In India, the governing law for the control of rent, protection of rights of landlords and the rights of tenants are governed by the Rent Control Act.
1. What is the Rent Control Act?
A central Rent Control Act was passed by the legislature in the year 1948. It regulates the rules of letting out a property and ensures that neither the landlords nor the tenants’ rights are exploited by the other. It should also be noted that currently, each state has its own Rent Control Act, though largely similar to each other, they carry some minor differences. Due to the 1948 Act being extremely stringent and pro-tenant, the real estate market has had difficulty in growing in some areas. There are some properties that have been let out that are still paying the same amount of rent since 1948, disregarding inflation and increased property valuations. In 1992 the Central Government tried to bring about amendments to the Act via a proposed model to ensure that the property is not devalued. Unfortunately, the changes were opposed by the sitting tenants and therefore failed to take effect.
2. What is a 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 reached without being expressly put in writing will not be a valid contract in this case. – Any changes regardless of the type of rectification must also be put in writing. – The agreement must be dated and signed by both parties, i.e. the landlord and the tenant. -The agreement must be stamped and registered. 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.
3. What are the Rights of a Tenant?
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:
- Right Against Unfair Eviction: Under the Act, the landlord cannot evict the tenant without sufficient reason or cause. The rules of eviction are slightly different from state to state. In some states for the landlord to evict a tenant, he/she must approach the court and obtain a court order for the same. In some states, the tenant cannot be evicted if he/she is willing to accept any changes to the rent.
- Fair Rent: The landlord when letting out a house cannot charge extraordinary amounts in rent. The valuation of a property for rent is to be dependent on the value of the property. If the tenant feels that the amount of rent that is being asked is too much compared to the value of the property, he/she may approach the court to seek redressal. Usually, the rent is to be between 8% and 10% of the value of the property, including all costs incurred via construction and fixtures on the property.
- Essential Services: It is the basic right of the tenant to enjoy essential services such as water supply, electricity etc. A landlord doesn’t have the right to withdraw these services even if the tenant has failed to pay rent with regards to the same property or a different one.
4. What are the Rights of a Landlord?
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: The right to evict a tenant is also different from state to state. Meaning in some states, the landlord may evict a tenant for personal and bona fide reasons such as wanting to live there themselves. Such a reason is not an acceptable cause for eviction in Karnataka. The landlord, in most cases, must approach the court to evict the tenant. It is also needed by law for the landlord to send sufficient notice to the tenant before approaching the court.
- Charge Rent: Being the owner of the property, the landlord has the right to charge rent upon the tenant. Since there is no actual legislation providing for an upper limit on the rent, the landlord may keep increasing the rent charges according to his wishes. Therefore, the prudent thing to do in such cases is to stipulate the amount of increase and the condition of increase in the rental agreement itself. Usually, the rent is increased periodically every year by 5% to 8%.
- Temporary Repossession of Property: The landlord may temporarily repossess the property to improve the condition of the property, alter the property in any way or make changes to the property. But such changes to the property must not bring any loss to the tenant or materially affect his tenancy.
5. Non-Applicability of the Rent Control Act
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.
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