Investing in property or even renting out already owned property is a great way for NRIs to ensure their property is maintained and doesn’t catch dust for the years they are abroad and it also creates a source of passive income.
While some people rent out their own property till they decide to return and some invest in property for the mere purpose of an investment, in both cases it’s crucial for the owner to take necessary precautions to prevent any legal problems when they return or change their mind about what they want to do with that property.
Here are top 8 to add to your checklist before you decide to rent or sell your property:
- Rental agreement
- Registration of Agreement
- Background verification
- Police checks
- NOC from society
- Expert assistance
1. Rental agreement
A rental agreement (11 Renting Laws Every Landlord & Tenant in India Must Know) is going to be the main source of documentation and evidence should there be any reason to take legal actions with respect to your property. It’s essential that your agreement –
- Outlines the present condition of the property and expectations from its occupants
- Documents house condition and list of things which you have rented out, for example, kitchen chimney, fixtures, any kind of furniture. This will make your rent agreement more transparent as well as help in keeping a damage check on your rental assets.
- Inclusions and exclusions in the rent: What is expected rent, how much security is being charged and who will take monetary responsibility for damages to the property (if any).
- Tenure: How long is the agreement valid for? (Generally, 11 months is the rule of thumb practice in india for homes)
- Rent increments: When will this happen and by how much percent. It is important to make this very clear as it is an expectation you are setting from the start and the tenant can plan and expect a hike.
2. Registration of Agreement
A rental agreement that is for eleven months or more has to be registered as per the law. Section 49 of the Registration Act states that an unregistered rental agreement will not be admissible in evidence.
It’s important to note that a registered agreement is treated as a proof of address which your tenant can use to get a new phone or gas connection. The registration process is super simple, all you have to do is get a hold of a registrar, pay the due stamp duty and registration charges and get the rent agreement notarized.
3. Background verification
When you live in a different city or country, you cannot visit your property to check up on the upkeep and usage of the property. When you rent property out – do thorough background checks of your tenants. You can for documents such as Identity proof, permanent address proof and employment records.
It is advisable to have a power of attorney residing in the location of the property to sign the documents or to carry out any dealings like renewing agreements, while you are away. This individual can help take care of legal formalities in your absence such as signing documents or carrying out any dealings such as renewing agreements etc.
5. Police checks
If you plan to rent your property to a foreigner or even a local person, we recommend you do a police verification to ensure they do not have a criminal record.
In some cities in India, it is a mandate by law that a police verification must be carried out as it may compromise the security of the nation, hence; not performing a police check is a punishable offence under the Indian Penal Code.
6. NOC from society
If your property is in a gated society we would recommend getting a Non-Objection Certificate from the society to avoid any hassles in the future when the tenant moves in.
7. Expert assistance
While you draft your agreement, run it by a lawyer or draft it with a lawyer vs real estate broker who may not always have the legal knowledge necessary for some clause.
Managing All of This With The Help of a Property Management Company
The process of handling property when you are overseas or even in a different city can be complicated when the landlord appoints one of his/her relatives or even a friend in the same city as where the property is to look after the property, rent it out and collect the rent.
While a friend or relative is a trustworthy person to overlook the process and can visit periodically – as individuals they will have their own day to day responsibilities.They may not be able to invest the right amount of time in your property, and that is why we recommend considering a property manager who will be fully invested in the management of your property.
The above mentioned tips need to be done with diligence or your property can be at stake. There are times that a documentation can slip through the cracks or documentation renewals are missed. By hiring a property management team, all your bases are covered!