Why Rent Agreements Are Generally For 11 Months?
Transferred to Gurgaon for a three-year period by his company, 26-year-old Akash Srivastava had a tough time looking for a rented accommodation. The Millennium City has no dearth of accommodations to fit his budget, but house owners were not willing to make a rental lease for 36 months. (His company wanted him to sign a three-year contract to claim the sanctioned house rent allowance.)
That made Srivastava wonder why most rent agreements in India were made only for a period of the 11 months? This is because if the duration of the tenant's stay is increased just by a month, rent control laws would apply on it, limiting the rights of the owners over the rented property in India.
How does this work?
It is to be noted that only 11-month lease agreements are signed because if a lease agreement is signed for a period of 12 months, the rent control laws will apply. And the repercussions of this would be many. For instance, lease agreements, which are covered by the rent control laws, have pre-determined rents set by respective state governments. The cost of building construction and the land's market price usually dictate the rent in this case. The rent pricing is based on cost and the year of construction and owners can't do much to manipulate rents.
The ownership of the rental property is also transferred to the tenant for an indefinite period under lease agreements of this nature. This causes problems for landlords, as there have been cases where tenants refuse to vacate a flat.
Now, an 11-month lease gives both landlords more flexibility, as they can set the rent and terms according to the current market. They only guarantee tenants the right to live in the rental object for 11 months, while a periodic renewal of the lease is possible.