Rental agreements and the law in Nepal

General information, not legal advice. Laws, tax rates and local procedures change, and municipalities differ. Confirm with your ward or municipality office, or a lawyer, before you act. Section numbers refer to the National Civil (Code) Act, 2017 (Muluki Civil Code 2074).

House rent in Nepal is governed mainly by the National Civil Code 2017, Part 4, Chapter 9, "Provisions Relating to House Rent" (sections 383 to 405), with local governments adding rent tax rules. Here is what the law says, in plain language.

What counts as a rented house

The chapter covers any house, storey, unit or room, and the land occupied by the house (section 383). No one may rent out, or take on rent, a house that is not safe to live in from a health and security point of view (section 384).

How long a lease can run

The period is what the agreement says, up to five years (commercial renting excepted), and can be extended by consent (section 385).

The written agreement

Section 386 says the owner shall make a written agreement with the tenant covering:

• names, addresses and citizenship numbers (passport or ID for foreigners)
• location and plot number; purpose, start date and period
• monthly rent, and the time and mode of payment
• who pays electricity, water, telephone and similar charges
• house rent tax, and insurance if any
• leaving the house and eviction
• whether subletting is allowed
• any other necessary matters

The tenant's photograph is attached, the agreement is signed by at least two witnesses from each side, and both keep a copy.

Exception: a written agreement is not legally necessary if the monthly rent is Rs 20,000 or less (section 386(2)), though it is still the simplest way to avoid disputes.

Registration: a rent deed with monthly rent above Rs 100,000 must be registered with the concerned office (the Land Revenue Office until another is designated), or it is not legally recognised (sections 463 and 464).

Before moving in

• The owner must disclose any structural weakness or fault when the agreement is made (section 387).
• The owner prepares a list of goods and fittings in the house; the tenant gives a receipt for items received (section 388).

Duties of each side

The owner must (section 389) let the tenant use the house as agreed, arrange water, electricity, sewerage and sanitation unless agreed otherwise, and protect the tenant from harassment by other occupants.

The tenant must (section 390) pay rent on time, look after the house as if it were their own, and not disturb other occupants or neighbours. Both must follow the agreement.

Paying rent and receipts

• Rent is paid as the agreement says. If it says nothing, rent is due within seven days after the end of each month, by cheque or cash (section 391).
• If the owner receives rent in cash, the owner must give a receipt.
• Unless agreed otherwise, the owner pays taxes and charges on the house. If the owner fails to pay on time, the tenant may pay and deduct the amount from rent (section 392).
• A tenant renting for business or industry must insure the house, or bears the loss from disaster, riot or fire (section 393).

Repairs: read this carefully

Under section 394, unless the agreement says otherwise, the tenant is responsible for repair and maintenance. If the agreement makes the owner responsible, the tenant gives written notice; if the owner does not act, the tenant may carry out the repair and deduct the billed cost from rent, after giving the owner a written cost estimate fifteen days in advance (unless agreed otherwise). So write clearly in the agreement who repairs what.

Subletting, changes and inspections

• Subletting is allowed only if the agreement permits it, and the tenant must inform the owner in writing of the sub-tenant's name and address within fifteen days (section 395).
• The tenant may not demolish, add to or alter the structure without the owner's written consent, unless the agreement allows it (section 396), and may not use the house for another purpose without the owner's consent (section 397).
• The owner may inspect with advance notice, and the tenant must allow it (section 399).

Leaving early: the tenant's side

A tenant may leave before the period ends if the owner fails their duties, breaks the agreement or the law, or if the tenant no longer needs the house (section 400). In that last case, unless the agreement says otherwise, the tenant must give at least 35 days' written notice. If the tenant leaves without notice, the owner may deduct rent for that period from any advance, or recover it.

Eviction: the owner's side

Under section 401 the owner may evict a tenant who fails their duties under section 390 (such as not paying rent), uses the house for illegal activity, breaks the agreement, or when the period ends, the house needs repairs that require it to be empty, or it is unfit to live in. The owner may also evict because they need the house themselves, but must give at least 35 days' written notice, may not rent it to someone else for three months without using it, and must offer it to the previous tenant first if renting it within that time.

The law does not set a notice period for the other grounds, so put one in your agreement.

Moving out and the deposit

When leaving, the tenant counts the goods, cleans (or paints, if required) and hands the house over in good condition, replacing or paying for lost or damaged items but not for normal wear from daily use (section 403).

We found no rule in the Civil Code capping deposits, advances or rent increases; these depend on the agreement and mutual consent (section 398), so write them down clearly.

If a tenant disappears

If a tenant disappears owing three months' rent or more, the owner may apply to the ward office, which issues a fifteen-day public notice and can then open the house and take the goods into custody (section 404). Owners should not break in themselves.

Rent tax

The Local Government Operation Act 2074 (section 57) lets municipalities and rural municipalities levy a rent tax on houses, land and other premises rented out. Each local government sets its own rate and procedure in its yearly finance act. For example, Lalitpur Metropolitan City's Finance Act 2082 set a 10% rent tax, required the agreement to be submitted where monthly rent exceeds Rs 20,000, and asked owners to report vacancies or rent reductions to the ward within 35 days. Check your own municipality's current finance act.

Disputes

The municipal judicial committee settles house rent disputes with claims of up to Rs 25 lakh a year, trying mediation first, and may set up ward mediation centres (Local Government Operation Act, sections 47 and 49). Under section 405 of the Civil Code, a case about house rent must be filed within six months of the act complained of.

Checklist

• Written agreement (advised even at Rs 20,000 or less), with photo and two witnesses per side
• Registered if rent exceeds Rs 100,000 a month
• Repairs, notice periods, deposit refund and increases spelled out
• Cash payments receipted
• Rent tax registered with your municipality