Gurdip Kaur, a middle-aged woman, residing in the UK had rented out her house here in Punjab. Last year she approached us due to a dispute between her & her tenant in India. Although she did have her rent agreement duly signed by both the parties and authenticated by independent witnesses, the agreement was not registered.
Having suffered mentally and financially due to the dispute, she came to us wanting to know the importance of the rent agreement registration and consequences of non-registration. And of course, she was very keen to seek a solution for her disputes.
In due time, with our able & diligent lawyers, Gurdip was able to sort out her legal issues. However, it made us think about the consequences of ignorance on these laws – and the dire need for people to understand the validity, importance and relevance of these laws.
Also read: Landlord Tenant Disputes
We believe that obeying law always goes in one’s favour. In case of any dispute, the party who has fulfilled all the legal requirements has greater chances of winning the case. We explained to her the provisions in law for registration of rent agreement and the importance of registration.
It stands as follow:
- Transfer of Property Act, 1882 and The Registration Act, 1908 deal with the registration of rent deed/lease deed.
- Registration of a document means recording the ownership of the property in Government records.
- It is mandatory to register the lease deed/rent agreement if rent deed is for a period of one year or more.
- An agreement where the rent is fixed for a short-term (less than a year) is a rental agreement and an agreement where the rental amount is fixed for longer duration, e. more than a year, is a lease agreement.
Under The Transfer of Property Act, it is provided that the lease deed for a period of more than one year or reserving a yearly rent can be made through a registered instrument only. Registration of a rent agreement, if rent /lease is for more than one year, has been made compulsory under the Registration Act, 1908. If the rent deed is for a period of 11 months, it is not compulsory to register the rent deed.
Importance of Rent Agreement Registration
Registration of a document: Registration of a document helps to maintain discipline in property transactions. The registered document is legally binding, and violation of its terms and conditions invites legal actions. Benefits of registration are:
- Legally defines ownership rights.
- Strengthens ones claim over the property.
- Helps to safeguard the owner’s rights and interests.
- It gives notice to all others about the ownership of the property. Ownership becomes certain.
- The landlord is more secure if the agreement is registered
Without registration, the new owner is not legally recognized as the owner.
Consequences of non-registration:
If the document is compulsorily register-able and is not registered, the document becomes ineffective. Some consequences of non-registration are listed below:
- The document is not admissible as evidence of the particular transaction in the court of law. It is used as evidence for limited purposes or evidence of collateral transactions
- Chances of fraud and forgery increases
- Chances of misappropriation are more
- Difficult to recover unpaid rent
- Difficult to effect the sale of the property
- The document does not create any right or interest.
Rent Agreement Registration is always better:
Registered rent agreement is always preferable over unregistered rent agreement. The rent agreement for a period of 11 months does not require registration. People prefer it to avoid payment of stamp duty and registration fees. Although it is legally valid, yet rent agreement registration safeguards the interests of both the parties. Rent agreement Registration enhances the evidentiary value of the document.
Generally, rent agreement for 11 months is done for residential purposes only. Commercial rent agreements/lease agreements are long-term agreements and are, therefore, registered.