Property Plus
Coimbatore
Is there anything called fair rent?
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 in everyone’s mind is whether there is anything called fair rent. If there is one, who determines it and how it is determined?
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. The provisions of this Act restrict the eviction of a tenant except on grounds mentioned under sections 10 and 14 of the Act . In some cases the law does not permit eviction of tenant but enhancement of rent is possible by approaching the Rent Controller. There are many instances where parties have approached the rent controller to fix the fair rent/for eviction of tenant.
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.The Guideline value contained in the Basic Valuation Register maintained by the Revenue Department or Municipality for the purpose of collecting stamp duty has no statutory base or force. The court observed that the guideline value cannot form a foundation to determine the market value.
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.
C. H. GOPINATHA RAO
(The author is former National President, Institution of Valuers).
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