Decoding lease, rent agreements: What you should know

Decoding lease, rent agreements: What you should know

There have been times when you would have come across terms like rental agreement, lease agreement, leave and license agreement, though they may sound similar but there are some crucial differences between them all.

Before getting into core details, let us understand some important often used terms:

Lessor/ Licensor: A person who leases or lets a property to another; a landlord

Lessee/Licensee: A person who holds the lease of a property; a tenant

License: The word ‘licence’ has been defined in section 523 of the Indian Easement Act, 1882 “where one person grants to another, or to a definite number of other persons, a right to do or continue to do in or upon the immovable property of the grantor, something which would, in the absence of such a right, be unlawful, and such right does not amount to an easement or interest in the property, the right is called a licence.

Lease: A lease is defined in section 105 of the Transfer of Property Act, which provides that “A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time expressed or implied or in perpetuity in consideration of a price paid or promised, or of money, a share of crops, service or any other things of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.”

A rental agreement also referred to as a tenancy or lease agreement. In these agreements, there is a transfer of interest from the lessor to the lessee while in case of a leave and licence agreement, there is no transfer of interest, but only a permission is granted.

In a leave and licence agreement the legal possession of the premises remains with the licensor and the licensee is said to be in constructive possession of the said premises.

Therefore, a leave and licence agreement does not create any interest in the premises in favor of the licensee but gives the licensee the mere right to use and occupy the premises for a temporarily defined period.

A leave and license agreement is also the mostly used for renting property as it mentions the limitation of use and ownership of property within the agreement. Which would include details about fixtures and fitting, maintenance, term of agreement, penalties etc . These terms are generally accepted by both the parties at the time of signing of agreement.

The right of termination of agreement lies with the landlord, it is a common practice of not registering a leave and license agreement as a specific amount of stamp duty has to be paid. The benefits of registering the agreement include putting the landlord on the stronger side in case of any issues with tenant. Therefore, a leave and licence agreement should always be registered, ignoring the miniscule expense at the time of execution of agreement.

Renting a residential or commercial property seems to be an easy task to do and most people follow the standard agreements available in the market yet it is wise to consult a lawyer to prepare your agreement for renting the property to avoid any future issues.

Original publication at Content.magicbricks.com by AtulayNehra

How to choose a realty broker?

The other day I was sitting with some of my pals and suddenly one of them spoke about his willingness to invest some money in real estate projects, with an anticipation to multiply it within a pre-conceived timeline. Although, with his previous experiences, he was not sure where to invest and how to do it having a limited reach and knowledge about the field. In addition, he had read and heard enough horror stories of investors running from pillar to post after investing their hard earned money without any clue on how to get out of the situations created by their own wrong decisions.

Above is an example of many such discussions that I have been a part of over the last decade and a half, and the same apprehensions have been spoken about in most of the discussions. Choosing a right property and a realty broker has become an important factor.

Some pointers for choosing the consultant for your biggest investment:

• Have Clarity on the scope of services and the term of engagement that the agent offers.
• The role, responsibility and liability of the agent should be clearly defined.
• Check the agent’s knowledge about the area, do not limit yourself to just one project.
• Ask for the reason for pitching a particular project or area. If the agent claims to have done a research ask for the source.
• Evaluate the level of questions that are asked by the consultant while suggesting a particular project.
• Ask for details of the company the agent is representing.

What should be avoided?

• Do not just go with the agent who offers “HIGHEST DISCOUNTS” or the “BEST DEAL”
• In case someone is offering the highest discount, ask for an upfront adjustment in the booking amount and fill the discounted pricing details of the property in the booking form yourself. It is to be noted that majority of the developers do not adjust more than two percent of the basic selling price on the booking form.
• Keep a copy of the booking form and cheque given to the agent and ask for a receiving copy of the signed and stamped cheque and booking form by the developer’s office.
• In the absence of a booking form, a copy of the cheque received by the developer’s office should be kept as a record.
• Do not fall in the “CREDIT NOTE” trap – some in the real estate brokerage business offer the facility to their investors where their sales representatives issue a credit note – not to be honored by them or the developer at a later date. So, avoid such arrangements.

Investing in real estate is a decision which a majority of the people take for the first time. In accordance, it is extremely important to choose the right agent to pick for you the best property matching “YOUR REQUIRMENTS” – “NOT THEIR’s”.

Original publication at Content.magicbricks.com by AtulayNehra

Evolve an exit strategy in buying your real estate investment.....

Evolve an exit strategy in buying your real estate investment

Based on the estimated population growth, an all India housing demand of over 12 million houses over the next five years will put immense pressure on the developer community to achieve such figures. This becomes difficult to achieve due to laxity in regulatory and economic scenario.

The major contributors to the above demand of 12 million units are the middle income groups (MIG) and the high income groups (HIG) in the metros and the mini metros of the country. With a marginal gap in requirement between the HIG and MIG the Lower Income Group (LIG) has the minimal demand of the required number.

The above figures look encouraging for those who plan to make multi-fold returns from real estate investments. The realty brokers in every corner too, will push you to buy the BEST available project in the area. However, as an INVESTOR in real estate you need to answer some questions to yourself.

• What should you buy: plot, residential apartment or commercial?
• Why should you buy the chosen category?
• What is my exit strategy from the investment?

Before considering any of the properties you should be able to answer the above questions. Let’s look at various aspects of choosing a specific category for real estate investment.

Plots

Mark Twain once said “Buy land they aren’t making it anymore”. With land banks decreasing day by day, land is an evergreen investment and has the potential to give phenomenal returns in the long term. Exiting from land investment is relatively easy.

Residential apartments or floors

The most easily available property type is the residential apartments. However, even after good availability, the new launches by developers do not fall back. Investors still put money in these new launches with the intent of making returns on investment. Gone are the days when investors used to get 50 to 100 per cent return on investment within a few months to a year.

Commercial property

Be it office space or retail, a commercial real estate project has always been seen as a challenge by the real estate developers. Commercial property in an upscale mall and a premium locality has always sold like hot cakes, and are bought by seasoned investors who rely on rental returns.

Lately many developers have come up with commercial office spaces, where they wanted giving an optimistic outlook on the demand for office space in the area the project is located. These are also the same projects which offer assured returns till possession or completion of the building. They are also the ones selling Virtual Spaces.

What to consider while buying a property as investment

• Look for properties with easy exit options, study them finely.

• Choose mid range property as high end property will have minimal capital growth.
• For quick money making, invest in smaller and unique projects with limited availability.
• Do not fall for virtual spaces unless from a good developer.
• Choose land or plots or independent floors over high rise apartments.
• Location plays an important aspect – do not invest in a prospective location which would take a decade to develop. Choose for area under development and closer to existing density.
• Study the reasons of claimed “Phenomenal Development”, “Best Project”, “Best Deal”, “Best Location”.

For a smart investment in real estate today it is very important to have an exit plan ready before entering.

Original publication at Content.magicbricks.com by AtulayNehra

What is mutation of property and why is it important ?

What is mutation of property and why is it important ?

There have been times while selling your property, the prospective buyer would have asked for a copy of the latest mutation. Many people do not know the importance of the document hence, let us start with understanding what mutation is?

Mutation is the change of title ownership from one person to another when the property is sold or transferred. By mutating a property, the new owner gets the property recorded on his name in the land revenue department and the government is able to charge property tax from the rightful owner. The documentation procedure and the fee payable vary from state to state.

Also known as “Dakhil Kharij”, mutation of a property should ideally be taken every six months from the revenue office in order to check for any wrongful transaction on the property. In case of inheritance after the death of the owner, the property should be mutated by submitting copies of Death Certificate and relationship documents.

Updation of revenue records should be applied in case the property has been bought through a registered Power of Attorney, as it transfers the ownership from the seller to the buyer.

In case of ownership related to land, mutation is considered a vital document. For eg If an agricultural land is acquired by the government and the registry of the land is in the name of person A while mutation is in favor of Person B, the government will release the acquisition funds in favor of Person B, as in the revenue records he is recorded as the owner of the land.

To apply for mutation, an application to the tehsildar of the area has to be given on a plain paper along with the required value of a non judicial stamp paper.

Following documents are required for mutation:

• Copy of Sale Deed
• Application for mutation with court fee stamp affixed on it
• Indemnity bond on stamp paper of requisite value
• Affidavit on stamp paper of requisite value
• Receipt of up-to-date property tax payment

Documents required for mutation in case of inheritance or Will are:

• Death Certificate
• Copy of Will or Succession Certificate
• Indemnity bond on stamp paper of requisite value
• Affidavit on stamp paper of requisite value attested by a Notary
• Receipt of up-to-date property tax payment in case of Power of Attorney
• Copy of Power of Attorney.
• Copy of Will
• Receipt for payment registered with a sub-registrar
• Application for mutation with court fee stamp affixed on it

Original publication at Content.magicbricks.com