Legal expert Ameet Mehta decodes the Rent Control Act and offers a balanced and humane solution.
What is the Rent Control Act? Has it been amended before?
The Rent Control Act is based on the English system. In India, the first law was passed in the Bombay Presidency in 1915 and then in 1939. This was replaced by a law called the Bombay Rents, Hotel, and Lodging House Rates Control Act, 1947, which has now been repealed and replaced by the Maharashtra Rent Control Act, 1999.
What are the salient points of the Act of 1999?
The new Rent Control Act of 1999 has withdrawn the application of the Act from the banks, PSUs or corporations established under central or state Act, foreign missions, international agencies, MNCs and limited companies having a paid up share capital of more than Rs 1 crore. There is also a provision to withdraw the application of provisions of standardisation of rent from the premises, whether old or newly constructed, which have not been let or given on licence for a continu-ous period of one year. By amendment to Section 4 of the Bombay Rent Act inserting Sub-section 1A after Section 4 in 1987, the provi-sions relating to standardisa-tion of rent were withdrawn for a period of five years to buildings constructed after the October 1, 1987, so that the landlord could recover a larger part of his investment in that period according to the rules of demand and supply. The Act of 1999 carries the concept further. The provisions relat-ing to standard rent have been withdrawn from the premises given on tenancy or license in buildings, whether old or newly constructed where they have not been let or leased for a continuous period of a year.
Under the Act of 1947, the standard rent once fixed could not be increased or decreased. Now under the new act, increase in standard rent is permitted annually at the rate of 4%.
As the security of tenure, one of the two basic tenets on which all rent control Acts were founded, has not been touched, it would have been keeping with the times if the standard rent, which has justifiably not been allowed to be revised retrospectively and which in any case was always a lesser principle and now evaporating in inflationary heat, had been allowed to be increased at the rate of at least 10 per cent annually, which is the norm and yet is considered a pittance by economics of the present day.
There are considerable safeguards for tenants like the one that says “no eviction suit can be filed on the ground of arrears until the expiration of 90 days, and next after notice of demand served upon the tenant.” No decree for eviction shall be passed in an eviction suit on the ground of arrears, if the tenants pays up within 90 days from the date of service of the summons of the suit, the arrears of rent with 15 per cent interest and continues to pay the standard rent and permitted increases till the suit is finally decided and also pays the costs of the suit.
Is the current amendment asking tenants to pay current market rates justified?
In long run it shall bring evenhandedness in the rent control but tenants shall have to shelve out from today. Hence a person who may be paying @ R500 for his room may suddenly have to shelve out more than R50,000 if he has to pay as per the prevailing market rate.
Don’t landlords also find it hard to maintain premises with rents of Rs 400 to Rs 500 a month?
It is difficult for landlords to maintain buildings, but changes can be done gradually. The government could have first kept the rent at 50 per cent of ready reckoner rate for five years, and, then could have kept matching the ready reckoner rate. The prevailing market rate would be higher than the ready reckoner rate.
What is the ideal middle ground?
A gradual increase instead of a sudden increase is advisable. Logic on commercial and residential should be separated. Commercial premises make enough money and they may be able to sustain the jump, which is not the case of residential tenants.
The landlord should not levy a market rent that is more than 30 per cent of the annual income of the tenant. The new amendment can also stipulate that senior citizen tenants will be liable to pay 50 per cent of the market rent or 15 per cent of his/her annual income, whichever is lower.
There are questions over the government’s motives...
By making amendments, the government may be trying to create more housing stock and development. Landlords have been complaining that the standard rent is low, a measly amount, really. Tenants state that a rise would have been welcome but it should have been done gradually, and not a sudden surge.
Advocate Ameet Mehta is a legal and housing societies expert, and managing partner of the legal firm, Solicis Lex