Rental Agreement Clauses & Terms Explained

The sections below define the clauses and terms that a rental agreement must contain. 

BASIC CLAUSES

---

Identity of the Landlord, Tenant, Property     This section explains who the landlord are tenants are. These people are identified by birthdate, address and relations to other people (parents, spouse, etc). This is because the formats were created before India's unique identification system (Aadhar) was implemented. While it can now suffice to just add in the Aadhar number, we still stick to the older ways for consistency.  The property is identified by its exact address and specifications. ​
Period of the agreement     This clause identifies for which period the agreement is valid for. 
Escalation   This clause defines what happens after the period is over, and if both parties agree to continue for another term. It defines what would be the increase in rent for the next period. This protects both the landlord and the tenant from revising rents arbitarily, and must be present in any rental agreement if there is an option to renew. 
Rent & payment date    This specifies the most important part in the rental agreement, which is what the rent payable every month will be and what will be the date of payment, and whether the payment will be in advance or in arrears. By "advance," it means the rent for the month is paid upfront when the month begins and by "arrears"  its meant that the rent will be paid post the month ends. 
Rent Delay Penalty    This clause specifies what happens if the rent is paid later that the date specified and what penalty (if any) applies at that time. 
​Security Deposit     Another super important clause in any rental agreement that talks about how much security deposit is to be paid and HOW the deposit will be paid (online, cheque etc). 
Allowable deductions from Deposit     This clause specifies that when the tenant vacates the property, what the owner can deduct bfrom the depsoit. Usually this includes any unpaid rent, unpaid utility bills, any painting, cleaning charges etc. 

RESPONSIBILITIES OF PARTIES

---

Use of property     This clause explains whether the property can be used for residential or commercials purposes. Commercial includes office,  shop (retail), guest house etc.  This is again an important clause in the rental agreement because a property is defined as commercial or residential by law, and property taxes and utility charges are according to the same - with commercial being higher. Hence using a residential property for commercial uses is illegal and can result in significant fines and penalties. 
Changes to property     This clause clarifies whether the tenant can make any changes to the property. Usually its put from preventing tenants from making structural changes (breaking walls, changing electricity wiring, etc) which can have dangerous implications if not done properly. 
Responsibility for damages/maintenance work     This clause if not stated clearly, can cause the maximim amount of dispute and is often a point of contention about what is acceptable for owners and tenants to pay. Usually it states that the tenant will take care of all minor issues and any damages caused by them and the owner will take care of any major and structural issues. However, owners and tenants tend to fight about what's minor and major as clearly this is subjective :D
Right to sublet     Again, a super important clause for those who care about who actually lives in their apartment. Some tenants tenant to sublet a room (or even the whole house) to someone else. This clause either restricts or allows that. If not present, it can be argued both ways, so it must be present for the benefit of both parties. 
Inspection by landlord     Every tenant desires that they be allowed to live in peace, without the landlord showing up un-announced and every landlord would like to have the authority to visit their property sometimes if they so desire. This clause ususally states that the landlord can visit with prior appointment and with a 1-2 days notice. 
Association payment    This clarifies which party (owner or tenant) willl be responsible for making the monthly or quarterly payments to the associations.  The rental arrangement can either state that the tenant will pay a certain amount of rent to the property owner INCLUDING the association charges, in which case the owner is responsible for paying the association charges. On the other hand, if the rent is excluding the association charges, then it will state that the tenant will be responsible for this payment and it is separate from the rent. However, there will sometimes be adhoc payments for structural or major changes to the common areas collected from the sinking fund, and its usually the landlord's responsibility to cover this. 
Association rules     Again, it is imperative to include this clause especially for rental agreements of apartment or villa complexes, where there are significant rules of the society to ensure the peaceful living of all residents. It is important that the tenant adhere to these.  
Tax & legal payments     Properties have a property tax that need to be paid annually. There are also other charges such as legal documentation for transfer of ownership etc. It is usually stated that these are the responsibility of the property owner and the tenant shall have no liability to pay these. 

TERMINATION & DISPUTE

---

Termination process     This clause in a rental agreement states HOW either party can communicate their intention for the tenant to vacate the premises. It usually states that either a resitered letter or email needs to be sent to the other party. 
Lock-in     A lock-in clause states for the first X number of months, the tenant and owner are both "locked-In" to the agreement and cannot terminate. The owner cannot ask the tenant to vacate and the tenant must continue to pay rent and continue their obligations as per the rental agreement. 
Notice period     This clause states that if either party wishes to terminate the agreement, how many days or months in advance do they need to inform the other party. It is usually 1 to 2 months. 
Handover condition & terms     This clause clarifies what is the acceptable condition in which the tenant must hand over the property. Example, must the house be repainted and professionally cleaned? Must all damages be fixed and all electrical and sanitary points and fittings be in working condition etc. Again, a very commonly disputed issue in rental agreements, and hence best to add as much clarity as possible. 
Return of Security Deposit    This clause states that after the agreement terminated and the tenant vacates, in how many days the landlord needs to return the depsoit to the tenant and the terms of the same. 
Violation of agreement terms     This clause states what happens when any party violates the agreement. 
Dispute jurisdiction     This clause states  that if there is a legal dispute between the 2 parties and the agreement is violated, in which court of Law a case can be filed. This is usually the same city as the property. 
Indemnity     An indemnity states that both parties will cover the loss incurred to them  as a result of the wrong doing by the other party. 

Difference between a Lease Agreement & a Leave and License Agreement explained