Things to Consider While Renting of Immovable Property

Whether a tenant or a landlord, you must know the crucial facts regarding renting immovable property. Let’s learn more.

Renting immovable property means transferring a right to enjoy the property for a certain time. It can be expressed or implied or in perpetuity. The transferee gives property on rent for some consideration to the transferor. It can be an amount paid or promised, a share of crops, or any service or other value that will render periodically or on specified occasions. The transferee must keep the property in its original state.

In Renting of immovable property, the transferor of a property is known landlord, and the person who receives it is known as the tenant; the price is known as premium.

How Renting Amount Consider as Tax in Immovable Property

  • The rented amount received from the immovable property will cover under declared service, and service tax is applicable accordingly. Renting is defined in section 65B of the Finance Act of 1994.
  • The amount should not be considered as part of the service tax if the security amount received in respect of the immovable property to the service provider if such amount is refundable.
  • However, if the security amount is re-adjusted in the rent amount, in that case, it shall be considered part of the service and service tax will be applicable on such adjusted amount.
  • The amount shall not be treated as a part of the service if the amount received is for electricity charges for supplying electricity in flats/shops (Charged on an actual basis); the service tax will not be applicable on such electricity amount.
  • In cases where the service provider provides the maintenance service towards the maintenance of the building/complex, it will be considered another service, and service tax will apply accordingly.

Advantages of Renting Immovable Property

Less Initial & Ongoing Costs

Property ownership and upkeep are expensive. You’ll need money for a down payment, utilities, regular maintenance, home insurance, property taxes, and home insurance. You will also have to pay more to furnish a larger room because most homes are larger than the typical rental home. Renting a property is the most reasonable option.

Flexibility in Changing Residences

Renting gives you the convenience of giving 60 days’ notice to depart if you need to move for work or personal reasons. Since renting involves significantly less work than selling a property, it can make it simpler for you to take advantage of job opportunities.

More Leisure Time

The time-consuming maintenance chores, such as exterior repairs, snow removal, significant renovations, appliance replacement, painting, plumbing, etc., will be handled by your landlord when renting a home. As a result, you’ll have extra time to do other things.

Enjoying Exceptional Amenities

Access to facilities that may not include purchasing a home or maybe too expensive when owning a home is another advantage of renting over buying a home.

For instance, many landlords provide residents with extras like exercise facilities, saunas, community areas, underground parking, and more at no extra charge.

Rights and Liabilities of Landlord

As for renting of immovable property, the landlord has some rights and has to oblige some liabilities.

Rights of Landlord

No specific landlord’s right is provided in any provision. But, there exist some rights of the landlord which can infer.

  • The landlord has the right to collect money from the tenant per the rental agreement.
  • The landlord has the right to take back the possession in case the tenant breach any condition stated. This right emerges from the exception provided by section 10 of the Transfer of Property Act.
  • The landlord has the right to collect the damage done to the property from the tenant.
  • In the rental agreement, the landlord has the right to take back possession of the property from a tenant on the termination of the rent duration.

Liabilities of Landlord

Section 108 of the Transfer of Property Act clauses (a), (b), and (c) lays down the liabilities of the landlord.

  • The landlord is responsible for declaring or disclosing any material defect of the property which the tenant cannot find out or is unaware of under ordinary supervision.
  • It ultimately means that a landlord must disclose any apparent defect to the tenant, and it is essential to do so as such defects might interfere with the enjoyment of the property by the tenant.
  • It is compulsory to transfer the possession rights of their property to the tenant as without possession, the tenant cannot fully enjoy the property.

Rights and Liabilities of the Tenant

The following are some rights and liabilities of the tenant while renting the property.

Rights of the Tenant

The Tenant’s rights are governed by sections (d) to (j) of Section 108 of the Transfer of Property Act unless a contract expressly states different or local custom governs the area.

  • Any modifications made during the tenure of the rent will be according to the provisions of the rent agreement.
  • The rent agreement may be voidable at the choice of tenant.
  • If the rented property is entirely or substantially damaged by fire, war, flood, violence, a crowd, or any other means, it is impossible for the tenant to utilise the property.
  • The tenant cannot breach the agreement if the damaged property can be repaired and put back in use.
  • Additionally, if the tenant damages the property, they will not be able to use his right to terminate the agreement.
  • If the landlord neglects to repair the rented property, the tenant has the right to recover charges for any repairs performed on the property from the rent amount.
  • The landlord has the right to collect any payments he must make directly from the lessor or by deducting the rent interest.
  • The landlord is entitled to remove or detach any items after the agreement has ended. They may have affixed the items to the land during the rent period. Nevertheless, the tenant must return the property in the same state that he found it in.
  • In the rental agreement that does not specify a lease term lease, the tenant or his legal agent will be entitled to all advantages and profits from the property.

Liabilities of the Tenant

Clauses (k) through (q) of Section 108 of the Transfer of Property Act specify the tenant’s duties.

  • The tenant must provide some important information that he is aware of that can raise the value of the rented property.
  • The breach of this obligation will not result in the termination of the rental agreement. However, the landlord has the right to sue him for the damages.
  • The tenant is required to pay the landlord or agent the rent or premium within the allotted time frame as mentioned in the agreement.
  • If there are many tenants, any one of them paying the rent is adequate. If there are many landlords, rent paid to any of them is adequate. The landlord may bring a lawsuit against the tenant for the rent plus interest if the tenant violates their obligations.
  • From the beginning of the rent agreement, the tenant is in charge of keeping the property in good condition and returning it to the landlord as it is.
  • Any acts affecting the property and any intrusion or interference must be reported to the landlord by the tenant.
  • The landlord is responsible for preventing any of the property’s possessions from being used for other purposes than listed in the rental agreement. He has to handle the property with care.

Conclusion

Over the past years, the government has placed much emphasis on leasing, even though leasing serves essential purposes, including tax. It is significantly important that both governmental and non-governmental organisations must make some effort to ensure or spread information regarding leases to ensure that neither the landlord’s nor the tenant’s rights get infringed.

Renting of immovable property involves the rent agreement specifying the time the tenant may utilise the property. In the absence of a period, the tenant is determined in line with local customs and regulations.

Renting an immovable property will give you many advantages; it helps you stay in an accommodation with fewer charges and many facilities. But these facilities can enjoy for a while. The landlord and tenant must follow some duties and responsibilities while renting the property.

FAQ's

What is the meaning of renting immovable property?

It incorporates all agreements involving the rental, letting, leasing, licensing, or other use of the immovable property to conduct business or for furthering trade.

What is the significance of renting immovable property?

One of the services that significantly impact the coverage of assesses and the amount of revenue collected is the rental of immovable property.

What is a latent defect?

A latent fault cannot be identified logically or by the landlord’s examination.

What is an apparent defect?

It is a defect where figuring out the issue through inspection is easier.

Can the tenant transfer his rented property?

The tenant can transfer the property or his stake in it by subleasing or mortgaging the rented property.