Having a tenancy or rental in place can incur cost and possibly reduce profit margins. However, the rationale to enter in a tenancy agreement is similar to having any other contract; to have clear terms in black and white to avoid ambiguity. In this article we will discuss about the importance of having a rental agreement for both parties.
1. Fixed Rental Rate And Duration For Tenant
Having a tenancy agreement can prevent the house owner from raising rental fee discriminately within the rental period. The tenant is protected from any rental fluctuation within the duration stated in the agreement.
With no clear agreement about the rental rate and period, owners can increase rental rate at whim and force tenants to comply or leave, resulting in you hunting for a home loan. With a valid tenancy agreement, the tenant is protected within the stipulated parameters of the agreement.
2. Protecting Tenant’s Deposits
A rental agreement is essential as a proof that tenants has placed a sum of money to the owner as a refundable deposit. Without the agreement, the owner can simply deny any transaction that has happened in the past. The owner can also refuse to refund the deposit if he or she decides to do so.
In addition, the tenancy agreement also clearly outlines the responsibilities of the owner and tenant during the whole duration of tenancy. If these terms are not met by the owner, the default in payments can cause the tenants to suffer the repercussions.
3. Higher leverage for owner
One major criteria banks look for when accessing one’s credit score is the applicant’s income. A house owner can submit a valid tenancy agreement to the banks as a proof of additional income source. With rental income, applicants will have better eligibility and higher chance of loan approval.
4. Protection for Owners
In the case of unforeseen events, the tenancy agreement has clauses that protects house owners. For example, if the house owner wants to recover his/her premise claiming defaulted rental payments by the tenant, the house owner can file a simple eviction summons in court using the tenancy agreement as a proof. Any dispute between the owner and tenant will be referenced to the tenancy contract
Having a tenancy agreement also grants the right for the owner to forfeit the deposit in the event of property damage. The right for deposit forfeit also ensures the tenant obeys the tenure duration, for if the tenant moves out in a sudden without notice the deposit will be revoked.
5. Are There Any Reasons For Not Having A Tenancy Contract?
There are a few reasons for not having a tenancy contract.
If the tenancy period is 3-6 months, a tenancy contract will be kind of a hassle to draft. Furthermore, tenants who prefer short term rentals while waiting for their own home renovation might prefer a more flexible duration.
Also, there are some house owners who want to save on stamp duty cost which can add up to a few hundreds. Some simply want to do away with the hassle.
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