Things NRIs Must Know Before Renting Out Properties

The real estate market in India has always been an attractive prospect for many Non-Resident Indians (NRIs). Many buy land and properties in the country with the hope of returning and settling in the motherland at some point of time. While living abroad, it is a good idea to rent out the property, especially if it’s an apartment or house instead of keeping it vacant. With high rentals in many major cities, renting out a property is also a good way to earn some extra money.

However, a main cause of concern for NRIs looking to rent their houses is whether the tenants may vacate their premises or not. There have been instances of tenants refusing to vacate after their rental agreements have run out. While there are no fool-proof methods to ensure complete security while renting out your premises, there are, nevertheless, some guidelines by which the owner can protect his property.

Types of Rental Agreements:

There are primarily two types of agreements, which the owner can draw up, outlining the use of property: Rental Lease agreement and Leave and License agreement. Both these agreements deal with rental guidelines but they differ in their legal aspects and for the same reason, often confused.

Rental Lease agreement:

This agreement is considered when there is a transfer of interest from a lessor to a lessee or, in other words, when possession is transferred to the tenant. The rental control is governed by any existing rent laws. Under the lease agreement or when rental legislation laws are considered, the tenant can sublet the property to a third party. In the event of death of the owner of the property, the lease agreement would not be terminated.

Leave and License agreement:

This type of agreement offers a higher degree of protection for the landlord. It doesn’t offer any interest in favour of the tenants. Hence, the landlord gets an upper hand over the rental. Under Leave and License agreement, the premises cannot be sublet by the tenant. Rent control is not applicable here so advance rent can be charged by the landlord.

If the landlord passes away during the timeline of the rental agreement, then the license is automatically terminated. Moreover, once the rental period is over, it is easier to evict the tenants. Therefore, NRIs who are looking to rent out their properties, should do so under the Leave and License agreement. This ensures more ownership security.

Tips for NRIs to note while renting out properties:

• Before renting out your property, conduct a background check on the person renting the property. Since it is not an easy job to do, you should try to check the employment records, previous address of residence etc.

• Rent out your property only after proper documentation and background check. Never let out your premises on good faith and first impressions.

• While renting out property to a foreigner, you should inform the local police. Many cities in India demand this by law.

• While drafting an agreement, do it with a professional like a lawyer instead of a real estate broker.

• Register the agreement legally after paying for the required stamp duty. Only a registered agreement offers protection.

• For a property located in a society, you should get a NOC from the society to avoid future problems.

• The ideal timeline for an agreement is eleven months. In case you want to, then the contract can be renewed after that period.

• It is always advisable to have a power of attorney residing in India to sign the documents or to carry out any dealings like renewing agreements, while you are away.