Renting a Property – 5 Points to Check

Renting a Property is sometimes painful for landlords. Finding a good tenant is tough. An owner trusts the real estate agents and brokers to find a good tenant. I hardly found direct renting between landlord and the tenant. The only exception is both are known to each other. Some landlords are skeptical in renting a property to people from specific professions as a lawyer, police, etc. A landlord has their concerns in this regard. Another common complaint is that tenant is not vacating the premises. It is especially true for commercial properties. Though these units are on long-term lease landlord may find tough to vacate for commercial reasons.

While Renting a Property, there is a common misconception among landlords to rent to a known person. Based on my experience i can say that RISK is much higher if you are Renting a Property to known person. Few years back i suggested one of my clients against Renting a Property to his close relative. Though over a period, i forgot about this case. Recently, he called me and told me that his relative is not vacating the flat. I am not trying to advise against renting to close relatives. Let’s accept there are practical and social problems attached to it. The biggest dilemma for my client is that he cannot initiate legal action against illegal occupation. Therefore, it is imp to check certain points while Renting a Property.

Renting a Property – 5 Points to Check

(a) Verify Permanent Address of the Tenant: Usually landlords don’t verify the permanent address of a tenant. At the time of Renting a Property, they may demand permanent address proof but it is equally important to check the same. In one of the case, a tenant of my client provided forged proof of permanent address. My client was staying in the different city. One fine day, the tenant request my client that he has lost his job and will not be able to pay rent for 2-3 months till he finds a new job. Tenant also asked him to deduct rent from the security deposit. After exhausting security deposit, he overstayed for few more months.

After some time, my client received a call from the secretary of the association that his flat is vacant, and the tenant left the place. In this case, he is being duped but cannot do anything. He also came to know that tenant has not cleared utility bills for many months. It is common practice that tenants don’t clear all the utility bills. The owner comes to know only after few months. In most of the cases, the tenant is non-traceable. Therefore, it is advisable that landlord should hold a small amount say Rs 5,000 for a month or so from the security deposit. It is a safety net in case of any pending dues.

(b) Occupation/Profession of a Tenant: As a thumb rule, Renting a Property to the salaried individual is the safest bet. Most of the landlords prefer the salaried individuals. Still, i am not suggesting that you avoid renting to other professions, self-employed or businessman. Quite interestingly, the reason for renting to the salaried individual is that rent is paid on time :). A common complaint of landlords is that non-salaried individuals don’t pay on time. Therefore, the point is to check the occupation of a tenant and also judge whether he has a regular source of income or not.

(c) Police Verification: Not many landlords are aware that at the time of renting, police verification of tenant is mandatory. It will avoid you any future hassle if the potential tenant indulges in any unlawful activity. Otherwise, you will be under the net of law. Even if the tenant is known to you, it is advisable to demand police verification certificate. In short, you have to inform the police, the credentials of your tenant.

(d) Misuse of Documents: A tenant may demand a set of documents from landlord like PAN etc. to claim a tax deduction. I came across misuse of such documents. In one of the case, at the time of renting a property tenant demanded a copy of PAN and electricity bill of the owner. He told that he needed to submit it to his organization. As the tenant was salaried, therefore, it didn’t raise suspicion. After few months of termination of rent agreement, the landlord received a call from the bank that he is not paying his EMI of the personal loan on time. On investigation, it was found that tenant misused the documents to open a bank account in the name of landlord and also obtained a personal loan. As a thumb rule, whenever you hand over any document either watermark it or write with a red pen, the purpose of same.

(e) Submit copy of Rent Agreement to Association: Though it is not mandatory in most of the associations landlord should inform the association. It is required for security and operational reasons. You must be wondering why the association is not concerned. The reason being, in case anything goes wrong in future, an association can squarely put the onus on the owner. Though the responsibility is of owner only but association cannot claim it was not aware of renting. In some of the cases, owners don’t inform and give wrong information. The reason being, if you are renting a property, then you might need to shell out higher maintenance charges. Also in some cities, renting of property means higher property tax. Therefore, to save these additional costs, landlords don’t declare the same.

You can also check my post on 11 Must Have Clauses in Rent Agreement for more details.

Words of Wisdom: In few cases, i observed that to avoid all the hassles, owner prefer to keep house vacant. There is a misconception that by doing so, the tax liability on rental income will be NIL. It is not true. I shared the same in my post on income from house property.  Therefore, renting of the property is always advisable else it is a financial loss to the landlord. Though the situations highlighted by me are rare, it is always advisable to take necessary steps rather regretting in future. Always hire a reliable and trustworthy real estate agent or broker to rent a property. Direct renting of the property is not advisable. Hope you liked the post.

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