As demand for rental housing continues to surge in the city, tenants are increasingly paying 'token money' to quickly reserve apartments even before signing formal lease agreements.
In one recent instance, a senior company executive searching for a flat in the upscale Indiranagar area decided almost immediately to rent a property in Defence Colony. With the monthly rent set at around ₹2.5 lakh and fears that other tenants might claim the apartment, the executive transferred an amount equal to one month's rent as token advance to secure the flat, according to brokers involved in the deal.
Real estate brokers say such payments are becoming increasingly common in the city's highly competitive rental market, where desirable homes are often finalised within hours of being listed.
According to Vittal B R, there is no formal legal definition of 'token money' in rental agreements.
'In many cases, landlords may have already shown the property to several prospective tenants. Paying a token advance is simply a way for tenants to request the landlord to hold the property until the move-in date,' he explained.
Brokers say the practice has become more widespread after the COVID-19 pandemic, as demand for rental housing in Bengaluru has increased significantly.
Depending on the property and urgency, token amounts can range from ₹10,000 to ₹20,000. In cases where possession is immediate, tenants sometimes pay an amount equivalent to one month's rent, which is later adjusted against the security deposit.
Legal experts warn that since token payments are not specifically regulated, tenants should take precautions before transferring money.
Advocate Akash Bantia noted that even the Model Tenancy Act 2021 does not contain provisions governing token advances.
Experts recommend that tenants obtain a written confirmation specifying the amount paid, the purpose of the payment and whether the amount will be refunded if the deal does not proceed.
In many cases, if the landlord backs out of the agreement, the token money is returned to the tenant. However, if the tenant withdraws after reserving the property, the amount may sometimes be forfeited because the landlord may have declined other interested tenants.
To avoid disputes, lawyers advise making payments through digital transfers and keeping written communication such as emails or messages acknowledging the transaction.