How Rental Bonds Can Help Disputes Around The lock-in Period Of A Rental Contract?

The lock-in period is the agreed amount of time during which neither party can cancel the rental agreement. Lock-in simply means that both the parties - landlord and the tenant are locked into the same deal for a specified period of time.

This ensures stability and protects the interest of both the parties involved in the transaction. For example, the tenants are assured that they will not be asked to vacate the house during the lock-in period. Similarly, the landlord is assured that his income will be consistent for at least the specified period. The landlord has to spend money to have the apartment maintained in terms of getting it cleaned, painted, and ready to move into. If a tenant leaves early, it is not worth the owner's time, money and efforts to go through the process.

Also, from the tenant's end, it is equally important for them because they do not have to move out constantly as shifting out or relocating is a difficult task. The tenant is hence protected as they will not be given any notice to vacate if the owner receives a higher bid for the same property. Tenants typically lease a residential space for 1-3 years, with a three month lock-in period.

Tenancy is a very critical subject in India, with a huge number of housing units remaining vacant. One of the reasons for the high vacant units of homes is the trust deficit between landlords and tenants. This is where rental bonds can help and make a big difference. Till now a rental agreement was a pact between two parties. With a rental bond, it becomes an agreement between three parties - the landlord, tenant and the institution that is writing the Rental bond. There is an institutional guarantee of receiving the rent during the tenure of the agreement, the lock-in period, and any other unpaid utility bills.

The Model Tenancy Act passed in 2021 was drafted and introduced by the Union government to reduce disputes between both parties. It aims to standardize and streamline the rental process across the country. It requires that all tenancy agreements be registered with the authority and assigned a unique registration ID. The registration agreements, along with any supporting documentation, would be posted on the rental authority's website.

Many landlords want a lock-in period of 12, or 24 months in order for them to have an assured rental income, and reduce the hassles of searching for a tenant again. Tenants on the other hand want a home on rent with no fear of eviction by the landlord. A rental bond provides for a proper lock-in, failing which the landlord is assured of making good his losses by the Rental bond issuing institution. This assurance of receiving rent on time, even in the eventuality of the tenant leaving will instill confidence in the minds of the landlords

The tenure of the tenancy can be mutually decided by the tenant and the landlord, making it flexible and a win-win situation for both the landlord and the tenant, with the renewal occurring during the tenancy period. Both the tenant and the landlord are entitled to a sufficient amount of time as notice.

(The author, Amarendra Sahu is the Founder & CEO of NestAway Technologies)