Rented property: India
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Delhi Rent Control Act
2006: Govt. considers, then shelves an alternate law
Stillborn rent act headed for burial
Owners worried, no clarity yet on focus of new law
Abhinav Garg & Dipak Kumar Dash TNN
The Times of India 2013/07/06
New Delhi: After 18 years in the mortuary, a politically sensitive property act is being given a quiet burial in the run-up to the Delhi assembly elections. The Centre’s move to repeal the amended Delhi Rent Act of 1995 has shattered the hopes of thousands of landlords who have properties in prime commercial areas such as Connaught Place, Karol Bagh, Paharganj and the Walled City.
Although the urban development(UD) ministry plans to introduce a fresh law, there is no clarity on its focus, intent and timeframe for introduction. The proposal to repeal the 1995 act was on the cabinet agenda last Wednesday but was withdrawn. It will be placed before the cabinet again soon, sources say.
The 1995 act would have replaced the archaic law of 1958 that protected the migrant population from arbitrary rent hikes by wealthy landlords. Although it served tenants well, the law became a tool to harass landlords over the next four decades. Even as property values skyrocketed, landlords bound by rent control rules continued to get paltry rents. The 1995 act was passed by both houses of parliament and received presidential assent, but after street protestsby tenantsthe government lost the will to notify it.
Sources said a proposal to repeal the 1995 law-in-waiting was moved aroundsix months ago after urban development minister Kamal Nath asked his officials to start work on a fresh law. “Until we withdraw the existing act, we can’t officially undertake the fresh task. Once the consultation process starts we can come to know what the shape of the new law will be,” said a ministry official.
Landlords are angry and say the government is delaying justice to appease the electorally significant tenant constituency. They term the 1958 act “unconstitutional” and have been fighting a casein the high court since 2010.
The UD ministry, which is supposed to push other states to undertake rent control law reform, is itself moving in the opposite direction, says Sobha Aggarwal, president, Committee for the Repeal of Delhi Rent Control Act. “Instead of notifying the Delhi Rent Act (DRC), 1995, which was passed by parliament, the government is repealing it. Since the implementing agency is itself violating the policy, it is not surprising that hardly any state has undertaken rent control law reform.” She alleges that the tenant-trader lobby in Delhi has compelled the government to “subvert” the policy, reform process and subsequent court orders.
In the absence of any legislation to remedy the situation, the courts led by the Supreme Courthave providedsomesuccor. They have allowed landlords to invoke “need” to get even commercial properties vacated. The DRC act remains the last defence available to tenants.
Property owners point out the1958 acthas no mechanism to bring the historical rent to the present market rate and gives a tenant the luxury to pay less than Rs 3,500 per month in perpetuity. The law clearly states that all those paying less than this amount will be protected. An amendment in 1988, though, allowed landlords to increase rent by 10% every three years. In effect, Aggarwal says, a tenant who was paying Rs 10 as rent in 1988 would hit the Rs 3,500 ceiling after 184 years. Even somebody paying Rs 1,000 in 1988 would cross the mark in 2027.
Rent Control Act, Delhi
2019: HC dismisses challenge to rent act’s ceiling
Landlords’ Body Wanted 1958 Rent Control Law Revoked
Hopes of property owners saddled with prime land paying paltry rentals in the capital were dashed on Monday when Delhi high court dismissed their plea challenging the city’s rent act ceiling.
A bench of Justices S Ravindra Bhat and A K Chawla declined the plea of an association of landlords to set aside the Delhi Rent Control Act, 1958 as “unconstitutional” and left it to the legislature to take a call if the cap imposed on rentals under DRC Act needs a relook.
The judgment, whose detailed copy with reasons is awaited, came on petitions filed in 2010 challenging the Act.
Introduced over five decades ago, the Delhi Rent Control Act puts a ceiling on maximum rent that could be charged by landlords and has been criticised by land owners for its failure to align rentals with prevailing market rates. The Act protects those paying less than Rs 3,500 per month as rent, which can’t be increased beyond this ceiling.
Property owners, including advocate Shobha Aggarwal, had argued that despite owning huge buildings in prime areas like Connaught Place, Karol Bagh, Paharganj and the Walled City, they draw a pittance as rent, while the tenants prefer to contest lengthy eviction proceedings.
The petitioners claimed that the DRC Act is ultra vires the Constitution as it discriminates against landlords and violates Article 14, 19(1)(g) and 21 of the Constitution. The last big change in the Act occurred in 1995 when the government brought in an amendment that was never notified, in effect killing the change.
In her plea, Aggarwal had argued that half the properties covered under the archaic law fetch a monthly rent less than even the daily minimum wage of unskilled worker earning as low as Rs 353 per day. The petitioners had highlighted that even as property values skyrocketed, landlords were forced into poverty because they could neither evict tenants nor increase the rent and instead had to pay higher property tax to the corporations as the latter revised the taxes.
The advocate had also sought a direction to the government to compensate landlords for their economic losses, and emotional and psychological trauma suffered by them because of the Act.
But the Centre, through standing counsel Akshay Makhija, had opposed the PIL’s arguing that all these issues have been considered by various courts, including the Supreme Court, earlier and were dismissed. The government also maintained that there is no data cited by the landlords to substantiate their claim that the DRC Act has become archaic.
Property owners, including advocate Shobha Aggarwal, had argued that despite owning huge buildings in prime areas, they draw a pittance as rent while the tenants prefer to contest lengthy eviction proceedings
A commentary on the judgement and the background
Old properties, acquired or inherited for next to nothing by today’s standards, should have proved a handy income source for their owners today. To the contrary, the rents from these have remained absurdly low, and Delhi high court dismissed the petitions challenging the cap on rental under the Delhi Rent Control (DRC) Act, 1958. Affected property owners can now only hope for a more favourable decision from the Supreme Court, where they will next take their fight.
The DRC Act, mindful that high rents would prove a burden for poor tenants in the post-Independence period, barred property owners from charging a monthly rent higher than Rs 3,500. Properties getting a rent of above Rs 3,500 are excluded from the Act, but petitioner and lawyer Shobha Aggarwal had argued that the Act offered no mechanism to bring the historical rent of the old to current market levels, or even to Rs 3,500.
Today, a large number of buildings in Connaught Place, the Walled City, Karol Bagh and even Lutyens’ Delhi remain covered by the DRC Act, getting for their owners paltry sums every month.
While declining the plea, the high court noted while it is true that several tenants do not deserve protection through a beneficial legislation, the fact was that “the housing situation is far from ideal even today”. It said the landlords’ need to occupy or make
a living off rents “cannot outweigh all other considerations which underlie the objective of DRC Act. Those objectives, i.e. protection of a section (which apparently continues to be a large section of the population) from the depredations of unscrupulous landlords, still has relevance. Without the protection of rent legislation, the weakest section of the society to whom the DRC Act still has relevance, may well face a daily threat of eviction.”
The court put the onus for any future course correction of aligning rentals with market rates on the legislature. However, the property owners remain skeptical of the political executive bringing any change in the law, given their track record of rental legislating in the capital.
After the first few decades, as Delhi’s real estate market
began climbing up, there was a clamour for amending the 1958 Act. However, it was not until 1988 that the Union urban development ministry relented and exempted properties fetching rentals above Rs 3,500 per month from the Act. In 1995, bowing to incessant demands, the central government decided to repeal the old law and enact a new one that prescribed a more realistic rental cap. This new law, despite being approved by Parliament, was, however, never notified.
Since then the sporadic attempts at changing the DRC Act have not sustained. For example, the UPA government in 2013 introduced the Delhi Rent (Repeal) Bill, 2013, but it didn’t even take off after the successor NDA regime brought in the Model Tenancy Bill in 2015. This envisages mutual fixing and revising of rent between the landlord and tenant, unlocking the existing properties which can be rented out and faster adjudication. But more than three years later, the Bill is still at the draft stage.
An aggrieved Aggarwal says, “It needs to be pointed out that the entire ruling class has continued to indulge in masterly inactivity on the issue since 1995, when the Delhi Rent Act, 1995 (which repealed the 1958 law) was passed unanimously by Parliament, but which the executive failed to enforce due to pressure from the powerful tenant-trader lobby of Delhi’s old markets. Vote bank politics takes precedence over Parliament representing the will of people of India.”
The Delhi Rent Control Act of 1958, mindful that high rents would prove a burden for poor tenants in the post-Independence period, barred property owners from charging a monthly rent higher than ₹3,500
Compensation/ rehabilitation for demolished shops
Equating tenants with landlord is wrong
Terming it an illegal act, the Delhi high court has quashed a municipal corporation's rehabilitation scheme under which it failed to differentiate between tenants and owners while granting compensation for demolition of shops.
HC wondered how the north corporation could put tenants of demolished shops at par with the owners by giving both of them 50% share in the relocated land.
Justice Indermeet Kaur observed in her recent order that converting a tenant's status to that of a landlord is against all the statutes dealing with such a relationship, and “all principles of equity , fair play and natural justice.“ HC's comments came while setting aside a resolution of the north corporation by which it devised the rehabilitation scheme to give alternative land to the owners and tenants of 121 shops at Azad Market in north Delhi.
The shops, which were leased out on a perpetual lease for 99 years, were demolished in 2009 for a road-widen ing project. Only nine of the 121 shops were occupied by tenants and the owners of four such shops had challenged the rehabilitation scheme of 2014. Allowing the plea of the owners, the court said, “By way of this resolution a man who was owning one complete piece of land had suddenly been reduced in his ownership to a status of 50%. By the present resolution, the corporation has taken away all the rights of the petitioners.“
“The petitioners who were the owners... have suddenly been reduced to a half ownership status. This was no fault on their part. This resolution, if allowed to be implemented, would cause a grave prejudice. It would be a serious detriment to the rights of such petitioners,“ the court added. It noted that the corporation had taken the same decision in 2009 when it had come out with a rehabilitation scheme subsequent to the demolition, but the high court had in 2012 set it aside and asked the civic body to consider it afresh.
Delhi Rent Control Act, 1958 came into force in 1959 to check rent escalation and eviction of tenants in certain parts of Delhi, including places like Connaught Place, Chandni Chowk, Karol Bagh and South Extension
The Act is applicable to properties rented below Rs 3,500 per month These properties, worth crores in prime areas, fetch negligible returns, rents being as low as Rs 50 to Rs 150 In 1988, a provision to increase rents by 10% every three years was included in the Act In 1995, Delhi Rent Act was brought in to repeal the earlier law but was never notified due to resistance from traders and tenants In 1997, Delhi Rent (Amendment) Bill was referred to a Parliamentary Standing Committee. Though it submitted its proposals, which were accepted by the government, nothing happened A Supreme Court ruling last April relaxed norms for owners. It ruled that a tenant can be evicted if his landlord proves he needs the property for personal use Though the SC ruling is heavily tilted in favour of owners, they are still sceptical and not ready for another round of legal battles. But others have heaved a sigh of relief and finally hope to get back their properties
1958 | Government brings Delhi Rent Control Act to protect tenants from arbitrary increase in rents
Makes eviction of tenants next to impossible. Tenants paying up to Rs 3,500 protected
1988 | Act amended to introduce 10% increase on base rental every 3 years
1995 | Major overhaul in law gives landlords more power to increase rent of property Outlines formula for rationalization of prevailing rental; links increase to inflation
The act was never notified after protests by tenants’ bodies despite assent from president
2013 | UD ministry decides to repeal 1995 act No clarity on focus of proposed alternative or deadline
Rent not paid
SC orders eviction
The Supreme Court has come to the rescue of a man from Vadodara fighting to regain possession of a shop he had rented out in 1958 for a monthly rent of Rs 30. Anil Kumar Dhekle had to fight a legal battle for nearly 40 years: he first moved court in 1978 after the tenant defaulted on payment from 1974 to 1976.
The Supreme Court has directed the tenant to hand over possession of the shop in Vadodara within two months.Although the apex court sympathised with the shopowner for fighting such a protracted legal battle to get his property back, the court itself took 10 years to decide on his plea.
“It is unfortunate that the appellant-landlord is litiga ting for more than four decades to get back possession of his own premises and, therefore, the respondent-tenants are directed to hand over vacant possession of the premises immediately ,“ a bench of Justices Kurian Joseph and R Banumathi said. Dhekle received rent regularly till 1974 and after the tenant failed to pay till 1976, the landlord approached court, which passed an order in Dhekle's favour in 1981. But the district court set it aside in 1983. Thereafter, Dhekle approached the Gujarat high court the same year, which in 2003 upheld the district court's order and allowed the tenant to hold possession by paying monthly rent.
Granting him relief, the SC said, “The findings and the reasonings recorded by the high court are not based on evidence and cannot be sustained. As rightly held by the trial court, the tenants are liable to be evicted...The respondent or other person(s) are directed to hand over vacant possession within two months.“