Things to Know Before Converting Your Space into a PG

“You sentimentalize property, you can kiss profits goodbye.” – Marty Byrde

Humans have sentiments attached to many dimensions and property is one among them. Not only in India but worldwide this affinity is eminent. However, renting a property has become one of the popular business models for the last decade.

Strict rules and regulations in first world countries have not only reserved the rights of a lessee/tenant but also of the lessor/landlord. In India, the scenario is quite different. Though laws to save the rights of a lessee and a lessor exist, barely we adhere to them, especially with student accommodation.

Renting a property is a risky entity owning to the history the  lessor and lessee have shared. Hence, student accommodation is considered much safer and hassle-free than renting to a family.

Also, thriving professional opportunities in metropolitan cities and booming education have led to an increase in demand for Paying Guests’ accommodation (PG).

But before you refurbish your property into a PG accommodation, here are few rules and regulations you should know as an owner:

No More a Residential Entity

The moment you convert your house/property into a PG accommodation, it will no more enjoy the benefits of a residential property. The bills and taxes need to be payable at the commercial rates.

Proper Licensing from Authorities

Before you make a profit out of the PG accommodations, as a responsible taxpayer, it is your duty/legal obligation to take necessary approvals and licenses from the concerned local and state authorities.

Police Verification of the Lessee

It is mandatory to conduct the police and background verification of the tenants/occupants alongside all the required documentation. Make sure the proper validation of the lease/rent agreement by the lessee.

Proper Written Agreement

It is better to have a written agreement in any eventuality between a lessor and a lessee which discusses all their rights and duties and also safeguards the interests of both, tenant and landlord.

Properties rented under an oral agreement are risky for both the parties.Further, it is mandatory to get a lease/rent agreement registered if the same is applicable for more than 11 months. The owner/lessor may keep the original signed copy of the agreement with the duplicates distributed among the occupants of the PG.

Damage to Property

Maintaining the original condition of the rented room in a PG is the responsibility of the student/occupant, except for the normal wear and tear agreed upon in the rent agreement. In case of damage to the property, the tenant should immediately bring it into the notice of the landlord.

Permission to Enter the Premises

As a landlord/landlady you cannot enter the PG premises without seeking the prior permission of the occupants or the time agreed upon in the agreement. Students/occupants have their personal space, which you cannot breach on the grounds of being a lessor/owner of the property.

As per the Model Tenancy Act, the timings for regular checks and visits with prior notice are from 7 am to 8 pm.

Security

Installation of security cameras and assigning a guard or a caretaker is important when you are planning to run a PG accommodation, especially in the case where you are renting out to females only.

POC

For the smooth functioning of your business, there should be one point of contact (POC) for all the occupants of the PG with whom they can share their suggestions, grievances and queries.

Basic Amenities

When a student shifts from his/her city to pursue advanced studies, professional courses et al., he/she always looks for PG accommodations laden with basic amenities such as a refrigerator, AC, laundry services, household help, Wi-Fi availability, beddings etc. Make sure you have made all the arrangements to make the stay of your tenant comfortable and safe.

Evacuation of the Property

The lessor/owner may ask the tenant to vacate the premises if he/she does not pay the rent for two consecutive months or as agreed upon in the rent agreement.

Also, if the owner wants the tenant to evacuate a property for certain reasons listed in the agreement or if the lease term is ending, the lessor should give the lessee a notice period of 15 days or the time mentioned in the rent/lease agreement.

Security Deposit

As per the Draft Model Tenancy Act, the lessor cannot charge the lessee a security deposit of over three times the monthly/weekly/yearly rent agreed upon. When the tenant/occupant evacuates the property, the lessor must return the security deposit within 1 month of the evacuation of the property.

However, the lessor may deduct the liable amount for the wear and tear of the property from the security deposit as agreed upon in the agreement.