Rent Control Act - Rental Agreement, Rights of Tenant & Landlord

The Rent Control Act in India governs the legal rights and obligations of tenants and landlords. It was introduced to regulate rent, prevent arbitrary evictions, and maintain fairness in rental relationships. While the central law was enacted in 1948, each state has developed its own version, making certain rules specific to the location of the property.

This article explains what the Rent Control Act covers, the legal format of rental agreements, tenant protections, landlord rights, and how the law applies to commercial leasing.

Rent Control Act

The Rent Control Act in India governs the relationship between landlords and tenants, ensuring fair treatment for both sides. Originally passed as a central law in 1948, most states now follow their own versions of the Act with minor variations.

The Act was introduced to:

• Prevent unfair eviction of tenants
• Regulate rent levels and avoid overcharging
• Balance the interests of both landlords and tenants
• Set a legal framework for rental agreements and resolving disputes

However, the original 1948 Act was considered too tenant-friendly, leading to stagnant rents and affecting real estate growth. A 1992 attempt to revise the law failed due to tenant opposition.

What is Rental Agreement?

In India, renting or letting out of any property for residential or commercial purposes is subjected to various rules and regulations, such as: – Under the law, it is a must to have a written agreement between the two parties enumerating all the terms and conditions of tenancy.

An agreement without being expressly put in writing will not be valid in the following cases:

• The agreement must be dated and signed by both parties, i.e. the landlord and the tenant.
• The agreement must be on a stamp paper. 
• The agreement must be registered if the rent period exceeds 11 months.
• Any changes or rectification in the existing agreement must be put in writing.

Without a valid rental agreement, the rights and duties of the landlord and the tenant cannot be enforced or protected by law. Therefore, it is always prudent to enlist the help of a legal practitioner in the making of such an agreement as many complexities entail, especially for commercial leasing.

Rights of a Tenant of the Rent Control Act

The Rent Control Act is established not only to protect the landlord and their property but also to protect the tenant. Under the Act, the few important rights that are given to the tenant are:

• Protection Against Unfair Eviction
  Tenants cannot be evicted without a valid legal reason. In most states, landlords must obtain a court order to initiate eviction. In some jurisdictions, tenants who agree to revised terms such as increased rent may not be evicted.
   
• Right to Fair Rent
  Rent must reflect the reasonable value of the property. If a tenant believes the rent is excessive, they can approach the rent control authority or court for correction. Generally, rent is expected to fall within 8% to 10% of the property's total construction and fixture cost.
   
• Access to Essential Services
  Tenants have the right to uninterrupted access to water, electricity, and other basic services. Landlords are prohibited from cutting off these services, even in cases of rent disputes.

Rights of a Landlord of the Rent Control Act

The point of interest in a rental agreement is always the property, and the property has to be protected from unfair exploitation. The Rent Control Act entitles the landlord with the following rights:

• Right to Evict
  Landlords can evict tenants on valid grounds, such as personal use of the property. However, they must issue proper notice and follow due legal process, which often requires court approval. Eviction rules may vary slightly by state.
   
• Right to Charge Rent
  The landlord has the right to fix and revise the rent, provided it complies with the applicable state Rent Control Act. Although there is no uniform legal limit on rent increases, it is common for rents to be revised annually by 5% to 8%. To avoid future disputes, any proposed increase should be clearly stated in the rental agreement.
   
• Right to Temporarily Repossess Property
  Landlords may reclaim possession of the property temporarily for repairs or alterations, provided these changes do not disrupt the tenant’s occupancy or result in financial loss.

When the Rent Control Act Does Not Apply

There are certain cases where the Rent Control Act is not applicable when the property has been let out. They are:

• Property let out to private limited or public limited companies with a paid-up share capital of Rs 1 crore or above.
• Property let out or sub-let to public sector undertakings, banks or any corporation established under any state or central Act.
• Property let out to foreign companies, international missions or international agencies.

6 Steps for Renting Commercial Property in India

The real estate industry in India faces cut-throat competition from within, and hence rent agreements have to be worked upon smartly. You need to know the right questions to ask and all the laws that are best suited for your business.

1. Verify Ownership and Title

• Request the title deed to confirm the landlord’s ownership. Check for sub-leases or encumbrances before proceeding.

2. Check Legal Approvals

• For under-construction properties, inspect the commencement certificate. 
• For built-up properties, ensure availability of an occupation certificate. 
• Confirm if any power of attorney is involved.

3. Draft the Correct Agreement

• Determine the exact nature of occupancy—whether it is a lease, license, or co-working arrangement. 
• Tailor the agreement accordingly.

4. Verify Tax and Property Classification

• Ensure there are no pending tax disputes. 
• Verify if the property is listed as commercial under the Income Tax Act or city zoning laws. 
• Misclassification may lead to unexpected TDS liability.

5. Run a Background Check on the Agent

• Vet the real estate agent’s credibility using previous client references or lease history. Avoid agents unwilling to share such details.

6. Ensure Validity of the Agreement

The agreement must include:

• Duration and renewal terms
• Rent amount, deposit, and payment schedule
• Signatures of all parties
• Full property address and usage type

Documents Required for Commercial Rental Agreements

• PAN card or any government-issued ID proof
• Original passport, if not Indian
• Power of attorney should be presented if ID is demonstrating another person for the registration
• Evidence and nature of business establishment
• Two in recent passport size photographs
• Commercial rental agreement printed on the stamp paper of the recommended value
• Memorandum of association and Articles of Association, if any
• Association of person’s understanding, if any
• Bonds and dealership proofs, if any
• Shareholder & Listing agreements, if any

How to Use the Commercial Rental Agreement?

The completed draft rental agreement must be provided to all parties, which may also include the guarantor. Each party should be given the opportunity and may need some time to read the agreement to finalise it, given the length of the document.

Step 1: Share the drafted agreement with all parties for review.
Step 2: Print the agreement on non-judicial stamp paper (or e-stamp paper) as per state requirements.
Step 3: Sign the agreement and ensure each party receives a copy.
Step 4: If the lease is for more than 11 months, visit the sub-registrar’s office for registration.

Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.