Are you an NRI investor with property investments in India? If so, the dilemma of whether to keep the property vacant, or to let it out, is not alien to you. Keeping property vacant not just makes it vulnerable to vandalism, but it also makes it difficult to keep track of the periodic upkeep of the property, which it might be in dire need of… You could hire a broker or rely on friends and family to maintain it for you. But, think about the returns that would accrue by letting it out. Also, your property would be cared for in one way or another.
If you are considering letting out your property, you need to keep a few things in mind. The relationship between a tenant and an owner is fraught with challenges, especially for an owner based out of India. It is difficult to escape a ‘problem tenant’ – one who doesn’t pay the rent on time, overstays his/her welcome… (read agreement), or breaches the tenancy agreement!
While you can resort to legal action, it helps to know what a tenant’s rights are, not just to ensure that your case is foolproof, but also to protect your own interests!
Disclaimer: While we have ensured the information contained in this blog post is as accurate and verified as possible, this post is for general information only and should not be construed as legal advice.
The rights mentioned below are based on The Rent Control Act of 1948 and The Tamil Nadu Buildings (Lease and Rent Control Act) 1960, which are widely followed as a base of most of the rent agreements across India. The rights mentioned are mainly the ‘market norms’ being followed.
However, the rights may vary from state-to-state and will also be affected by the clauses and terms mentioned in the individual rent-agreements, signed between the owners and tenants.
If you need further clarity on any of the specific rights of an Owner, we recommend getting in touch with our Property Managers or get a legal counsel before drafting an agreement.
A Tenant’s Rights In India: Demystified
Tenants and owners both have rights and responsibilities during the period of the tenancy agreement. A tenant has certain rights before and after moving into the property, which you as an owner need to be aware of. Here they go…
1. Right To Security
The tenant has the right to demand a safe and secure home, i.e. the property should have all the minimum safety measures, such as operating door locks, safe electrical installations, structural safety, etc. The house should be habitable and If the property needs repairs, the tenant has the right to request the required repairs from the owner even after he/she moves into the premises, provided that the damage wasn’t caused by the tenant’s careless or hostile actions.
2. Right To Privacy
Living in rented property does not take away a tenant’s right to privacy. The owner or any representative appointed by the owner to act on his/her behalf, cannot enter the house casually, without requesting the tenant’s permission. Also, a tenant can complain to the owner about any disturbance caused by neighbours or other tenants.
A tenant also has the right to have visitors stay overnight or for short periods of time, unless specifically forbidden in the tenancy agreement.
3. Right To Receive Legal Documents
A tenant has the right to get a written copy of the tenancy agreement, a written notice of the owner’s legal name and address, as well as the rent receipts. The owner, broker or such other representative appointed by the owner cannot deny the same.
4. Right To Receive Deposit Money
The owner must also return the deposit money to the tenant at the end of the tenancy period. In case of damages to the property, the owner can recover the same from the deposit money, and return the rest to the tenant.
5. Right To Reimbursement
A tenant is entitled to reimbursements for any repair work carried out by him/her. However, the tenant must take the owner’s permission before any such work is carried out.
Alternatively, the tenant can let the owner take care of the required repairs on his own.
6. Right To Know The Terms of Tenancy
A tenant is entitled to know the terms of tenancy beforehand. These are covered by the tenancy agreement. A tenant also needs to be given sufficient notice before the termination of tenancy, so that he/she is prepared to vacate the premises.
There are two kinds of agreements between the owner and the tenant – lease agreement, and leave and license agreement.
- A lease agreement is not favoured by owners since it allows the tenant to occupy the property for a longer period. This might encourage the tenant to develop an interest in permanently occupying the property, making it difficult for the owner to evict him/her.
- Under a leave and license agreement, the tenant can occupy the premises for a particular period of time – which cannot be more than 5 years. Since the Rent Control Act, considered to favour tenants, does not apply to agreements of less than a year, a period of 11 months is generally preferred by the owners. This obviously doesn’t mean that for a tenancy agreement, where the tenancy period is less than 11 months, the tenant’s rights should not be observed.
7. Right To Based On The Terms Of Agreement
The amount of rent to be paid should be clearly mentioned in the tenancy agreement, along with the date of payment and the tenancy period.
The rent is usually determined based on the agreement between the owner and the tenant. If the owner decides to revise the rent, he is expected to give a signed notice to the tenant, written according to the norms stipulated in Section 106 of the Transfer of Property Act, 1882. This is more applicable wherein the tenant and the owner have entered into a Lease Agreement. In case of a leave and licence agreement, the rent revision generally is done at the end of the tenancy tenure.
Also, in case of the lease agreement, if for some reason, the owner refuses to accept the rent after repeated efforts by the tenant, the tenant can immediately file an application with the Rent Control Court, to deposit further rents in court.
8. Right To Necessities
The tenant’s basic requirements such as electricity and water, as well the right to use common amenities cannot be withdrawn by the owner to recover rental dues. In such instances, the tenant can take legal action against the owner.
9. Right To Question Eviction
An owner can ask the tenant to evict the premises, provided a notice period, as agreed and mentioned in the rent agreement is served. This is typically a month.
Under the Rent Control Act, the tenant can be evicted only under specific grounds which include a wilful default in the payment of rent, subletting of premises without prior consent, causing nuisance, conducting illegal activities in the premises, or if the owner wants to use the property himself. Even so, the owner has to file a petition with the court to seek the eviction.
To avoid litigations arising out of owner-tenant disputes, the Supreme Court has declared that the owner cannot evict a tenant for at least five years if the tenant has paid the rent regularly according to the agreement between the two parties. However, the owner can evict a tenant if he wants to use the premises himself after giving a notice of eviction with reasonable time.
10. Rights Of The Legal Heirs of The Tenant
Legal heirs of the tenant are also tenants and get all the protection available to the tenant under the Rent Control Act. However, it is the choice of the legal heir if he wants to renew the contract with the owner and continue to stay.
The thing to be noted here is, in case of a Leave and License Agreement for a period of fewer than 12 months, the above doesn’t apply since the Rent Control Act is not applicable for tenancy agreements of less than 12 months.
How Tenants’ Rights Affect An NRI’s Investment in India?
Having looked at the rights of the tenants, it is important to understand their implications for an owner. This is especially important for an NRI investor since he/she should not be held responsible for the actions of a broker or any other person acting on his/her behalf. By taking care of the following points, an NRI owner can effectively avoid any issues that may arise due to a tenant’s rights.
1. Maintain the property
You need to make sure that your property is well-maintained, and is habitable for potential tenants who are interested in renting it. The broker, or a representative you hire, must be proactive enough to undertake any repairs needed to keep the property in habitable condition.
2. Respect The Tenant’s Privacy
You must instruct the broker or a representative appointed by you to respect the tenant’s privacy – there should be strict restrictions on barging into the premises without requesting the tenant’s permission.
3. Clarity In Legal Documents
You must try and keep the agreement as clear as possible, with regards to the tenancy period, the rent amount, the date for payment of rent, as well the names and addresses of all the parties involved. You must also include a list of all the furnishings and fixtures in the premises, the penalty to be paid in case of destruction, and other restrictions such as subletting without prior consent, conducting illegal activities, etc. Also, make sure that the rent receipts are handed over to the tenant without delay.
It is ideal to have a leave and license agreement to ensure that your interests as an owner are protected.
4. Lawful Collection and Revision of Rent
Instruct the broker, or a representative appointed by you to avoid extreme measures such as cutting off the electricity or water supply for rent recovery – it could land you in a lawsuit. In case of revisions to the rent, make sure that you give prior notice to the tenant.
5. Process of Eviction
Always follow the legal route, in case of eviction, to ensure hassle-free move-outs. Pay heed to the circumstances under which a tenant can be rightfully evicted.
6. Keep Track of Changing Property Laws
Indian laws governing owners and tenants keep changing over a period of time, to accommodate changes in the dynamics between them. As an owner based outside India, it is necessary to be abreast of such changes to be able to handle tenants with ease, and minimum hurdles.
Keeping abreast of the laws, and managing everything mentioned above from overseas, can be a daunting task. What you need is a service dedicated to entirely to your benefit – a one-stop solution to all your property-related woes.
Enter Property Management! Property Management services take care of all the daily operations of your real estate investments. A property manager is assigned to you by the property management service. He/she will handle it all – right from the upkeep of vacant properties, to handling the ones occupied by tenants, from dealing with tax-related and legal issues to the periodic inspection and maintenance of the properties.
If you need a property management service you can trust, look no further – Get in touch with Homzhub today!