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Worrying trend: If the steep rise in rent is one issue, the others daunting the tenant are frequent rise in rent and forceful eviction.

The rent of residential buildings has soared in the recent past. What was Rs. 6 per sq.ft about five years back is now Rs. 15 per sft. The rent for a two bed room apartment in Alwarpet was Rs, 7000 a few years back but now it is about Rs. 15000. In Velacheri what was Rs. 3000/ per month, now has gone past Rs 7000.

If the steep rise in rent is one issue, the other issues that are daunting the tenant are frequent rise in rent and forceful eviction. Some tenants say that rents are raised every six months and they are given less or no options about it. The owners, on the other hand, feel what they charge is a fair rent and proportionate to the property price. They also feel that the rent received is less than the bank interest for their capital value. The question is whether there is anything called fair rent. If yes, who determines it and how?

Fair rent for a building is fixed in accordance with the principles set out in the Tamilnadu Buildings (Lease and Rent Control) Act. The fair rent for any residential building shall be 9% gross return per annum on the total cost of such building and for any non-residential building 12% of gross return per annum on the total cost of such building.

The total cost referred to shall consist of the market value of the site in which the building is constructed, the cost of construction on the building and the cost of provision of anyone or more of the amenities on date of application for fixation of fair rent. Some of the amenities listed in the Act are air conditioner, lift, water cooler, electrical heater, excess portion of vacant land, compound walls and play ground. The Act also states that the cost of the amenities shall not exceed 15 per cent in case of any residential building and in the case of non-residential building 25 per cent of the cost of site in which the building is constructed and the cost of construction of the building put together.

Based on these provisions of the act the fair rent has to be determined. The tenant or the landlord of a building can approach the Controller (District Munsif or Magistrate) for fixing fair rent.

Rent Control orders were first issued in 1941 to impose control on rent and to prevent unreasonable eviction of tenants when the country was facing spiralling inflation, soaring cost of living, increasing urban population and scarcity of accommodation during the wars. The order was renewed periodically and ultimately Act XVII of 1990 was passed. In some cases the Act does not permit eviction of tenant but enhancement of rent is possible by approaching the Rent Controller. There are provisions in the Act for the tenant or owner or both to make appeal to higher courts when they are not satisfied with the Rent Controller’s decision. The judgment delivered in 2007 by the High Court explains this (Greaves Ltd chennai vs V.S.Raghaven and another- (2007) 4 MLJ 229). In Chennai, a commercial building measuring about 5702 sq.ft and located in a 11,287 sft site was fetching a rent of Rs.20,000 per month . The landlord filed a petition in 1996 to enhance the rent to Rs. 65,400 a month stating that the premises is situated in prime commercial locality and deserves increase in rent. Based on the documents submitted by the parties the Rent Controller arrived at the land value as Rs. 26,13,417 and fixed the rent at Rs.37,258 per month. Aggrieved by this order, both the parties preferred an appeal before the Rent Control Appellate Authority. The authority fixed the value of the land at Rs. 47,51,666 and revised the rent as Rs. 59,590 per month. However the High Court revised this on appeal and made the following observations.

The court observed that the guideline value cannot form a foundation to determine the market value. The court held that since the petition premises is on the main road it would be appropriate to fix a rate slightly higher than the market value fixed by the Rent Controller. Taking into consideration the locality and other facts of evidence the ground value was fixed at Rs.12,50,000 and the rent as Rs. 41,771 per month.

There are many instances of such disputes regarding fair rent and many cases remain unresolved for a long time. The delay is the deterrent. What is required is a reform in rental legislation that will take care of the interests of both the landlord and tenant. Expert bodies such as Economic Administrative Reforms Commission have already come up with suggestions for change. The Ministry of Urban Development, Government of India prepared a paper recommending a Model Rent Control Law. This was done in the nineties. While some states have amended their respective rent control Acts, Tamil Nadu is yet to amend its Act. There is now urgency for reforms in Rental Act.

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