Rent Laws in India- Changing Situation over Time
By Aditya Marwah July 27, 2016
A Landlord-Tenant dispute is one area, which has been under scrutiny and debate over many decades now. The landlord leasing out his property, and the tenant not paying the rent and then not vacating the premises, makes the matters even worse.
In India, there are two types of agreements that deal with tenancy, namely the Lease Agreement, and the Leave & License Agreement. The former is covered by rent control laws in which the amount of rent is arrived at by taking into consideration the cost of construction of property and the market price of the land. Landlords have to abide by the strict rent laws which apply to these agreements when they rent accommodation with a 12 month lease. The latter however only grants the tenant a license to occupy the property for a period shorter than one year, like 11 months, with an option to renew the lease, at the expiration of the said period.
Landlords, therefore, prefer to give out their houses on a Leave & License Agreement, because the rent control laws, that are favorable to the tenants, only apply for Lease Agreements that are of at least 12 months. The present practice, which exists, is that the tenant and the landlord sign an agreement, in which the tenant gets to occupy the property for 11 months, (so that Rent Laws of 12 months or more do not apply on them) with periodic renewal as an option. Moreover, the right to ownership of the property gets transferred from the landlords to the tenants in Lease Agreements, as a result of which tenants are able to refuse to vacate the premises. A Leave & License Agreement, on the other hand, allows the landlords to take pre-emptive measures for eviction of the tenants from their property.
The Rental control laws which exist right now prevent the landlords from overcharging the tenants and protect the tenants from sudden or unfair eviction. Landlords need to show a reason, legally considered valid if they intend to evict the tenant. Examples of such legally valid reasons that landlords can avail of are: Need to occupy the premises themselves or for accommodating their family members (which could include both immediate and distant family members). Other reasons like, desire to let out the property to someone else for a higher amount of rent, is usually not considered enough reason to seek eviction of the present tenant.
Though it might appear that a 12 month lease is more favourable to the tenant (than the 11 month lease) as he is assured of a fixed rent rate (at or below the market rate); it also has its share of cons. Under a 11 month lease agreement a tenant, (like the landlord) enjoys more flexibility and can decide to leave the rented premises before the termination of the contract. The landlord thus has the option of fixing the rent amount and terms as per the current market condition and rates, and the tenant at the same time would be less bound by the lease.
Owing to the large number of tenancy related disputes that have been pending in courts for the past so many years now, the Parliament is now deciding to revive its Tenancy Bill (Draft Model Tenancy Act, 2015), which allows landlords to charge market rate from the tenants, and at the same time allows them to increase the rent periodically by 10% at the expiration of the rent agreement. This can be seen as a paradigm shift from the current Rent laws that makes eviction of a tenant cumbersome and prevents the landlord from altering of the rent amount; both of which are the primary causes of long drawn out court battles between the two that continue for years.
In the case of P. Suryanarayana (D) by Lrs. v. K.S. Muddugowramma, the Supreme Court held that ‘in a suit for eviction of the tenant, if the landlord has a bona fide requirement, only then can the tenant be evicted.’ In this present case, an eviction petition had been filed by the landlady widow who had two major sons on the ground of bona fide requirement. The court held that only when the landlord can present a case showing that s/he needed the rented out premises for himself or his family members, will the court presume that ‘such premises is required’. This, the court held was mandatory keeping in mind the ‘phrase’ used by the legislature.
Furthermore, the Bill allows both the landlord and the tenant to mutually decide the period for which the premises will be leased out wherein the tenant cannot be evicted from the premises, unless he fails to pay the rent instalments. Also, in order to speed up the settlement of rent disputes that often drag on for decades the proposed law also provides the rent authority to revise or fix the rents. The Draft Model Tenancy Act, 2015 also provides that in case the tenancy period extends and it is not renewed, the tenancy shall be deemed to be renewed on a month-to-month basis in the same terms and conditions for a period of six months. The Act also provides compensation to the landlord, which is double of the monthly rent, if the tenant refuses to vacate the premises after his tenancy has been terminated by order, notice or agreement. Rent Courts and Tribunals have also been proposed to be set up under the Act, in order to hear and decide applications relating to disputes between the landlord and the tenant or any matters related thereof.
However, it can be argued whether the proposed bill is more favourable to the landlords as opposed to the tenants. The proposed Bill provides revison of rent, wherein it states that the rent cannot be increased in between the tenancy period, unless the amount of increase has been set out in the Tenancy agreement expressly. But at the same time, if it is seen from a practical aspect, a 10% rent increase after the expiry of the 11 month tenancy period, can be seen as hurting the tenant’s pocket. The Bill does not provide any guidelines or norms to deal with this practice that is commonly followed in various metropolitan cities such as Delhi, Mumbai, Bangalore, etc. It is interesting to note that the Bill also does not provide any solution for the automatic right which the tenant gets over a property of he continues to reside in it for an uninterrupted duration of 12 years, which is also commonly known as adverse possession.
Thus, if this Bill is passed, it could prove to be favourable for both the landlord and the tenant,which would be a welcome change from the previous situation under the Rent laws where the tenant was favoured, thus allowing hassle-free rent hikes for the landlord, and an incentive to rent out their properties. At the same time, the tenants will have no fear of them being evicted out at the whims and fancies of the landlords.
 Pro-tenant laws in India often inhibit rental market, Global Property Guide, available at: http://www.globalpropertyguide.com/Asia/India/Landlord-and-Tenant, last accessed on 21st June, 2015.
Rental Agreements, Leases and Regulations in India, AngloInfo, available at: http://india.angloinfo.com/housing/renting-accommodation/rental-agreements/, last accessed on 22nd June, 2015.
 Did you know, Owner can’t evict a tenant for five years if tenant pays rent regularly, unless owner needs to use property himself, Live Mint, available at: http://www.livemint.com/Money/VP59yu6RiUO1gjOvfwZ9XM/Did-you-know--Owner-can8217t-evict-a-tenant-for-five-yea.html, last accessed on 22nd June, 2015.
 Bill for Easy house rent strikes table, The Telegraph, available at: http://www.telegraphindia.com/1150520/jsp/nation/story_21082.jsp#.VYfEQhOqqko, last accessed on 21st June, 2015.
 P. Suryanarayana (D) by Lrs. v. K.S. Muddugowramma, (2004) 3 SCC 589.
 Section 5(3), Model Tenancy Act, 2015, available at: http://mhupa.gov.in/W_new/Draft_Model_Tenancy_Act_2015.pdf, last accessed on 30th June, 2015.
 Section 23 of the Model Tenancy Act, 2015.
 Section 9 of the Model Tenancy Act, 2015.
 Article 65 of the Limitation Act provides for this period of 12 years.
rent law , 12 month lease , 11 month leave and license agreement , adverse possession , 12 years , rent hike , eviction of tenant , landlord , P. Suryanarayana (D) by Lrs. v. K.S. Muddugowramma , rent law bill , Draft Model Tenancy Act , 2015