The transactions of the real estate sector in India is in fact governed by various laws that have been enacted by the Central Government as well as the State government. The laws that govern the rental of both the commercial and residential property is the Rent Control Act.
These laws are necessary to enforce the civil rights of both landlords and tenants and to prevent any form of deceit. Some of the major challenges of this law are that there are some operational inefficiencies and scuttle competition. In India, the Rent Control Act has been used as a welfare mechanism that has existed since the pre-independence era and it is time that some reformation is made to the law.
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What is the Rent Control Act?
The Rent Control Act was introduced by the government of India to protect the tenants and eliminate the exploitation of the tenants by their landlords in 1948. The main aim of the rent legislation was to ensure that only fair rent was being charged by the landlord and also to protect the tenants from eviction.
There are often discussions that state that the Act should be repealed to boost the construction to meet the growing demand or requirements of housing and aid employment generation. This will lead to the cogent utilization of the prime location and will also facilitate continuous action of urban renewal. The Rent Control Act has also led to the fixed price as rent in some regions since 1948 disregarding inflation and increased property valuations. The Central Government has taken initiatives in the year 1992 to bring in amendments in the existing rent laws to eliminate the devaluation of the property however was strongly opposed by the sitting tenants.
The rent legislation has been enacted and adopted by various states to avoid any dispute between the landlord and the tenant. Some of these rent control legislations include the Maharashtra Rent Control Act, Delhi Rent Control Act, Tamil Nadu Rent Control Act, the Karnataka Rent Control Act, etc. All these state legislations indicate the fixation of a standard rent along with the decree of possession.
What is a Rental Agreement?
The rental agreement is an important document in cases of rent or lease of a property in India. It is a mutual document that contains the terms and conditions that have been agreed upon by the landlord and the tenants. You may be required to hire a professional legal advisor as there aren’t many tenant-friendly laws in the area of commercial leases and no standard lease agreements.
They can aid in negotiating the best deal of a commercial lease as they would be aware of the research zoning laws and local ordinances. They will further help in understanding the local real estate market conditions and customs. a properly documented rent agreement on stamp paper is mandatory if the lease period is >10 months in case of both residential and commercial
The rental agreement also establishes the legal relationship between the landlord and tenant as it is capable of legally binding the parties to the contract. In cases of any changes or additions to the rental agreement, it needs to be mentioned in writing. The legal agreement should be duly completed, signed, and dated by both the tenant and landlord.
The document should be easily accessible to both the parties after it has been signed and attested. The agreement should also be registered and the landlord is responsible to provide the tenant with a copy of the same. The tenant may be exempted from making payments of rent until the landlord delivers a copy of the registered agreement.
What are the Rights of a Tenant?
The Rent Control Act aims at protecting the interest of both the landlords and tenants by providing them with particular important rights. The rights granted to the tenants include:
Right against Unfair Eviction
Under the Rent Control Act, the landlord is not permitted to evict the tenant without any reasonable justification or cause. However, the rules regarding the eviction of the property may vary from one state to another. In some states, the landlord is required to approach the court and obtain an order for evicting the tenant while in some states, the tenant cannot be evicted if they agree to a change in the rent.
The landlord while letting out his property for rent, shall not be permitted to charge an extraordinary amount as the rent under the Rent Control Act. The law requires that the rent amount be calculated based on the value of the property. If the tenant thinks that the rent charged is extraordinary or high then he may approach the cost for the redressal.
Normally the rent is paid at a rate of 8-10% of the property value including all costs incurred for construction and fixtures on the property. How to estimate and decide fair rent. You can also file a complaint with the Rent Controller if you are charged high.
It is a basic right of every tenant to be able to enjoy essential services such as water, electricity, etc. The Act does not permit the landlord to cut these essential services even if the tenant fails to pay his rent on the same property or different property.
What are the Rights of a Landlord?
Some of the rights provided under the Rent Control Act to the landlords are:
Right to Evict:
As already stated above, the right to evict varies from state to state as some states provide that the landlord may evict a tenant for personal and bona fide reasons. An example of such reasons is that the landlord wants to live in the property themselves. Such reasons are not permissible in Karnataka and are required to approach the court for the same. The law also requires the landlord to send a notice to the tenant before moving to the court.
Changing the rent of the property
He is also permitted to charge rent on the property as he is the owner of the property. No legislation provides for an upper limit on the rent however 8-10% of the property value is considered prudent or reasonable. You may also adopt the practice of increasing the rent at a reasonable rate.
Temporary Repossession of Property:
The landlord is also permitted to repossess the property temporarily to improve the condition of the property or to make certain changes to the property. However, it is important to note that such changes brought in should not result in any loss to the tenant or materially affect the tenancy.
Summing up, the rental laws or the Rent Control Act is necessary to protect the rights of both the landlord and tenant. The law provides various rights to the tenants such as the right against unfair eviction, the right to fair rent, the right to essential services such as water, electricity, etc. the Act also provides that the landlord has the right to temporarily repossess the land and also increase the rent amount at a reasonable rate. The eviction laws may vary from state to state. The Act mandates that the parties should ensure to get a rent agreement prepared by a legal professional and that it needs to be registered.