Legal Briefing

Rent control laws: time for a change

The In-House Lawyer Logo

Real Estate | 01 July 2010

Disputes between landlord and tenant are the most common and vicious in India. Many states in India have enacted rent control laws that govern the relations between landlords and tenants. Rent control laws exist in approximately 40 countries around the world. In most of these countries, the rent control laws were enacted in the backdrop of the First World War, mainly with the objective of protecting the public and preventing the landlords from imposing rent increases that make the tenants vulnerable.

background and existing legislation

The right to housing has been codified as a human right in the Universal Declaration of Human Rights. Further, in India too, right to housing has been considered as a part of the right to livelihood under Article 21 of the Constitution of India. The basic objective of the rent control legislation in India is to ensure reasonable rents and security of tenure for the tenants. These legislations apply to those premises in urban areas that fall under the prescribed threshold of standard rent under the rent control legislations, except the ones belonging to government and local authorities. These legislations seek to fix the prescribed ‘standard rent’, the permissible increase in the standard rent and also to protect the tenants against arbitrary eviction by the landlords. These legislations were enforced in the post-Second World War period as a temporary measure to cater to the then prevailing housing crisis and have unexpectedly lasted. Although it may sound strange, the restrictions imposed by the rent control legislations have resulted in a scenario where individuals and multinational corporations are occupying premises in affluent localities, but are paying rents that have scarcely changed over the past few decades.

Reasons for change

The Supreme Court has also observed that the provisions relating to the determination and fixation of standard rent can no longer be considered as reasonable. Further, in a recent ruling the court observed that the conditions that necessitated the enactment of the rent control legislations were no longer the same and that the urban centres are faced with newer problems, some of them having their origin in the rent control legislations. It also showed that it is necessary to take another look at the relationship between the landlord and the tenant.

The inherent nature of the rent control laws also suffers from certain anomalies. The Transfer of Property Act 1882 provides that a landlord can evict their tenant after the expiry of the notice for eviction. However, it may be noted that, in cases where the rent control legislations apply, the landlord cannot start eviction, unless the grounds for eviction as specified in the rent control legislations are met. This has also led to the occupation of dilapidated buildings as there is no incentive for the landlords to maintain such buildings, hence posing a threat to the safety of the occupants. Further, the rent control acts cannot apply where the rent exceeds a certain value. In view of the escalation of prices due to inflation and the corresponding fall in the value of the rupee, the ceiling of rentals specified in the rent control acts is unreasonable and outdated, and does not stand the test of time. Only in a very few states in India is this rent control legislation applicable to all properties, irrespective of their rental values. The widening divergence between the interests of the landlords and tenants has not only led to increased litigation but also to increased crime. A large number of criminal cases have their origin in disputes relating to rented properties.

Various state governments have formed committees to advise on the significance of the rent control legislations in present times. These committees have advocated the repeal of the rent control legislations, and for providing a coherent formula for updating the old frozen rents and periodically revising them.

comment

With the passage of time and consequent change of circumstances, the validity and significance of the rent acts have become questionable. When the archaic rent control legislations become a thing of the past and are replaced by new legislations in sync with the changing times, there should be something for everyone to look forward to.