A few weeks ago, the Uttar Pradesh government revealed plans to overhaul the tenancy rules in UP. One key change is related to stamp and registration fees for rent agreements. Under Indian law, rental agreements for residential properties for a 11-month term don’t need mandatory registration. This is why most rental agreements are for 11 months only. There is another reason why most residential rent agreements remain unregistered and are for 11 months and that is related to circle rates.
In a press conference, Ravindra Jaiswal, Minister of State for Stamp and Registration Fees announced that the Uttar Pradesh government is planning to impose a stamp duty of Rs 1,000 for rent agreements where the annual rent is Rs 2 lakh.
A major problem with unregistered or verbal rent agreements is proof. These agreements usually cannot be used as evidence unless the courts allow it.
How does the proposed UP rent law benefit people?
Malav Virani, Partner, MDP Legal, told ET Wealth Online that the government’s main concern was low registration rates for rent agreements.
In the old system, the stamp duty and registration fees on tenancy agreements were calculated as a percentage of rent, roughly around 4%, based on four times the property's circle rate. Virani says this often resulted in a higher stamp duty implication even for agreements with modest rents.
To cut down on stamp duty and registration fees, many people chose to make verbal agreements instead of written ones. Even when written agreements existed, they were rarely registered.
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Experts believe the new reforms would work together with the Uttar Pradesh Urban Premises Tenancy Regulation Act, 2021.
Virani explains that these reforms aim to support the implementation of that Act by removing the cost barrier that stopped people from registering their agreement. The goal is also to reduce the volume of landlord-tenant disputes that end up in court because of missing or informal paperwork.
How can this new development help?
There are a few concrete ways in which these changes help not just individual tenants but also the landlords.
According to Virani, one major relief for tenants is the reduction in costs incurred on stamp duty and registration fees. This will push them towards registering their agreements, which in turn will give them rights under the Act.
Virani says: “Armed with a registered agreement, tenants will enjoy a strong legal standing with proof of tenure, agreed rent, and other terms being documented.” This matters if a landlord attempts an illegal eviction, disputes the rent amount, or denies the very existence of the tenancy.
Formal documentation is meant to give stronger legal protection to both parties while discouraging unlawful practices.
According to Virani, landlords also get the benefit of having their contractual terms not only reduced to writing but also registered. This protects them and their property against a tenant refusing to vacate after the term ends, failing to pay rent, and other similar defaults.