All real estate transactions in India are governed by various laws enacted by the Central Government of India and the respective State governments. The rental law is one such example. These laws govern the rental of commercial and residential property and are required to enforce the individual civil rights of both proprietor and tenant and to prevent deception. The primary goal of rent control legislation is to protect tenants from exorbitant rents and arbitrary rent increases, as well as to ensure tenure security. The legislation was required as a result of scarcity conditions in urban rental housing markets. Because housing is a state issue, various state governments have enacted rent control legislation. By 1972, almost every state in the country had passed Rent Control Acts (RCA). This article will be focusing on rental provisions as mentioned in Maharashtra Rent Control Act, 1999. The Maharashtra state government passed the Maharashtra Rent Control Bill, 1999, to regulate rental housing, and the Maharashtra Rent Control Act, 1999, went into effect on March 31, 2000. The Act aims to unify and consolidate rental housing in the state, as well as to encourage the construction of new houses by ensuring property owners receive a reasonable return on investment (RoI).
- What is Standard Rent?
This is mostly applicable in India. In India, the Rent Control Act forbids the owner from charging more than the prescribed rent, regardless of market rent. The standard rent is the rent that is legally permissible to charge to a tenant. The standard rent has been defined in the rent control act as a state act, and all states have definitions that may differ slightly in meaning from one state to the next. According to the provisions of the rent control act, the standard rent cannot be higher than a certain amount, regardless of the market conditions, supply, and demand situation, or what the affording tenants can pay to a landlord. If there is a disagreement between the proprietor and the tenant about the rent or an increase in rent, either party can go to court. If the rent is excessive, the court will determine the standard rent.
1.1 Fixation of Standard Rent under Maharashtra Rent Control Act (MRCA), 1999
The provisions governing rent fixation differ depending on the type of tenancy. Tenancies can be broadly divided into three categories for this purpose: existing tenancies where standard rent is chargeable, newly let tenancies that are exempt from the provision of standard rent, and tenancies that do not fall into the previous two categories. The property owner cannot charge a rent that is higher than the standard rent for existing tenancies. The tenant may file an application to the courts for the determination of standard rent without regard to time constraints.
Standard rent (SR) is defined as the rent fixed by the court or rent controller under previous enactments, or if the rent was not so fixed, the rent at which the premises were let on October 1, 1987, or if not let on that date, the rent at which the premises were last let before that date. Except in the case of premises leased on October 1, 1987, the frozen rent will be increased by 5%. Following that, the SR can be increased by 4% per year. If there is a disagreement over the rent between the landlord and the tenant, the court will set the standard rent. Existing tenancies where the rent was not fixed by earlier laws and which were not leased on or before October 1, 1987, but which were leased afterward, are not addressed by the act. If there is a disagreement between the landlord and the tenant in such a situation, the court may presumably fix the standard rent upon application from either party.
However, the act provides no formula or guidelines to the court for determining rent in such cases. Most rent acts include a formula based on the cost of the house or a standard rent fixation based on rents in similar premises. This oversight must be addressed. The determination of standard rent is left to the court’s discretion as it sees fit.
Charging rent above the standard rent is prohibited in areas where the Act’s rules apply. Such an offense is punishable by imprisonment for no more than three months or a fine of no more than Rs 5,000, or both.
1.2 Permitted increase under MRCA,1999
Landlords have the right to raise the rent on any premises that has been rented for any purpose by 4% per year. Rents can also be raised if repairs or alterations are made to the rented property to improve its condition. The increase in the latter scenario, however, should not exceed 15% per year of the expenses incurred due to special additions. The proprietor may also raise the annual rent if he is required to pay higher government-imposed taxes. In this case, the rent increase should not be greater than the increase in tax.
a) It has been held by the Division Bench that once fair rent is determined, the same would have prospective operation and such fair rent can be directed to be paid from the date such application is moved in the case of Kewalchand Kastoorchand v. Samirmal Jaini and another (1953).
b) In the case, Z.B. Mohd Ismail v. P.R. Kharwade (2016), the landlady had filed a suit for eviction of the respondent and sought determination for standard rent. The appellate court allowed the appeal filed by the respondent partly and set aside the decree for eviction. Both the parties filed writ petitions challenging the judgement of appellate court. The landlady was aggrieved for setting aside the decree for eviction and the tenant for extent of determination of standard rent at Rs. 5000 per month. The court in its order upheld the standard rent being Rs. 5000 per month payable, however the direction to pay interest amount on standard was set aside and that the landlady is entitled for a decree of eviction of the tenant only on the ground of arrears of rent.
c) In Malpe Vishwanath Acharya & Ors. vs. State of Maharashtra & Anr., (1998), a three-judge Bench found and held that the provisions of the Bombay Rent Act relating to the determination and fixation of ‘standard rent’ are no longer reasonable. The only reason the Court did not strike down those provisions, despite the finding, was that the Bombay Rent Act was set to expire on March 31, 1998, and the Court was informed that the State was in the process of enacting a new Rent Control Act. Following the Court’s decision in Malpe Vishwanath Acharya, the Bombay Rent Act was replaced by the Maharashtra Rent Control Act, 1999, which went into effect on March 31, 2000.
The rent control act defines standard rent as the highest possible rent for a specific property. Many support rent control laws, arguing that they prevent landlords from charging exorbitant rents, while others argue that such laws cause deterioration of existing housing stock because the rent paid is low. India’s rental laws must be revised. Special attention should be paid to removing restrictions on rental increases. Amendments to several states’ rent laws are a step forward.
- Zainab Bee Wd/O Mohd Ismail vs Prabhakar Rajaram Kharwade (Writ Petition No. 211 of 2015)
- Malpe Vishwanath Acharya & Ors. vs. State of Maharashtra & Anr., (1998) 2 SCC 1
- Kewalchand Kastoorchand v. Samirmal Jaini AIR 146 (Nag 1953)
- Wadhva, Kiran. “Maharashtra Rent Control Act 1999: Unfinished Agenda.” Economic and PoliticalWeekly,vol.37, no. 25, 2002, pp. 2471–75. JSTOR, http://www.jstor.org/stable/4412277. Accessed 23 Sep. 2022.
- See Sunit Mishra, Maharashtra Rent Control Act: Everything you need to know, housing.com (June 21, 2021) https://housing.com/news/maharashtra-rent-control-act/ (Last visited Sept.23, 2022)
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