Putting a house on rent becomes a good option of income of an individual now are days. But some times they get sick worrying about the kind of tenants related to the property, and also how they would take care of the property and much more. Still, many decide to rent it out because locking up a house doesn?t make any financial sense.
Real estate experts say that, such people should take a shot at leasing their property to companies. This is great option for people who are living far away from their apartment or even abroad. Most multinational and large companies look for apartments to house their expatriate as well as Indian employees.
They prefer to take a house on corporate lease, especially if the employees are posted for 2-3 years? projects. A company lease accommodation (CLA) can mean less headache for the landlord, as the company is liable for any default, damage or any breach of the terms and conditions that are usually outlined in the agreement.
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?The most important advantage that a corporate lease offers over a personal lease is the vastly enhanced safety factor. The possibility of fraudulent activity of any kind in a corporate lease is minimal, since the corporate assumes complete responsibility for the occupant. The rent comes on time, and the owner stands a very high chance of getting another occupant from the same company immediately on the expiry of the lease period,?
Corporate leases are understood to be for longer period of time, which is usually agreed upon at a flat 10% increase year on year. This, however, restricts the owner from commanding the market rent, which can be extracted in case of individual lease, since individual leases are for a period of 11- 22 months only. ?People who let out property on individual leases perceive a risk of encroachment or an over stay even after the period of expiry of the lease, which may be difficult to tackle.
Corporates usually go for properties that are of good quality and are well maintained. ?Most corporates approach property negotiations through international property consultants. Some also approach through local brokers. Thus, for best results, it would be ideal to register your property with a real estate service provider,? says Jain.
Most corporates are also process-oriented, so there would be a number of checks and visits from them before they finalise a property. They can also demand certain fittings or white goods, etc, which will eventually be compensated for with a higher rental. But the companies may require that initial investments have to come from the owner.
Finally, the legal agreements should be professionally worked out. ?If done through a transaction services company, these are automatically taken care of through their legal department. Else, the owners can have it done through legal services? professional if they choose to. In either case, the details will be whetted by the corporation?s appointed lawyer.?
?A corporate lease arrangement makes sense for property owners who value the high sense of security offered by tenants whose financial soundness is vouchsafed to the highest degree possible. They are also ideal for owners who seek the sustained cash-flow that is assured by long-term leases, since corporate leases are generally signed for either 24 or 36 months?.
Owners looking to lease out property to corporates should expect only a steady increase in rental, which may be less than the market rental. This is generally because most corporates look for a lease period of 3- 5 years and insert a clause that allows for approximately 10-12% increase in rental value on a year- on-year basis.
If the property is situated in a high-demand location, rental values can move up at a much faster rate. Individual leases are for shorter terms, usually lasting for about 11- 22 months, which gives the owner scope for renegotiation. In high-demand markets, increase in the rental values even in a period of 12 months can be significant.
Even though the rent will be calculated on a monthly basis, the payment mode can differ from company to company. Some may pay the rent for an entire year upfront while others may release payment on a monthly basis.
There are some key factors should be kept in mind:
- A few things should be kept in mind while leasing out a property to anyone ? be it a corporate or an individual.
- Find out the prevalent rental values for comparable properties in the location of the property you plan to lease out. This will ensure that the property is not over or undervalued.
- Incorporate renewal and exit clauses in the agreement.
- Fix a rental value for furniture and fixtures, if applicable.
- State explicitly the amount of security deposits that will be claimed from the prospective tenant and the process of reimbursing the deposit at the end of the lease.
- Insert a clause on repair and maintenance.
- Also define what will be considered as regular denudation against damage to property
Under CLAs, a company accepts unfurnished, semi or even fully furnished apartments. Accordingly, you can fix the rent after consulting the agent and studying the rentals in the area. However, ensure you put every term and clause on paper.
The idea is to maintain a cohesive yet professional relationship with the company. This can be rewarding and ensure a steady form of income for you to pay off the EMIs or even manage your expenses.
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