A number of landlords make the processing of the rental agreement a complicated process for the tenants so that they do not have to create a rental document and avoid paying tax. However, there are many benefits that a rental agreement brings with it for the tenant. So, you should always insist on the creation of one.
Basically, there are two types of rental agreements:
- Rental Agreement
- Lease Agreement
A rental agreement offers the right to tenancy to the tenant for a short period of time (typically 11 months). Once the duration ends, the period can be automatically renewed. The cycle continues until the landlord or the tenant wishes to end it with mutual consent.
The tenant has to pay monthly rent and a one-time deposit. In most cases the deposit is refundable.
As opposed to the rental agreement, a lease agreement is for a longer time period of 12 months or more. When any rental property exceeds the timeframe of 1 year, a number of laws apply to it. As a result, the legal documents for the same have to be framed very carefully.
As the time duration of the tenancy is longer, the deposit is high, which is paid when the tenant vacates the property. Unlike the rental agreement, the lease agreement is terminated after the lease expires. This means that the contract does not renew on its own. Both the tenant and the owner needs to go through the entire process to renew the agreement.
Till the new lease agreement is made, the tenant has to pay the rent on the daily or weekly basis.