Whether you are renting out a portion or floor of your own residential premises, or an additional house located in the same or some other city, there are certain things that you need to keep in mind when you let out your house to a third person. Most of it has to do with the documentation, as well as personal information of the person who is going to take your house on rent.

Here are some points which one must keep in mind while renting out your house:

Deciding on the Rental Amount

This is an important factor when renting out a house, and warrants plenty of thought on your part as well. It is very crucial to come up with the right amount. This is because the market for rental properties is highly competitive, and you cannot really ask for more than the market rate. If you do so, it will definitely put off the potential tenants. At the same time, the rate should not be lower than the rent for similar properties in the vicinity. However, if the house is in good enough condition, or newly constructed, you can always ask for a premium.

Identity and Residence Proof Documents

Obtain a copy of the tenant’s PAN Card. The PAN Card stands for Permanent Account Number Card. PAN is a unique number provided by the Income Tax Authority of India. It is proof of the fact that she or he has a bank account and other financial dealings in the country that the government is well aware of. It is also an indication that the individual in question earns income from legitimate sources and perhaps pays taxes as well.

Along with the PAN Card, you also need to obtain a residence proof such as a copy of the Passport, Voter Card or Aadhar Card, to keep a record of your tenant’s background and permanent address. The Aadhar Card, Voter Card and Passport happen to be the identity proof of a person. Such documents confirm that she or he is an official resident of India, and prove the fact that the Indian Government has officially allowed them to stay in India.

Apart from the above, also obtain one or two references for reference check.

Police Verification is Mandatory

It is very important to ensure that you are not renting your house to a criminal. Now the question that arises in this case is, how do you ensure that? The answer is pretty simple. You need to do a background check of your tenant with the police. For this, all you need to do is fill out a verification form from the police and submit it to your local police station. In this case, you also need to submit identity proof documents of your tenant. In many states, these forms are available nowadays online at the websites of the state police department.

Moreover, police verification of a new tenant is mandatory in all parts of India. You need to keep in mind in this context that failure to do so would make you guilty under Section 188 of the IPC (Indian Penal Code).

Drafting Lease/ Rental Agreement

Your rent agreement is basically the legal document that binds you and your tenant to an agreement that both have to comply for as long as the same is in effect. It goes without saying that all the conditions have to be agreed to by both of you. In case any dispute arises between the two of you, this would be the most crucial document of all. This is the reason why you need to take the maximum possible care to make sure that there are no issues in the future between both of you.

For example, you need to decide matters like who would pay for major and minor repairs, who would pay the maintenance charges to the RWA or society, and who would pay the electricity and water bills. It is always better to get it drafted by a legal expert so that it is foolproof.

The following points should be included in the agreement, as far as possible.

1. Name, address, and father’s name of both the tenant and the landlord are to be mentioned. The names should match the names as given in the identity proof documents such as Aadhar Card or Voter Card or Passport, whose copy the tenant has given.
2. If the property is jointly owned or jointly being rented, the names of all the parties should be mentioned under respective heads.
3. The rent should be clearly mentioned (also whether it includes any maintenance fee). In society flats, where monthly/ quarterly maintenance fees is payable, it is the norm to ask the tenant to pay the maintenance directly to the RWA or facility management service provider. So both the components – rent amount and maintenance amount, should be separately mentioned.
4. The mode of payment of rent, preferably in cheque, plus the date of payment, is also important and should be specified in the agreement. The quantum of increase in rent and effective from which date should also be made clear. The interest to be paid in case of delayed payment should also be stated clearly.
5. The period of tenancy (start and end date) should be clearly mentioned. The security amount and the lock-in period are also important. Security deposit defers from city to city. In smaller cities, usually one month’s rent is the norm. In bigger cities, landlords usually take two months’ rent as security deposit. The security amount, how the amount will be refunded or whether it will be adjusted in the advance rent, should also be clearly mentioned.
6. Who will pay water and electricity charges is also important and needs to be mentioned.
7. In case the flat is furnished, an inventory of fittings and fixtures should be made and penalty for damage decided in advance. The landlord should also check walls, kitchen fittings, wardrobes, plumbing, electrical, sanitary fittings, curtains, airconditioners, geysers etc, and mention their condition in the agreement. Details of the condition of walls, ceilings and rooftop should also be mentioned, so that there is no dispute over damage to the house, in case there is any.
8. The purpose of tenancy should be clearly written- premises rented out for residential purpose should not be allowed to be used for commercial purpose such as running a tuition centre, boutique, food delivery kitchen, call centre or finance company, chit fund etc. This aspect can have legal and tax implications for the landlord.
9. The process for premature termination of the lease.
10. The agreement must specify the availability of facilities like common passage, roof, park, car parking, library, club, gymnasium, etc, in addition to the rented property, and charges payable, if any, for these.
11. Any other condition.

Registering the Lease

Once you have prepared your lease agreement, it should be signed by both the parties, and at least two reliable witnesses. The next important step that you need to take is to make sure that you register your lease agreement. Only then would you be able to use it as proof in case you are embroiled in a court case with your tenant. However, this is compulsory only in cases where the period of lease is more than 11 months. For the purpose of registration, you need to pay stamp duty and registration fees, and visit the registrar office along with the tenant.

Also remember to receive the first months’ rent and the security deposit in advance from the tenant, before he or she moves in.

Emergency Phone Numbers

Obtaining emergency phone numbers of the office, and near and dear ones of the tenant is also extremely important, especially in cases where some emergency crops in the household of the tenant and you feel obliged to call people who may be close to them. The tenant may be a student or working professional who has relocated from another city, and may not know too many people in the vicinity. Otherwise too, this exercise can be useful for you in so many contexts that it would be hard to enumerate over here in brief.

A house is an expensive asset that you have purchased with your sweat and blood. So, take time to perform the due diligence before you rent it out.