CHAPTER 4 FAIR RENT DIMENSIONS AND IMPLICATION An

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CHAPTER 4

FAIR RENT DIMENSIONS AND IMPLICATION

An important issue which the government has not tackled is what

the definition of fair rent is. Fair rent can be defined either as

market rent or a rent which besides giving a ‘reasonable rate of

return’ to the landlord also covers the variable costs of renting.

Reasonable return sounds like a nebulous concept. The economic

variables would be:

(1) Base on which the rate of return is to be calculated- should the

base be actual cost of the house, or replacement cost of the house

or its current market value?

(2) The definition of reasonable rate of return- should it be equal to

return on long term government securities or on equity of blue chip

companies or average rate of return from other long term

investments etc.?

For instance, the U.P. Bill has not affected in any manner the status

or tenure of tenancies acquired under the earlier acts of 1947 and

1972. There is a relationship between the revision of rent and the

status of tenancies which has to be cordially maintained with each

new amendment or a new legislation. A failure to synchronise the

two belies the logic of present economic conditions the standard

rent which has been made revisable at five per cent.121 This could

have been made revisable at a uniform licence fee charged in case

of premises given on leave and licence and can be said to be

121 Rajasthan Rent Control Act, 2001, sec. 6.

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reasonable in the current inflationary trends.122 The bill needs to

establish the status of tenancies in sync with the present conditions.

A major problem faced by the tenant is uncertainty regarding

duration of tenancy and future level of rent. There may be no

objection to paying the market rent if the tenant can be certain of

the stability of this rent or the security of the tenure at least for a

few years. The landlord again may not be looking for a return on

the investment that he may get in the stock market but with

inflation soaring currently at roughly eight and half per cent would

a rental increase of merely 5 per cent continue?

4.1 Fair rent

The expression “Fair Rent” is not defined in the Act. Section 4

only prescribe a method according to which rent controller can fix

the fair rent. Fair rent means the basic rent increased to certain

percentage according to the provisions of the section. 123

The rate of rent was agreed between the parties. It has been held

that though the rate of the rent was agreed upon between the tenant

and landlord yet it is open to either of the parties to move the rent

controller for fixing the fair rent.124

Situation of the building cannot be said to be identical merely

because the building is situate near another building. Rent cannot

also be doubled on the ground that size of the building in question

122 Karam Chand v. L.R.s of Labh Chand, RLW 2008 (2) Raj 1685.

123 Ram Piari v. Shri Jagan Nath, 1982(1) Rent LR 109 (DB P&H).

124 Amar Nath v. Prem Nath, 1982(1) Rent LR 18 (P&H).

109

is double the size of another building alleged to be identical in

situation. Fair rent cannot be fixed in this manner.125

4.2 Formula for fixing the fair rent explained

It was held that the basic rent can be increased to 25% of the rise in

general level of price index but this view was held to be not correct

and was overruled in Gela Ram v. Sat Pal126. In case the

methodology applied in Bhim Sain's127 case is to be accepted as

correct, then each and every basic rent, irrespective of its rate, was

to be increased to the same extent, i.e. by Rs. 82/- in order to fix

the fair rent of the demised premises. This certainly is not the true

implication of this sub-section. As a matter of fact, the index

number as such has nothing to do with the rate of rent of a

particular premises. As is commonly said, index numbers are only

barometers of economic activity, i.e., if one wants to get an idea as

to what is happening to economy. He has to look to important

indices like the index number of industrial Production. agricultural

production, business activity etc. Thus when one has to say that the

index number of wholesale prices is 112 for September 1987 as

compared to September 1986 when it was hundred, it means there

is a net increase in the prices of wholesale commodities to the

extent of 12% during the year. This percentage has only to be

found out to work out the percentage by which the basic rent has to

be increased in order to fix the fair rent.

Fomula to calculate Fair Rent:

125 Bhim Sain v. Pushpa Devi, (1984) Rent LR 534; 1984(2) RCR 54; 1984 HRR 418.

126 1988(2) PLR 35.

127 Supra note 125.

110

Fair Rent = Basic Rent + [.25 x Increase in Price Index] x Basic

Rent

100

Fair Rent--Fair rent fixed on the basis of formula laid down by

Division Bench in Gela Ram v. Sat Pal Sharma's128 case.

Formula of calculation for determining the fair rent as per Gela

Ram's case:

Basic rent = Rs. 400/-

Wholesale price index during the year 1981, was 278.4

Wholesale price index in the year 1989, (i.e.,) the year preceding

the presentation of petition was 462.2

Difference = 462.2 - 278.4 = 184 (rounded off)

25% of increase i.e., 25% of 184 = 46%

The increase of 46% is to be allowed in respect of rent which is

already being paid i.e., 46% on the basic rent of Rs. 400 = 46 x

400/1 00 = Rs. 184.

Therefore fair rent will be Rs. 400 + Rs. 184 = Rs. 584.129

4.3 Revision of fair rent already fixed

The application filed by the landlord seeking fixation of fair rent

had been filed after the expiry of five years from the date from

which the fair rent had been earlier fixed. Section 5 of the Act is

unambiguous in laying down a ban on the revision of fair rent

already fixed under Section 4 of the Act. Thus, Section 5 does not

permit any revision in fair rent unless a period of five years had

expired from the previous fixation of fair rent under Section 4 of

the Act. The first proviso to sub-section (1) of Section 5 created an

128 Supra note 126.

129 Bhim Sain v. Pushpa Devi, (1984) Rent LR 534; 1984(2) RCR 54; 1984 HRR 418.

111

exception to the general rule whereby revision of the fair rent was

allowed in a case where any addition, improvement or alteration in

the building had been carried out by the landlord at the request of

the tenant. It was neither a case of an application prior to the expiry

of five years nor a case of any addition, improvement or alteration

in the premises carried out by the landlord. Thus, Section 5 of the

Act is found to be not applicable to the case of the respondent-

landlord. Appeal against such re-fixation contrary to provisions of

the Act held maintainable. Appellate Authority directed to decide

the appeal on merits.130

4.4 Practice and procedure

Whether an application is made u/s 4 or 5 is to be determined on

the basis of the facts and grounds mentioned therein even if it was

not specifically mentioned whether it is under section 4 or 5 or the

section is wrongly mentioned. Landlord sought fixation of fair rent

over and above the fair rent fixed earlier by the rent controller. It

was obviously an application for revision of fair rent under section

5.131

4.5 Fair rent: Determination

Vide rent note dated November 1, 1962, the tenant had taken the

demised premises on rent for a period of six months at the rate of

Rs. 70/- per month plus house tax. After the expiry of the period of

tenancy, the tenant continued to be in use and occupation of the

demised premises and resultantly claimed himself to be the

statutory tenant. Despite the contractual tenancy having come to an

130 Hari Pushap v. Pawan Kumar, 1998 (2) RCR (Rent) 508 (P&H).

131 ibid.

112

end the tenant continued to pay rent at the agreed rate defined in

the rent note which was accepted accordingly by the landlord

without any protest. Thus, the Rent Controller correctly arrived at a

conclusion by taking Rs. 70/- as the agreed rate of rent for the

purpose of determining the fair rent.132

In this regard reliance has been placed upon the judgment of the

apex Court in Ishwar Swaroop Sharma v. Jagmohan Lal133 and

the pointed reference has been made to para 13 of the judgment

which reads as under:

“For fixing the basic rent under Section 4 of the Act the only

question would be - was there a subsisting agreement of tenancy

under which rent was payable when the application for fixation of

fair rent was filed? If the answer is in the affirmative the agreed

rent must be taken as the basic rent. If not, then the basic rent is the

prevailing market rate.

Therefore, even though the agreement may have been entered into

in 1976 as is admittedly true in this case, but the tenancy was

continuing until the date of the application, the Rent Controller was

obliged to take the rate agreed to in 1976 as the basic rent under the

first limb of Section 4(2)(b). It is only after the fair rent is fixed

that the landlord could seek re-fixation under the second limb,

subject to the limitations provided in the Act, as the rent would

then cease to be the agreed rent.”

4.6 Arrears of rent

132 Neki Ram v. Balwant Singh And Ors., 2002(2) Rent LR (Punjab & Haryana) 22.

133 (2001-2)128 P.L.R. 158 (S.C.)

113

This petition filed under Section 15(5) of the East Punjab Urban

Rent Restriction Act, 1949 (for brevity, 'the Act') raises a limited

question as to whether the fair rent assessed by the Courts below

has to be enforced prospectively. In other words, when rent has

already been paid by the tenant-petitioner in earlier applications for

ejectment filed by the landlord-respondent, could the tenant-

petitioner claim that even in respect of the payment made in those

cases the fair rent as assessed by the Rent Controller later on in an

application filed by him should be applied and the excess amount

be refunded.

In pursuance by applications filed under Section 13(2)(i) of the

Act, the tenant-petitioner had tendered the rent at the rate of Rs.

300/- per month as demanded by the learned counsel for the

landlord. He had tendered the rent under protest but he did not

claim any issue in those applications filed by the landlord-

respondent in which prayer for ejectment on the ground of non-

payment of rent was made. However, the tenant-petitioner

subsequently, filed a Rent Application No. 1 dated 8.1.1983 under

Section 4 of the Act with a prayer for fixation of fair rent in respect

of the demised shop. The Rent Controller recorded a finding and

determined the fair rent at the rate of Rs. 200/- per month. He made

his order operative from the date of institution of the application.

Amount tendered as arrears of rent in ejectment proceedings on the

ground of ejectment, cannot be said to have been voluntarily and

gladly paid. The effect of failure of the tenant to join issue with the

landlord in those proceedings in regard to rate of rent is only this

that on the plea of constructive res-judicata, he might be debarred

from claiming the refund of excess deposit.

114

Revisional jurisdiction: Relief claimed in the revision is for Rs.

2,000/- i.e. the difference between arrears of rent paid and fair rent

fixed by the Rent Controller. The policy of the law is reflected by

Section 102 of the Code of Civil Procedure, 1908 which provides

that a second appeal involving an amount of less than Rs. 25.000/-

cannot be filed under Section 100. It is a paltry sum which may not

warrant exercise of revisional jurisdiction of this Court under

Section 15(5) of the Act.134

There was no subsisting agreement between the parties when the

application for determination of fair rent had been filed on

20.12.1980. Thus, the approach of both the Courts below in

adopting the rent on the basis of agreement which was subsisting

upto 31.12.1969 as the basic rent was totally erroneous.135 This

issue has already been decided by this Court in Gobind Ram v.

Kanshi Ram136 in which it was held that if there was no subsisting

agreement of tenancy on the date on which the fair rent had to be

fixed, the rate of rent mentioned in the agreement prior thereto

could not be said to be the rent agreed between the landlord and the

tenant.

Basic rent of the demised premises was fixed at Rs. 37/- per month.

Increase in price index for the said period comes to 66% and 25%

of this comes to 16.6%. Accordingly, on the basic rent of Rs.37/-

increase of 16.6% was applied which came to approximately Rs.

6/- higher. No illegality in fixation of fair rent.137

134 Gian Chand v. Pawan Kumar (2004) 138 P.L.R. 385.

135 Vijay Pal And Anr. v. Smt. Kaushalya Devi And Ors. (2004) 136 P.L.R 773.

136 2002 H.R.R. 37.

137 Malkiat Singh v. Khushi Ram And Ors. (2005) 141 P.L.R. 822.

115

Tenant failed to deposit provisional rent as assessed by the rent

controller. Eviction order passed. Subsequent variation in

determination of fair rent by appellate authority would not result

into affording an opportunity to the tenant for depositing the rent

enabling him to save eviction.138

Mere filing of a petition under Section 4 of the Haryana Urban

(Control of Rent and Eviction) Act, 1973 for determination of the

fair rent of the premises which was rented out in the year 1985,

per-se, is not sufficient enough to draw an adverse inference

against the bonafide need of the landlord.139

Rent was increased when the landlord raised construction of

additional 10 feet behind the shop and got installed a shutter in the

front verandah. Fresh agreement is only supplementing the earlier

agreement of tenancy. Since the tenancy cannot be bifurcated, no

illegality or irregularity in the orders passed by the authorities in

holding that the agreed rent shall be basic rent with effect from the

original tenancy.140

Basic rent is to be taken as a rent agreed between the parties.

Whereas Court had determined the fair rent and the same has been

accepted by the parties and every month the same was paid as a

rent. It indeed is a basic or agreed rent. Therefore, it cannot be said

that every time when the rent is to be revised the Court has to

138 S. Nihal Singh Motors And Ors. v. Shama Malhotra Etc. (2004) 138 P.L.R. 389.

139 Punjab National Bank v. Ankur Singla & Ors., 2005(1) LAR 70 (P&H).

140 Dara Singh v. Murti Shri Durga Bhawani (Hetuwali) Regd. Trust, 2006(2) LAR 177

(P&H).

116

determine the agreed or basic rent afresh by taking prevailing

market rent as a criteria.141

Building constructed in the year 1962. Tenant paying Rs. 300/- as

monthly rent. For purpose of fixation of fair rent under section

4(2)(b) of Rent Act, the agreed rent is to be taken as basic rent and

the increase is to be according to the formula under section 4(3) of

the Act. It is only in the case where there is no agreed rent, that the

market rent can be looked into.142

4.7 Revision in fair rent in certain cases

Fair rent fixed by the Rent Controller. Petition u/s 5 of the Act.

Rent Controller assessed the rent relying on fair rent fixed earlier.

Application to lead additional evidence before the appellate

authority was dismissed on the ground that in petition u/s 5

assessment is based upon fair rent and additional evidences sought

is not relevant. No patent illegality or irregularity in exercising its

revisional jurisdiction.143

4.8 Landlord not to claim anything in excess of fair rent

In order to prosecute landlord under section 19, it must be proved

that excess rent was charged in relation to very property for which

fair rent was fixed.144

141 Murti Shri Durga Bhawani (Hetuwali) Trust v. Chander Kishore, 2009 (2) RCR (Rent) 407

(P&H).

142 Chet Ram v. Amar Nath, 2009(1) RCR(Civil) 658: 2009(1) RCR(Rent) 83(P&H).

143 Smt. Basanti Devi and others v. Radha Kishan and others, 2006(1) LAR 308 (P&H).

144 M/s Kwality Restaurant v. Shri Krishan Chand, 1970 RCR 125 (P&H).

117

Section 6 will only apply where fair rent has already been fixed

and does not apply to the cases where fair rent has not been

fixed.145

Where landlord and tenant agreed to enhance the rent from 250 to

400 Rs. Per month by mutual agreement, it was held that

agreement is not violative of section 6(1)(b) of the Punjab Rent

Act.146

Enhancement of rent by agreement between landlord and tenant is

valid but where the fair rent was fixed rent cannot be enhanced by

agreement.147

There is fair and candid admission by the landlord-respondents that

by a bona-fide mistake the rent has been claimed twice in respect

of a particular period. Apart from non-fixation of fair rent, it is also

evident that no sanction from the Rent Controller as is mandatory

under Sub-section (3) of Section 19 of the East Punjab Urban Rent

Restriction Act, 1949 was obtained by the tenant-petitioner. It is

well settled that no criminal prosecution could be initiated against

an accused until and unless sanction from the Competent Authority

is taken in cases where provision is made for obtaining of such a

sanction.

A perusal of Section 6(1)(a) of the Act shows that there is a

statutory prohibition to claim rent by a landlord in addition to fair

145 Mangat Rai v. Kedar Nath, 1980(2) RCR 673 (SC).

146 1987 HRR651: 1987(2) PLR 475.

147 Smt. Harkaur v. Bulaki Ram, 1988(1) RCR 102: 1987 HRR 651.

118

rent or to claim or receive any premium or any rent in excess of

such fair rent. Any agreement according to Section 6(1)(b) of the

Act contrary to the aforementioned provision is considered as null

and void. Only those acts of landlord are punishable under Section

19 of the Act which fall within the provisions of Section 6(1)(a) of

the Act. in the case of Shri Vidya Prachar Trust v. Pandit Bassant

Ram148, and the view of the Supreme Court in this regard is

discernible from the following observations made in para 16:-

"Section 6 thus merely provides that where a fair rent is fixed by

the Controller it would not be open to the landlord to receive any

amount in advance in excess of the fair rent. Section 6(2) further

permits the landlord to stipulate and receive in advance an amount

not exceeding one month's rent. Clause (b) make any argument for

payment of any sum in excess of such fair rent null and void. This

Section therefore, clearly deals with a situation where a fair rent

under Section 6 is fixed by the Controller on the application of the

parties. Neither in the present case nor in Vidya Prachar Trust's

case was there any allegation that a fair rent had been fixed by the

Controller. Section 19 is the penal section which makes a person

punishable with imprisonment for a maximum period of two years

if he violates the provisions of Section 6. So long as fair rent is not

fixed by the Controller the parties are free to (sic) and neither

Section 6 nor Section 19 would be attracted to such a case.

Moreover, even if the tenant were to deposit future rent it is always

open to the landlord not to withdraw the future rent but confine

himself to taking out only the rent that is in arrears which will not

at all violate any provision of the Rent Act."

148 (1970)1 S.C.R. 66.

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4.9 Analysis of fair rent provision in India

Delhi

Procedure

Rent in excess of Standard Rent not recoverable, except where rent

is liable to periodical increase by virtue of an agreement entered

into before the 1st of January 1939.

Fixation of Standard/Fair Rent (Basis)

Standard rent in relation to any premises means: In the case of

residential premises: (where such premises have been let out at any

time before the 2nd day of June 1944)

If the basic rent (as determined in the Second Schedule) of such

premises <=Rs.600 p.a., the basic rent.

If the basic rent of such premises >Rs.600 p.a., the basic rent +

10% of such basic rent. (where such premises have been let out at

any time on or after the 2nd day of June 1944)

In any case where the rent of such premises has been fixed under

the Delhi and Ajmer Merwara Rent Control Act, 1947 or the Delhi

and Ajmer Rent Control Act, 1952-

If such rent p.a. <= Rs.1200, the rent so fixed.

If such rent p.a. > Rs.1200, the rent so fixed together with 10% of

such rent. In any other case, the rent calculated on the basis of

7.5% p.a. (8.25% if the rent so calculated exceeds Rs.1200 p.a.) of

the aggregate amount of the reasonable cost of construction and the

market price of land comprised in the premises on the date of the

commencement of the construction.

In the case of non residential premises: (Where the premises have

been let out at any time before the 2nd day of June, 1944)

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The basic rent of such premises together with 10% of such basic

rent (if the rent so calculated > Rs.1200 p.a., a rate of 15% will be

used) (Where the premises have been let out ant any time on or

after 2nd June 1944)

In any case where the rent of such premises has been fixed under

the Delhi and Ajmer-Merwara Rent Control Act, 1947 or the Delhi

and Ajmer Rent Control Act, 1952-

If such rent p.a. <= Rs.1200, the rent so fixed

If such rent p.a. > Rs.1200, the rent so fixed + 15% of such rent.

In any other case, the rent calculated on the basis of 7.5% p.a. of

the aggregate amount of the reasonable cost of construction and the

market price of the land comprised in the premises on the date of

the commencement of the construction (where the rent so

calculated exceeds Rs.1200 p.a., a rate of 8.625% shall be used).

Notwithstanding anything mentioned above: In the case of any

premises, whether residential or not, constructed on or after 2 June

1951 but before 9 June 1955, the annual rent calculated with

reference to the rent at which the premises were let out for the

month of March, 1958, or if they were not let, with reference to the

rent at which they were last let out, shall be deemed to be the

standard rent for a period of 7 years from the date of the

completion of the construction.

In the case of any premises, whether residential or not, constructed

on or after 9 June 1955, including premises constructed after the

commencement of the Act, the annual rent calculated with

reference to the rent agreed upon between the landlord and the

tenant when such premises were first let out, shall be deemed to be

the standard rent for a period of 5 years from the date of such

letting out.

121

Revision in Rent and Other Charges

An increase of 10% in the standard rent after every three years in

allowed.

When the fair rent has been fixed under this Act, no further

increase in the fair rent shall be allowed except in cases where

some necessary addition, improvement or alteration has been

carried out at the landlord’s expense with the approval of the tenant

or the Controller. The standard rent may be increased per year by

an amount not exceeding 15% of the cost of the additions. Where a

landlord pays in respect of the premises any charge for electricity

or water consumed in the premises or any other charge levied by a

local authority having jurisdiction in the area which is ordinarily

payable by the tenant, he may recover from the tenant the amount

so paid by him; but the landlord shall not recover from the tenant

whether by means of an increase in rent or otherwise the amount of

any tax on building or land imposed in respect of the premises

occupied by the tenant.

Haryana

Procedure

The Controller shall, on application by the tenant or the landlord of

a building fix the fair rent after holding an appropriate enquiry.


In fixing the fair rent, the Controller shall first determine the basic

rent which shall be:

In respect of the buildings the construction whereof was completed

in or before 31 Dec, 1967, or land let out before the said date, the

rent prevailing in the locality for similar building or rented land let

out to a new tenant during the year 1962.

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In respect of the buildings the construction whereof is completed

after 31 Dec, 1961 or land let out after the said date, rent agreed

upon between the landlord and the tenant preceding the date of

application, or where the rent has been agreed upon, the basic rent

shall be determined on the basis of the rent prevailing in the

locality for similar building or rented land at the date of

application. In fixing the fair rent the Controller may allow an

increase or decrease on the basic rent determined as above, not

exceeding 25% p.a. of the rise or the fall in the general price level

since the date of agreed rent or the date of application, as the case

may be, in accordance with the average of All India Wholesale

Price Index Number as determined by the Government of India, for

the calendar year immediately preceding the date of application.

If the fair rent for building or rented land has been fixed under the

East Punjab Urban Rent Restriction Act, 1949, a landlord or a

tenant shall be entitled to get its fair rent fixed as above. And if

there is a compromise between the parties to the proceedings, the

Controller may fix the standard rent as agreed upon. This will be

binding only between the parties and the heirs.


No increase allowed for five years once the fair rent has been fixed.

After that increase allowed when there is an improvement in the

premises at the landlord’s expense after the tenant’s request or

there is an increase in the amount of taxes or cesses payable by the

landlord with respect to the rented premises. Decrease may also be

done if the quality of the premises deteriorates.

Himachal Pradesh

Procedure

123

The Controller shall on application by the tenant or the landlord of

a building or rented land fix the fair rent for such building or rented

land after holding an appropriate enquiry.


The Controller shall first fix the basic rent taking into

consideration:

The prevailing rates of rent in the locality for similar

accommodation in similar circumstances during the 12 months

prior to 15th August 1947 and the rent value of such building or

rented land if entered in property tax assessment register of the

municipal corporation. In fixing the fair rent of a residential

building the Controller may allow, if the basic rent.

(In case of a building in existence before 15th Aug 1947)

<=Rs.25 p.m., an increase <=10% on such basic rent >Rs.25 p.m.

and <=Rs.50 p.m., an increase <=15% on such basic rent. >Rs.50

p.m., an increase <=25% on such basic rent.

(In case of a building constructed between 15th Aug 1947 and 15th

Aug 1966)



p.m., an increase <= 50% on such basic rent.


Aug 1971)




In fixing the fair rent of a scheduled building the Controller may

allow, if the basic rent:

124

(In case of a building in existence before 15th Aug 1947) <=Rs.25

p.m., an increase <=15% on such basic rent >Rs.25 p.m. and

<=Rs.50 p.m., an increase <=20% on such basic rent. >Rs.50 p.m.,

an increase <=30% on such basic rent.


Aug 1966) <=Rs.25 p.m., an increase <=30% on such basic rent

>Rs.25 p.m. and <=Rs.50 p.m., an increase <=45% on such basic

rent. >Rs.50 p.m., an increase <=55% on such basic rent.





In fixing the fair rent of a non residential building and rented land

the Controller may allow, if the basic rent:

(In case of a building in existence before 15th Aug 1947) <=Rs.25


<=Rs.50 p.m., an increase <=50% on such basic rent. >Rs.50 p.m.,

an increase <=60% on such basic rent.










No increase in rent except when there is an improvement or an

alteration in the premises at the expenditure of the landlord, at the

125

tenant’s request or when there is an increase in the taxes and the

cesses payable with respect to the building tenanted out. No

provisions for a decrease in fair rent.

The increased rent shall not exceed the rent for a similar building

in the same locality with such additional improvement or alteration

and it shall not be chargeable until such addition, improvement or

alteration has been completed. The amount of the increase owing

to the increase in the cesses and taxes shall not exceed the increase

in the amount of such taxes.

Maharashtra

Procedure

It shall not be lawful to claim or receive on account of rent, for any

premises, any amount above the standard rent and the permitted

increase, unless the landlord was, before the commencement of the

act, entitled to receive such amount under any of the repealed acts.


Standard rent in relation to any premises means:

Where the standard rent is fixed by the court or the Controller

under the Bombay Rent Restriction Act, 1939, or the Bombay

Rents, Hotel Rates and Lodging House Rates (Control) Act, 1944,

or the Bombay Rents, Hotel and Lodging House Rates Control Act,

1947, or the Central Provinces and Berar Letting of Houses and

Rent Control Order, 1949, or the Hyderabad Houses (Rent,

Eviction and Lease) Control Act, 1954, such rent + an increase of

5%.

Where the standard rent is not so fixed, then:

The rent at which the premises were let on the 1st day of October,

1987 Where the premises were not let on the 1st day of October,

126

1987, or the rent at which they were let before that day + an

increase of 5%, the rent of the premises let before 1.9.1987 or the

rent fixed by the court.


An increase of 4% per annum is permitted.

Also, increase allowed when there is an improvement in the

premises at the landlord’s expense and after the written approval

of 70% of the tenants’ or there is an increase in the amount of taxes

or cesses payable by the landlord with respect to the rented

premises. Decrease may also be done if the quality of the premises

deteriorates.

Punjab

Procedure

The Controller shall, on application by the tenant or the landlord

fix the basic rent of a building after holding such an enquiry as he

thinks fit.


The Controller shall first fix a basic rent taking into consideration:

The prevailing rates of rent in the locality for similar

accommodation in similar circumstances during the 12 months

prior to 1st Jan 1939 and the rent value of such building or rented

land if entered in property tax assessment register of the municipal

corporation.

In fixing the fair rent of a residential building the Controller may

allow, if the basic rent-

(In case of a building in existence before 1st Jan 1939) <=Rs.25

p.m., an increase <=8.5% on such basic rent. >Rs.25 p.m. and

127

<=Rs.50 p.m., an increase <=12.5% on such basic rent. >Rs.50


(In case of a building constructed on or after 1st Jan 1939) <=Rs.25








In fixing the fair rent of a non residential building and rented land

the Controller may allow, if the basic rent:

(In case of a building in existence before 1st Jan 1939) <=Rs.50

p.m., an increase <=37.5% on such basic rent. >Rs.50 p.m., an

increase <=50% on such basic rent.


p.m., an increase <=50% on such basic rent >Rs.50 p.m., an

increase <=100% on such basic rent.

Nothing in this section shall be deemed to entitle the Controller to

fix the fair rent of a building or rented land at an amount less than

the rent payable for such building or rented land under a subsisting

lease entered into before the 1st day of January, 1939.


Where the fair rent of a building has been fixed under this Act, nor

further increase in such fair rent shall be permissible except in

cases where some addition, improvement or alteration has been

carried out the landlord’s expense and, if the building is then in

occupation of the tenant, at his request. The increased rent shall

not exceed the rent for a similar building in the same locality with

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such additional improvement or alteration and it shall not be

chargeable until such changes are completed.

Also, the landlord shall be entitled to increase the rent of the

building or rented land if after the commencement of the Act, a

fresh rate, cess or tax is levied in respect of the building or rented

land by any local authority, or if there is an increase in the amount

of such a rate, cess or tax being levied at the commencement of the

Act, provided that the increase in rent shall not exceed the amount

of any such rate, cess or tax or the amount of the increase in such

rate, cess or tax, as the case may be.

Rajasthan

Procedure

Rent payable for a premises will be as agreed between the landlord

and the tenant.


Rent payable for a premises shall be as, subject to other provisions,

agreed upon between the landlord and the tenant and shall not

include the charges payable for amenities.


If the premises were let out before the commencement of the Act:

Where the premises have been let out prior to 1st Jan, 1950, it shall

be deemed to have been let out on 1st Jan, 1950 and the rent

payable at that time shall be liable to be increased at the rate of

7.5% p.a. and the amount of increase in rent shall be merged in

such rent after 10 years. The amount of rent so arrived shall again

be liable to be increased at the rate of 7.5% p.a. in similar manner

up to the year of the commencement of the Act. Where the

premises have been let out on or after 1950, the rent payable at the

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time of commencement of the tenancy shall be liable to be

increased at the rate of 7.5% p.a. and the amount of increase in rent

shall be merged in such rent after 10 years. The amount of rent so

arrived shall again be liable to be increased at the rate of 7.5% p.a.

in similar manner up to the year of the commencement of the Act.

In cases where the period of 10 years for the merger of rent is not

completed up to the year of the commencement of the Act, the rent

at the rate of 7.5% p.a. shall be increased up to the year of the

commencement of the Act and the amount of increase in rent shall

be merged in rent.

The rent arrived at above, after completion of each year from the

year of the commencement of the Act, shall again be liable to be

increased and paid at the rate of 5% p.a. and the amount of increase

in rent shall be merged in such rent after 10 years. Such rent shall

further be liable to be increased at similar rate and merged in

similar manner till the tenancy subsists.

In case of new tenancies: In absence of any other agreement to the

contrary, the rent of the premises let out after the commencement

of the Act shall be liable to be increased at the rate of 5% p.a. and

the amount of increase of rent shall be merged in such rent after 10

years. Such rent further liable to be increased at the similar rate and

merged in similar manner till the tenancy subsists.

Any agreement for increase in rent > 5% p.a. shall be void to that

extent.

Conclusion

The provisions of fair rent should not be inclusive of the

maintenance costs. Practically, in India, due to the non-stringent

interpretation of the laws, the liabilities of payment for continued

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maintenance of a building is not clearly demarcated. With no

incentives for the landlord to make continued investments on his

property, a rational landlord would like to preserve the amount

spent. With a clear determination of liabilities in the legislation

itself, transaction costs for dispute resolution would be reduced,

thereby efficiently allocating the rights, making neither the tenant

nor the landlord worse off.

Documents

CHAPTER 4 FAIR RENT DIMENSIONS AND IMPLICATION An