How much increase in rent is allowed under the Rent Control Act?

The Rent Control Act binds the Landowners and tenants by some duties and rights under this act. What are the main highlights of this act? Let’s discuss them further.

The Union government of India has launched the Rental Control Act to regulate and control the rent charges and protect the rights of the tenants and landlords. In July 2019, the Government floated a proposed Model Tenancy Act to regulate and promote rental housing throughout the Country.

The Center has bestowed power to the respective states to execute the act or make changes as per their requirements. Chandigarh has started implementing the Model Tenancy Act 2020, earlier drafted by the Union Ministry of Housing and Urban Affairs.

While the UPA government in Maharashtra has opted for dual rent control laws, the Model Tenancy Act will be implemented in newly built constructions. The existing tenants will get protected under its own Maharashtra Rent Control Act 1999.

What is the Rent Control Act?

The parliament passed the Inion Rent Control Act in 1948. It handles the management of letting out a property and guarantees that neither the landlords nor the tenants’ rights are manipulated by the other. It should also be reported that nowadays, each state has its own Rent Control Act, and though identical to each other, they have some little dissimilarities.

Due to the 1948 Act being excessively strict and pro-tenant, the real estate market has had difficulty developing in some sites. Some properties have been let out and are still paying the same rent charge since 1948, ignoring inflation and boosting property valuations.

In 1992 the Central Government attempted to modify the Act via a suggested measure to confirm that the property gets not depreciated. Unfortunately, the sitting occupants disagreed with the modifications and therefore failed to take impact.

Who is a tenant as per the Rent Control Act?

After knowing what is rent control act, let’s find out who is a tenant under this act. Talking about the exact definition tenant is defined as a person on whose account or by whom rent is payable for any premises.

The definition also includes:

• Deemed tenant

• Sub-tenant

• A person who adopted the title under a tenant.

• A person to whom the interest has been transferred and assigned to the premises.

Rules under the Rent Control Act

The most crucial rules and regulations under the Rent Control Act are:

Provision for a security deposit for residential tenancy is capped at two months, while non-residential gets capped at one month in the Act.

A committee will be formed to help resolve issues related to tenancy in the Rent Authority department; once the unique identification number (UID) is issued, the executed rental agreement will be reported to the Rent Authority. The executed rental agreement should be reported within two months.

Provisions that help landlords

• The tenant who refuses to vacate the property after the termination of the tenancy period will be penalised strictly.
• The tenant cannot sublet the property without informing the landlord.
• If the tenant fails to pay the rent simultaneously for two or more months, the landlord has the power to approach the court asking for an eviction.

Provisions that help tenants

• It is mentioned that landlords can not increase the rent during the tenancy period and must give three months prior written notice to the tenant before increasing the rent.
• The landlord is responsible for the structural maintenance of that particular rented property.
• The landlord must inform at least 24 hours in advance to visit the tenant’s house.

Rental Agreement

Before letting out or renting a property for a residential purpose in India, it is important to have a rental agreement under specific rules and regulations. These rules and regulations are listed in a written agreement for both the parties- landlord and tenant and must be dated, stamped, registered, and signed by both tenant and landlord. There should be a valid rental agreement enforced under the law that protects the Duties and Rights of the tenant and landlord.

Some important considerable things that must be included in a rental agreement are the following:

• Payment details: An agreement should contain details of the Bill paid as rent every month and the due date it must get paid. The security deposit and date of refund should be included. Additional payments like maintenance charges, water bills, electricity bills, etc., must be clearly stated.

• Tenancy period and renewal criteria: Generally, the rental agreement is enforceable for 11 months. Extention is based on the tenant’s and landowner’s interests. The details such as how and when the agreement will get renewed, a rent increase, and is there room for negotiation, etc.

• List of fixtures: Address, number of rooms, Details about the floor, door no, and so on must be mentioned in the agreement. If there is a furnished house, the details about the furnishings should be listed.

• Restrictions: Before finalising, you get to know if there are restrictions like pets are not allowed, any issues regarding cooking non-veg, etc.

Registration of the rent agreement

Registration of the landlord and the tenant should be mentioned in the rent agreement. Any agreement for letting of any premises or leave and licence entered into between the landlord and the tenant or the licensee, as the case may be, after the Act came into effect, shall be registered in written form under the Registration Act 1908, says the Act.

The responsibility to get such types of agreements registered is on the landlord. In case of failure, the punishment includes imprisonment, which might get extended to three months, a fine not exceeding Rs 5,000, or both.

Rights of Tenant

Through the Rental Control Act, the tenants get the following rights:

• Right against unfair eviction: Without a reasonable cause, the landlord is restricted from evicting the tenant. If the tenant is ready to accept the changes in rent charges, the landlord cannot evict him. In some states, the owner must go to court to evict tenants. Suppose the tenant fails to pay the rent for two months or more after receiving notice for the same cause of action from the landlord. The landlord has the power to a suit against the Tenant to recover the possession in states like Maharashtra, Karnataka, Tamil Nadu, and Delhi.
• Fair Rent: The rent charged should be between 8% to 10% of the property value by the landlords. If the landlord demands more rent, the tenant can appeal to the court to seek redressal.
• Essential Services: Even with failure to pay the rent, the landlord cannot stop him from using water, electricity, and other essentials. If there are any repairs in the building, the tenant can serve the landlord’s notice within fifteen days. If the landlord neglects to fix it, the tenant may repair the premises themselves and deduct the expenses from the rent. This total amount should not exceed one-fourth of the tenant’s rent payable for that particular year.

Rights of Landowner

The landowner’s responsibility is to protect the property from unfair means of exploitation. The rights that landowners are entitled to are as follows:

Right to evict Use of the property for illegal activities or damage to the building has already depreciated the property’s value. If the tenant has permitted someone to occupy the property without the landowner’s consent, then the tenant can get evicted from the property.

Non-Applicability of the Act

In case when the property has been let out, there are certain cases where the Act is not applicable. They are as follows:-

• Property is let out to public limited or private limited companies with a paid-up of Rs 1 crore or above share.
• Property sub-let or let out to public sector undertakings ( PSUs), any corporation or banks established under any central or state Act.
• Property is let out to foreign companies, international agencies or international missions.

The oldest Rent Control Act in India

Delhi Rent Control Act is considered the oldest one in India. On December 31, 1958, Rent Delhi’s Rent Control Bill was supported by both Houses of Parliament and ratified by the President.

The Delhi Rent Control Act came into existence on February 9, 1958. It advances to locations within the boundaries of the New Delhi Municipal Committee, the Delhi Cantonment Board, and the Delhi Municipal Corporation for metropolitan regions.

Courts are lawfully bound to read the ordinance requirements harmoniously to maintain the landlord and tenant’s rights and duties.

Rent control standards are required when the market for rental property exceeds supply and tenants are manipulated by landlords. These rent control laws (RCAs), including the Rent Delhi Rent Control Act 1958, were planned to perform two primary objectives: protect the tenant from spending more than the standard rent and unilateral expulsion.

How much increase in rent is allowed?

Landlords are allowed to make an increase of 5% per year in the rent of the house that has been rented out for any objective. Rents can also be raised if repairs or modifications have been made in the leased premise to advance its state. However, the rise in the latter scenario should not surpass 15% per annum of the expenditures incurred due to particular reserves.

The landlord has the freedom to boost rent every year, and approximately 5% can get advanced every year. For Delhi, the rent can be increased under Section 6A and Section 8, and these sections allow the landlord to raise 10% rent every three years.

The landlord is also within his privilege to raise the annual rent if he is needed to pay inflated government-imposed taxes. The rent upsurge should not surpass the increased tax amount in this circumstance.

Conclusion

The Rental Control Act was passed by the Government of India in 1948. This Act aims to regulate land ownership and the various forms of tenancy and curb the exploitation of either the tenant or landlord due to occupancy or rent.

When a tenant occupies a rental home or when a landlord lets out his home on rent, such activities fall under the ambit of the Rent Control Act. Each state has its own Act.

The broader aspect is to settle disputes between the tenant (licensee) and the landlord (licensor).