Lease Agreement in Nepal 2026: Rules, Format, Tax & Notarisation

Most rental disputes in Nepal come down to the same thing: there was no proper agreement, or the one that existed left out the clause that mattered. A handshake and a month's deposit is not a lease.

A lease agreement in Nepal is governed by the Muluki Civil Code 2074, which sets out when a written agreement is mandatory, how long a lease can run, who pays the rent tax, and how much notice an eviction needs. Get those right on paper and most disputes never happen.

This guide explains lease agreements in Nepal in 2026 — the governing law, when writing is required, what the agreement must contain, the witnessing and notarisation, registration, rent tax, and the eviction notice period.

What Is a Lease Agreement in Nepal?

A lease agreement — commonly a rent agreement, or bahal sambhauta — is a contract between an owner and a tenant setting the terms on which a property is rented. It records the rent, the duration, the responsibilities of each side, and what happens at the end or in a dispute.

It applies to homes, shops, offices, and commercial space. The agreement is what turns a casual arrangement into an enforceable one: without it, both sides rely on memory and goodwill, which is exactly what fails when money or eviction is on the line.

Key takeaway: A lease agreement converts a rental into an enforceable contract — it is the single best protection both owner and tenant have when something goes wrong.

Legal Basis: The Muluki Civil Code 2074

Renting is governed by the house-rent provisions of the Muluki Civil Code 2074. A handful of sections do the heavy lifting:

Knowing the section behind each rule is useful when a dispute arises — it lets you point to the law rather than argue from opinion.

Key takeaway: The Muluki Civil Code 2074 sets the rules — written-agreement threshold (Section 386), five-year cap (Section 385), rent tax (Section 389), and 35-day eviction notice (Section 393).

When Is a Written Lease Agreement Mandatory?

Under Section 386, a written rental agreement is mandatory when the monthly rent exceeds NPR 20,000. Below that figure, a written agreement is not legally required — though it is still strongly advisable, because an unwritten arrangement is far harder to enforce.

For commercial premises and any meaningful rent, a written agreement is simply the norm. Our advice is to always put it in writing regardless of the threshold: the cost of drafting is trivial next to the cost of a dispute with no document.

Key takeaway: A written lease is legally mandatory above NPR 20,000 monthly rent — but for any serious tenancy, put it in writing whatever the amount.

What a Lease Agreement Must Include

A complete lease agreement leaves nothing to assumption. At a minimum it should cover:

• Full details and citizenship information of the owner and the tenant
• Property location and plot number
• Rental period — within the five-year limit for residential leases under Section 385
• Monthly rent, payment date, and deposit terms
• Responsibility for utilities and the rent tax
• Whether subletting is permitted
• Maintenance and repair responsibilities
• Grounds and procedure for eviction and vacating

The clauses people forget — deposit return, utility responsibility, and notice for vacating — are precisely the ones that cause fights later. A properly drafted agreement spells them out. Our legal document drafting service prepares lease agreements in Nepali and English with all of these covered.

Key takeaway: Cover rent, duration, deposit, utilities, tax, subletting, and exit terms — the clauses owners and tenants skip are the ones that turn into disputes.

Witnesses, Notarisation, and Registration

A lease becomes solid through three things: witnesses, notarisation, and — for larger leases — registration.

Witnesses. Section 386 requires the agreement to be signed by at least two witnesses for each party — the owner and the tenant each bring two. Both sides keep a copy.

Notarisation. Notarising the agreement confirms the identities and execution and makes it far stronger if it is ever questioned. For most tenancies this is the practical level of formality.

Registration. Larger and longer leases must go further. Registration at the Land Revenue Office (Malpot) is required where the annual rent exceeds NPR 500,000, or where immovable property is leased for more than ten years. Below those thresholds, a witnessed and notarised agreement is the norm.

Where an owner is abroad, they can authorise someone in Nepal to sign on their behalf through a power of attorney.

Key takeaway: Two witnesses per party are required; notarise the agreement for strength; and register at the Malpot when annual rent exceeds NPR 500,000 or the lease runs beyond ten years.

Rent Tax, Duration, and Eviction

Three rules cause most of the confusion between owners and tenants — and the Civil Code answers all three.

Rent tax. Under Section 389, the owner is responsible for the house-rent tax leviable by law, unless the agreement says otherwise. If the owner fails to pay on time, the tenant may pay it and deduct the amount from the rent.

Duration. Under Section 385, a residential lease period should not exceed five years; commercial arrangements can differ by agreement and may be extended by mutual consent.

Eviction. Under Section 393, an owner must give the tenant at least 35 days' written notice, stating the ground, before requiring them to vacate. Eviction without proper notice is not lawful.

Key takeaway: The owner pays the rent tax unless agreed otherwise, residential leases cap at five years, and a lawful eviction needs 35 days' written notice with a stated reason.

Common Mistakes to Avoid

In our experience drafting agreements for owners and tenants in Kathmandu, the same gaps recur:

• No written agreement — relying on a verbal deal above the NPR 20,000 threshold, where writing is mandatory.
• Silent on the deposit — no clause on how and when the deposit is returned, the most common flashpoint.
• Missing witnesses — fewer than the required two witnesses per party.
• Ignoring registration — a high-value or long lease that should have been registered at the Malpot but was not.
• Evicting without notice — skipping the 35-day written notice and the stated ground required by law.

Key takeaway: Put it in writing, nail down the deposit, include the witnesses, register when required, and follow the 35-day notice rule — these five habits prevent almost every rental dispute.

Conclusion: A Good Lease Prevents the Dispute

A lease agreement is cheap insurance. A few clear pages — rent, duration within the five-year limit, deposit, utilities, tax responsibility, and exit terms — signed before witnesses and notarised, settle in advance the very things owners and tenants otherwise fight about.

The Muluki Civil Code 2074 already sets the framework; a well-drafted agreement simply turns that framework into terms both sides can rely on, and registration adds another layer for larger leases.

We draft and notarise residential and commercial lease agreements in Nepali and English, covering deposit, tax, and exit terms so nothing is left to assumption. See our drafting services or talk to our notary advocates in Kathmandu. Get your documents notarized in Kathmandu →

Reviewed by: The Legal Team at Notary Kathmandu — Nepal Bar Council registered advocates

Last reviewed: April 2026