Can I include penalty clause for late payment in rent agrement?


The Model Tenancy Act of 2021 requires the landlord/owner and the tenant to sign a written agreement which specifies the rent, period of tenancy and other related requirements.

The security deposit for residential property is fixed at maximum of two monthsÕ rent and for non-residential property, the maximum is fixed at six monthsÕ rent.

Under Section 7 of this Act, a tenant cannot sublet the property except if he enters into a supplementary agreement in addition to the existing tenancy agreement.

The tenant cannot sublet the whole or part or the premises acquired by him as a tenant and neither can he transfer or assign his rights as given in the tenancy agreement without an additional subletting agreement.

The Act establishes a three level quasi-judicial adjudicating bodies which are Rent Authority, Rent Court, and Rent Tribunal.

Further, no civil court will have jurisdiction over matters relating to the provisions of this Act.

The initial burden of proving sub-letting is on the landlord; meaning that once the landlord has established that a third person was in sole possession of the rented property, the burden to prove that the he continues to hold legal possession over the property shifts onto the tenant.

We will have to prove in court that the landlord had agreed to the subletting arrangement and that you continue to have legal possession over the property, as subletting by tenant without a written agreement is prohibited under the Model Tenancy Act.

You can put penalty clause in the tenancy agreement.

The usual amount is five percent (5%) late fee on all rental payments (minimum and/or additional) which are received by Landlord more than ten (10) business days after their due date.

Reference: Model Tenancy Act of 2021



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