When renting a property, landlords and tenants must engage in proper documentation to make the rental agreements legally binding. There are a host of legal formalities involved. All agreements for leave and license must be stamped and registered. While this remains the basic rule, the rates and laws vary in accordance with the State you wish to lease a property in. The article below takes a peek into the stamp duty and registration laws for rental properties in the State of Maharashtra.
What is stamp duty?
Stamp duty is a tax applicable on the sale of a property by the State government. It is payable under Section 3 of the Indian Stamp Act, 1899. The tax is typically calculated as a percentage of the transaction value or the property's market value, depending on the jurisdiction.
What is leave and licence agreement?
The Indian Easements Act, 1882 outlines leave and licence agreements in Section 52. This section states that "where one person grants to another, or to a specific number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which, in the absence of such right, would be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a licence.
Stamp Duty on lease agreement in Maharashtra
The Bombay Stamp Act, 1958 governs the stamp duty on lease agreements in Maharashtra. It is administered by Article 36, read with Article 25 of Schedule 1 to the Act. All leave and license agreements must be stamped with a flat stamp duty charge of 0.25 percent of the total rent for the period. Note that the rate of stamp duty in Mumbai is the same for residential and commercial properties for a period not exceeding 60 months.
In Maharashtra, leave and licence contracts may be executed for a maximum of five years. Such agreements are subject to the following registration and stamp duty fees:
| Stamp duty | 0.25% of the consideration value mentioned in the document |
|---|---|
| Registration Charges | Rs 1,000 for properties in urban areas |
| Rs 500 for properties in rural areas |
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How to register for online lease agreement on IGR Maharashtra website?
One must first create a profile on the official website before filing a rent agreement online in Maharashtra. To register the rental agreement online, follow these steps.
Step 1: Visit the website for electronic filing at https://efilingigr.maharashtra.gov.in/ereg/
Step 2: Choose the "District of Property"
Step 3: Click "Next" to build your profile on the e-filing website. The website leads you to the "Property Details Page" once the profile has been successfully created.
Step 4: Enter the property's information, including the Taluka, Village, Property type, Unit Area, Address, and other information listed on the "Property Detail Page" of the e-filing website. Click on Save
Step 5: A token number is generated after the form is submitted successfully. Candidates must use this token number as their user ID for log in the account
Step 6: Now, fill out the necessary 'party information'. And save the new information
Step 7: Add another set of party information by selecting "Add: Party Details" and save the modifications.
Step 8: Now choose "Next: Rent & Other Terms”
Step 9: Rent and other terms- Enter the owner and, if appropriate, the renter’s information.
Step 10: Pay stamp duty online. The applicant can create an online challan receipt to pay the fees and stamp duty online.
When calculating stamp duty, the following information is typically taken into account:
- The full address of the building
- Names of the landlord, the current tenant, and, if relevant, the prior owner.
- Include the CTS number if the property has already been surveyed by the city.
- If the property in question is a piece of land or is located outside of a town, then the name of the Taluka or Revenue Village in which it is situated should be used.
Step 11: Decide on a time to meet. After successfully paying the required fees, the applicant must schedule a meeting with the sub-registrar. The effective registration of the applicant's property is ensured by showing up at the sub registrar's office with the required paperwork in print.
Stamp duty in Maharashtra on lease agreement: How to pay?
There are three ways to pay stamp duty in Maharashtra, viz., non-judicial stamp paper, e-stamping, and franking. In the case of the non-judicial stamp paper procedure, the agreement consists of all details pertinent to the leave and license and is signed by the executants. Further, the agreement must be registered at the sub-registrar’s office within the next four months.
The franking method, on the other hand, requires the agreement to be printed on plain paper, which is then submitted to a bank. The bank processes the documents by means of a special franking machine.
It is important to understand that, while stamp duty can be saved under certain circumstances, not paying stamp duty can lead to a heavy penalty for evasion.
Registration provisions for rental agreements
As per Section 55 of the Maharashtra Rent Control Act, 1999, every tenancy agreement must be in writing with mandatory registration, regardless of tenure. One simply needs the tax receipt of the tenant, landlord, and a few documents of the witnesses like passport-size photos, ID proof, electricity bill, and property documents.
The registration fee for tenancy agreements in Maharashtra varies across locations. For instance, for properties that come under the municipal corporation area, the registration fee is Rs. 1000. For rural areas, on the other hand, it is Rs 500. It is extremely important that both the landlord and the tenant get the rent agreement registered, as failure to do so could lead to penalising the landlord in the form of three months of imprisonment and a fine of Rs 5000.
Is rent agreement mandatory in Maharashtra?
Yes, a rent agreement plays a crucial role in resolving disputes between landlords and tenants. In Maharashtra, the rent agreement is usually made for a period of up to 11 months, since it is required to register it if it extends beyond 11 months. It is important to know the applicable stamp duty and registration charges for rent agreements in Mumbai, Pune, and other cities in Maharashtra if you are looking for a home on rent.
Is registration of rent agreement compulsory in Maharashtra?
Unless the agreement specifies otherwise, every lease agreement for immovable property from one year to the next, or more than one year in duration, must be registered under Section 17 of the Indian Registration Act.
Draft Model Tenancy Act
States may soon begin enforcing the Model Tenancy Act requirements, as the Centre envisions it to become a law. The draft has been made available to the public, and comments on the policy are welcome until October 31, 2020. Then on June 2, 2021, the Union Cabinet approved the Model Tenancy Act, 2021 for implementation by the States and union territories. It aims to: (i) create a quick dispute resolution process; (ii) control the rental of property; and (iii) safeguard the rights of both landlords and tenants.
Things tenants and landlords should know in Maharashtra
Following are the duties and responsibilities that the landlords and tenants should know in Maharashtra:
Rent: It is the landlord's right to decide how much rent to charge for a property. If structural repairs are carried out under the Maharashtra Housing and Area Development Authority Act (MHADA), rent can be increased by 25 percent per year. Rent can also increase if taxes increase during the same period. In the event that a landlord charges a rent higher than the standard rate, they will be subject to a penalty. Depending on the severity of the offense, the penalty can be up to 3 months in prison or Rs 1,000.
Eviction: If a tenant makes a permanent change without permission, the landlord may seize the property. The possession may also be reclaimed by the landloard if the tenant or any relative of the tenant is proved responsible for any nuisance or causes irritation to the neighbouring house. A landlord will seize the property if a tenant uses it for any illegal activity.
Providing essential services: A landlord is not allowed to stop providing essential services like electricity, water supply, stairway lighting, lift use or sanitary services. Tenants have the right to file a judicial case if their landlord restricts these services. If the landlord disobeys the court's directives, they will be fined. The fine can go up to Rs 100 every day. If the penalty is not paid, the court may sentence the offender to up to three months in prison or a fine of Rs 1,000, or both.
Registration of rent agreement: The rent agreement must be registered by both landlords and tenants. The contract must be in writing and registered in accordance with the Registration Act of 1908. The landlord is accountable for registering the rental agreement. If it is not completed, a landlord might face up to three months of jail or Rs 5000 fine or both.
Property usage: Residential properties cannot be used for commercial purposes. Tenants cannot do this either. In the event that a defaulter is found guilty, he or she may face imprisonment for up to six months or a fine up to Rs 10,000, or both.
Rent receipt: Tenants must receive monthly rent receipts from landlords. If not, a daily penalty of Rs 100 is imposed.
Service of the apartment: The landlord is in charge of maintaining the property's condition. A tenant may give a landlord a 15-day notice in the event that the property needs repair. A tenant may also deduct the cost of repairs from the rent. Keep in mind that the deductible cannot be greater than one-fourth of the annual rent due. If a landlord decides to make renovations, they must make sure that the new building has the same number of apartments as the previous one. If the building is torn down, the demolition project must be finished within 15 months of the tenant's departure.
Inspection of property: The property may be inspected by the landlord at any time, although advance notice is required.
Registering the tenancy agreement is crucial as the agreement consists of all provisions regarding the lease. This document can aid in the resolution of any dispute that may arise between the landlord and tenant.
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