If you are taking additional deposit don’t agree to deduct portion of it every month
2) it does appear to be loan
Dear Sir, I am a planning to start constructing commercial complex, we have already got a tenant who is interested, and we have fixed the advance and rent with the tenants for signing MOU which will be for 11 years, my counsel has already prepared MOU model. but the tenant requires more amenities to be done by the landlord which will cost more.My Tenant is ready to pay for the extra amenities as an additional deposit which he wants it to deduct every month for one year, when he will start to pay rent in the future .We have planned to mention in one of the clauses in the MOU regarding additional deposit . I am bit of a doubt that this additional deposit looks like a loan from tenant, My question is taking an additional deposit from a tenant and then deducting it on monthly basis for an year will it have any kind of impact in the future for the landlord or is it advisable or not.Kindly let me know your valuable advices.Thank you
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If you are taking additional deposit don’t agree to deduct portion of it every month
2) it does appear to be loan
Thanks for your instant reply, So what should i do in this situation.
1. I am not clear what do you mean by ' additional deposit' as the same is hardly in place in rental business.
2. There is scope for taking ' security deposit ' which is to be refunded at the time of end of tenancy with or without interest after adjustment, if any, for the loss caused to the property.
3. With regard to your additional deposit there is hardly any convention in this business and it is your choice whether you wish to take this or not. This is certainly not a part of rent and the tenant can claim it as anything including loan as per his choice or convenience..
After 11 months the amenities provided by you will be yours. He is adding value to your property and you are getting it by spending in installments.
This amount can be take as adjustable interest free security deposit then there shall be no issue , same can be mentioned in MOU and can be accordingly deposited there won't be any issue for the land lord then.
You can obtain additional deposit amount along with the regular deposit amount itself and dont have to show it as additional deposit.
This extra amount is obtained for the purpose of providing him additional facilities hence let this be merged with the originally agreed deposit amount itself.
Then there is no question of deducting the amount from the rental amount.
This shall be part of the agreement or the proposed MOU then there is no question of any legal hassle in future on this.
You may proceed on the basis of the suggestions rendered in the previous post or you can consult a local advocate for guidance based on the prevailing circumstances.
1. Taking REFUNDABLE & INTEREST FREE "additional deposit" and recording them in the relevant Deed with strategic clauses of terms & conditions, would not amount to Loan, under the Income Tax parameters and is a perfect legal transaction, without any futuristic liability to your interests or in your Balance Sheet.
2. You can mutually consider taking "Advance Rent" for so & so Months, to cover up your capital expenditures.
Thanks Sir, I will mention as as "Without interest in Additional deposit " as a seperate clause, to avoid future issues.
Yes. You can. This is not a issue. In fact, it is a gesture for healthy landlord and tenant relationship.
You can decide to add the contents as proposed by you however you may have the document vetted by an experienced advocate before getting the same executed.