for an year.
An year agreement is required to be registered to make it executable under the Registration Act.
“In a recent 2014 judgment, it was declared by the Karnataka High Court that 11-month agreements can no longer be produced as an evidence in the courts as any transaction affecting the property. So, if a dispute arises regarding a rental property and that particular dispute is governed by a 11-month agreement, then the agreement cannot be used as an evidence in the court for all purposes.”
SIGNING ON AN 11 MONTH AGREEMNT CAN BE A RISK. THINK BEFORE YOU MOVE AHEAD!!
Case Law: Abdul Rasheed v. Srinivas:
Justice HG Ramesh in this case probed a question “Whether a lease deed, where the term of lease stated therein does not exceed one year, requires to be registered under the Registration Act, 1908.”
In an order that debunks 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 an evidence of an transaction affecting the property”.
Section 107 of the Transfer of Property Act says:
“A lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument.” However, in this particular case the High Court order gave importance to the following paragraph of the Section 107 which says, “All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.”
Section 49 of the Act also says that unless a document requiring registration is not registered, then it cannot “be received as an evidence of any transaction affecting such property.”
Held:
The court held that if a document is something that governs the rental agreement only for a period of 1 year, but it is a written document and not just an oral agreement, then that particular document needs to be registered in the sub-registrar’s office after paying the stamp duty on it. Therefore, they become inadmissible in court if not registered under Section 49.
SO WHAT ABOUT THE 11-MONTH UNREGISTERED AGREEMENT? IS IT VALID OR NOT VALID?
In this particular case, it was also held by the court, even if the unregistered agreement cannot be used as evidence in the court of law it can still be used as a corroborative (or supporting) evidence to the existence of any prior agreement. BY this it means thatn such an unregistered document on its own cannot be admitted in the court but it can still be valid and can be recognized as a supporting evidence if not the main.
This, of course, is a legal distinction which lies under the judge’s discretion as to its claims of validity. Even Section 17 (d) of the Registration Act states about a similar provision which mentions that a lease or a yearly rent cannot be valid unless it is a registered instrument.
The 11-month agreement is currently subject to a lot of scrutiny. However, to avoid any legal hassels it is better to opt for a complete 1 year rental agreement for residential purposes rather than a 11-month rental agreement.
