BASIC ANALYSIS OF RENTAL

LAWS IN INDIA
There are separate and exclusive Acts for each sector in the Indian real estate
which has been framed and governed by the central and state government of
India. So, when the rents of the real estate property are concerned, the Act
enforced is the Rental Law.

This law has the scope to all commercial and residential property�s rent and it
solves all the tenant-landlord disputes by enacting civil laws. These Rent Laws
are state laws. Each state has its laws relating to their rental property and
agreements. For instance, the Rent Control Act, 1999 in Maharashtra, the Rent
Control Act in the year 1958, Delhi, Tamil Nadu Buildings lease and Rent
Control Act,1960. These Acts are enacted primarily to solve the disputes
between two parties involved in the rental agreement.

There are 2 types of rental contracts mostly preferred by the landlords, the
rental agreements, and license agreement. This article speaks about the
introduction to the Rent Laws, methods used primarily, and the utilities
provided in the first stage. Then the Rent Control Act along with its new
modifications will be discussed. The last portion of elaborately comprises an
integral part of this Act and the conclusion.

If we have to rent a property, a legally bound contract between the landlord

and tenant will be drafted. The contract will have the rules and responsibilities,
according to which both parties have to bind. Some of the basic ingredients
that are usually given in the contract document are the rent amount, security
deposit amount, date of deposition of the security amount, and other legal
conditions.

If any of the parties violate the bound rules, then the aggrieved party can apply
for the relief in the Civil Court. Many people have common and general
knowledge about rental pacts. The objects in the rental agreement can be
negotiated with the landlord. The most basic objectives that will be needed is
the tenant will be asked to pay an advance amount to the landlord to avoid
fraudulent acts which will be returned during the end the period of the lease
and the amount will be returned to the tenant if the property is left behind
with good condition

And both parties have to be notified before vacating the property. These are
the basic information that everybody knew relating to the rental of the
property. But there are further information and notifications regarding the
rental pacts in India.

Elementary methods:
As seen earlier, there are two types of rental pacts. The rental agreements and
the license agreement.
Rental contracts that are over 12 months are considered to be the rental
agreements. This type has to stand by severe rent control laws that are mostly
in favor of the tenants. The Rental Control Laws at this time prevent the
landlords from overpricing the tenants and protect the tenants from
unexpected or prejudicial eviction. Also, the right to ownership of the property
will be transferred from the landlords to the tenants in case of a lease
agreement, making it more solid for the landlord to vacate a tenant. Hence,
this is not a type that Landlords prefer.

Another type of agreement is the license or leave the agreement. the Leave
and license agreements on the other side are limited to a period of 11 months,
with an option of renewal of the agreement at the termination of the contract.
As a rental agreement that is 11 months long is just a license for the tenant to
occupy the premises for a short duration, Rent Control Laws necessarily need
not to be applied. Further, rental contracts that are 11 months long allow the
landlord more actions to take in case of eviction of the tenant from the
property. Hence, most landlords prefer to enter into a rental agreement that is
11 months long, to be on the safer side, with an option to renew at the end of
the agreement period.
Utilities provided:
The contract should contain the details of the provided utilities. The electricity
expenses if included with the rent then the meter cards should be provided to
the tenant, or if the tenant itself has to pay them, then such details must be
provided. The same applies to the water connection and the amount can be
determined by the source of water supply given to the accommodation. The
gas connection has to be provided by the landlord. The other non-mandatory
supplies like the internet, phone connection as so should be done by the
tenant.

The Rent Control Act:

Rent Control Act was a method by the Government of India to eradicate the
abuse of tenants by landlords. Rent legislature tends in providing fair rents to
the landlords and protection of tenants against eviction. But the tenants are
paying fixed rates as rents since 1947. The Rent Control Act has led to several
adversative situations like deteriorating speculation in rental housing,
Withdrawal of already existing housing stock from the rental market, festering
municipal property tax revenue.

This Rent Control Act along with the security of tenure has not given any
motivation or encouragement to the owner of the house for renovation
purposes due to which most of the property has a not properly maintained
look. Revocation of the Rent Control Act would lead to structural affluent and
it will boom the growing need for the housing and other property which may
lead to the flourishment of employment opportunities. The prime locations in
the city will be used leading towards betterment which results in urban
development.

Introduction of the Model Act:

In 1992, all the state has circulated a proposal of model rent control legislation
by the Central Government. This model act prescribed some of the
modifications in the already existing provisions regarding the inheritance of
tenancy and mentioned about their rent limit beyond which this act could not
be applied. This act was not very famous because it failed the introduction.
Even the New Delhi Rent Control Act that was passed in the year 1997 was
based on this act.

This was a failure because the traders were the sitting tenants who resisted
this act. All the new Rent Control Acts introduced in various states of India has
the requirements for the disagreement among the landlords and tenants. Each
of the State Rent Act provides for fixation of Standard Rent as well
announcement for ownership and necessities that lay down the gratification of
the Court.

Rental Agreement is an essential part of Rental Law:

Rent or lease of any property which may be residential or commercial property
in India is subject to strict Indian laws. A mutual contract on the terms and
conditions of the rented property by the landlord and the tenant is required. In
the present times, rental of commercial space in India as contrasting to
retaining commercial real estate is turning out to be an excellent move.

There are no standard lease agreements or contracts and there are very little
tenant-friendly laws in the commercial leases subject because of which the
legal advice becomes necessary. Negotiating informal decisions and finding the
best deals on a commercial lease can be done effectively with the help of a
lawyer. The local ordinances and researching zoning laws along with
elaborating about the present market conditions and customs of the local real
estate can be consulted by a lawyer.
The rental agreement explains the relationship between the tenant and the
landlord. This is a legal binding upon the parties involved. In brief, this may
have the conditions and obligations relating to the issue. If any changes are
made, then it has to be notified in writing.

The rental agreement is a proper legal form that has to be maintained by the
sign, date, and the completed form by both the tenant and landlord. There are
legal forms for all the rental properties. For rent, lease, and management of
residential rental properties. Both the properties will be involved and will
access the document once it is signed.

The landlord should get the agreement registered. the the owner should
provide the tenant a duplicate copy of the rental agreement, failing that the
tenant is not indebted to pay rent till the tenant receives a duplicate of the
rental agreement.
For a lease agreement, the terms of the leaseholder (tenant) and also the lease
giver (landlord) once they enter into a lease agreement would come with
terms just like the period of the lease, deposit sum, and scheduled rentals. The
lease giver or the owner ought to make sure the premises come within the
right form in recovery.
There has been no damage to the covering, plumbing, flooring, or
electrification and therefore the premises are within the proper condition.
No major changes have been incorporated within the premises. If the
leaseholder has created some changes, that are not acceptable to the lease
giver, the latter could raise him to undo the changes.
All the electricity and telephone charges have been taken care of until the
required date by the lessee or tenant at the time of recovery.
In the case of leasing of equipped premises, the condition of the furnishings is
the incorrect condition.

On satisfactory fulfillment of these aspects, the lease giver ought to provide

the refund of the protection deposit (if given) to the tenant providing vacant
and peaceful possession of the premises.

In an occupancy Agreement, there is a transmission of interest and it creates

the non-eviction of the tenant by the owner excepting on the grounds of
eviction mentioned under the Rent Act.
Under the Leave and License Agreement transfer of interest takes place on
permission and also the same will be terminated as per the terms of the
agreement.

The possession will be demanded back from the licensee. The label to the
agreement may well be Leave & License or tenancy Agreement, however, it is
the intention of the party that counts. Documentation of the commercial lease
is additionally a very important Rental Law procedure.

DISPUTE MECHANISM UNDER A

LEASE
Introduction
Every contract includes a system for dispute resolution as an important
element of it. The contract or agreement presents a means of resolving a
problem that may reasonably be expected. Arbitration, mediation, and
conciliation are just a few of the well-known dispute resolution procedures.

Additionally, a lease agreement could include these Dispute Resolution

Mechanisms, which are now legally binding, and if no such method is
specifically named in the agreement, the dispute can be addressed through
adjudication.

The question arises is there any dispute mechanism resolution available for
lease or not? According to the Arbitration and Conciliation Act, 1996, there is
no demarcation between as to what matters are arbitrable and which are non
– arbitrable. But the apex court in many cases cleared, interpreted, and laid
down certain tests and points to clear the confusion of it, for e.g. Four-Fold
test laid down by the apex court.

The Transfer of Property Act, (TPA) of 1882 governs leases, and they are
discussed in detail in Chapter V of the Act, which runs from Section 105 to
Section 117.

What is Lease?
As described in section 105 of Transfer of Property Act, 1882 An agreement
to lease property is a handover of the claim to use and benefit from the land
for a stated amount of time, expressly or by implication, or in indefinite
period, in exchange for a premium paid or vowed, or in concern of money, a
percentage of crop production, facility, and every other valuable items, to be
deemed at regular intervals or on defined periods to the lessee by the
lessor, who acknowledges the handover on the terms agreed to by the
lessor.

The terms lessee, lesser charge, and lease are defined. — The transferor is
referred to as the lessor, the transferee is referred to as the lessee, the
valuation is referred to as the premium, and the amount, portion, service, or
other object to be supplied in exchange for the transfer is referred to as the
rent. So, to brief it up, For the purposes of this definition, a lease is an
agreement in which one party promises other side for right to use property
or land in exchange for a fee and for a determined period, that is termed as
both parties enter into a lease agreement, which outlines the terms and
circumstances of the agreement between the two parties. The lessor is the
person or entity that owns the leased premises or property. The lessee is the
party who agrees to accept the subject premises.

What is the Difference between lease & leave

& license agreement?
Section 105 of the Transfer of Property Act and Section 52 of the Indian
Easements Act talks about lease and license, respectively.

 Unlike a leave and license arrangement, a lease establishes a stake

in the property.
 Leases provide tenants complete ownership, whereas leave and
license agreements merely allow them to use part of the premises.
 Leases aren’t revocable, but licenses are.
 The lessor does not have control over leases, whereas it does with
licenses.
 Leases can be transferred, but not licenses.
 In contrast to licenses, a lease creates rights that can be passed
down through generations.
 The selling of property to a third party does not impact a lease.
Unlike with a license that terminates immediately upon transfer of
ownership, it remains in effect while the property changes hands,
and the buyer must wait until the amount of time specified in the
lease agreement has expired before he can take possession.
  A lessee has the legal right to safeguard the property he or she is
leasing. A licensee, on the other hand, has no legal standing to
justify his or her ownership because he or she has no ownership
interest in the land.
 Unlike a licensee, a lessee in respect of the land has the right to any
changes or additions that are made to the property.

What are the possible disputes that may

happen?
To understand what disputes may arise, we need to first understand the
concept of Right in personam and Right in rem.

Right in Rem
It implies that the right is available against the entire world, and that
nobody has the authority to interfere with it. For example, say A owns a
residence in which he has entire control over the property. He has a Right in
Rem in regards to the residence, and no one has the authority to interfere
with his ownership rights.

Right in Persona
It indicates that the right that is accessible against the individual who is
performing the task that is enforced upon only that one specific individual.
Those who enter into an agreement are granted Rights in Persona under
the Indian Contract Act. Consequently, the parties involved in the contract
are only able to enforce their contractual rights against one another. As an
illustration, C received a loan from A. The right to reclaim the money belongs
alone to A, and not to the rest of the world collectively.

The most frequent and possible disputes that arise from it is Tenancy –
Landlord dispute which is resolved through the medium mostly of arbitration
the SC has given its view in many cases regarding the same for e.g.,

In Navrang Studios case, the Supreme Court of India remarked that the
dispute between landlord and tenant is the matter of Right in Rem, and it
concerns the general public, and as a result, the tenancy issues are not
arbitrable and still the issue being that whether the disputes regarding the
same are arbitral or not which will be further discussed by help of the
Supreme court cases.
Why do we need a dispute mechanism?
The need for a dispute mechanism in lease started from the “Booz – Allen
case” where it was stated that the disputes concerning removal and tenancy
were not arbitrable. Generally speaking, leases are regulated by the Transfer
of property Act, 1882 (often known as the “TOPA”). According to Section 8 of
the Arbitration and Conciliation Act (“Act”), “even though there is a dispute
settlement agreement between the two parties, and even though the conflict
is encased by the arbitration clause, wherever the civil suit is subject to
review will be reluctant for a provision of Section 8 of the Act, to pertain the
arbitration proceedings if the source material of the suit is competent of
being resolved through negotiation or mediation.”

Non-arbitrable disputes were classified into the following categories

by the Judge:

i) rights and responsibility problems emerging out of felonious violations;

(ii) marital conflicts involving divorce, legal dissociation, compensatory

damages of conjugal protections, and custody of children;

(iii) insolvency and closing down issues; and

(iv) eviction or eviction-related issues;

The court further interpreted and discussed the principle of Right in Rem and
Right in persona which is discussed in aforementioned subheading.
Explaining it further the court held that historically, all issues involving rights
in personam have been arbitrable, but all disputes involving rights in rem
must be decided by judicial and public forums because they are unsuitable to
private arbitration. This isn’t, however, a hard and fast rule that can’t be
bent. All challenges pertaining to inferior personal rights originating from
superior real property interests have often been regarded as arbitrable.”

When it comes to lease agreements it is governed by special statutes like

the Rent Control Act which differs state to state. However, there are
contradictory rulings from various High Courts on the topic about whether
lease agreements controlled by the TOPA can be subjected to arbitral
proceedings, which is a tricky concern in the eye of law.

Landmark Judgement & key observation

Booz-Allen & Hamilton Inc v. SBI Home Finance Ltd & Others
The issue that emerged before the Apex Court in this case was that whether
a conflict involving a mortgage should be resolved through arbitration or
litigation. Specifically, an application was submitted under Section 8 of the
Arbitration and Conciliation Act, which dealt with the redemption of the
mortgage in this particular instance. While commenting on the issue, the
apex Court went into greater detail on the idea of “arbitrability of conflicts,”
including the breadth and essence of such a concept. The apex court went
over three components of arbitrability that are related to the competence of
the Adjudicating Authority in this instance. The court found that the
fundamental concept is that every civil or business issue that can be resolved
by a judiciary is in principle, accessible to arbitration, excluding those cases
in which the authority of an arbitral tribunal is limited by legislation. In
addition, it included a number of suggestions of non-arbitral problems, which
included the relevant studies:

The following types of cases are heard in court:

 basic rights and responsibility issues arising from or relating to

felonious offences;
 marital conflicts involving relationship breakdown, legal separation,
compensatory damages of conjugal protections, custody of the
children;
 guardianship conflicts;
 insolvency and winding-up disputes;
 intestate succession disputes; and
eviction or tenancy landlord matters, which are controlled by special
statutes of states in which the tenant is protected from forced
removal and only the defined courts are granted jurisdiction to hear
the matters.
Himangni Enterprises v. Kamaljeet Singh Ahluwalia

The Apex Court has clarified that conflicts involving tenancy and eviction are
not subject to arbitration. Moreover, according to the Highest Court, while
tenancy issues are arbitrable under the Transfer of Property Act, some lease
disputes that are governed by specialized tribunals have been granted
authority to determine the particular rights of both the parties involved.

Vidya Drolia & Ors. v. Durga Trading Corporation

The ultimate word play regarding the dispute mechanism system was
completed in this case ruling. Earlier decisions made it plain that landlord-
tenant conflicts are not arbitrable under the law, as previously stated.
Nevertheless, in this case, following a thorough discourse and a thorough
recognition of all arguments, the Supreme Court examined the
appropriateness of the margin established under the Himangini Enterprises
as well as the verdicts on which it relied, namely, Nataraj Studio and Booz
Allen, before reaching a decision. The Court established a four-fold test for
determining whether the relevance of a dispute in an arbitration clause is
arbitrable or not in order to resolve the issue. Non-arbitrable disputes are
those in which the parties cannot come to a mutually agreeable resolution
through arbitration. The four-fold test were as follows: –

 The issue at hand is around right in rem, which is distinct from

inferior right in persona, which is derived from right in rem.
 The dispute’s issue area affects a third party’s right, demanding
decisive adjudication
 The state’s sovereign and interests of society functions are at issue
in this case
 Binding legislation prohibits arbitration of the dispute’s subject
matters.

Critical Analysis
In light of the above rulings, we can deduce that the highest Court has
explicitly said that a quarrel between a tenant and a landlord is arbitrable
only if the issue is not addressed by a rent control legislation. As a result, the
approaches adopted for a matter to be exempt from arbitration:

 A specific legislation governs the subject matter

 Specialized legislation provides procedural safeguards to renters.
These specific legislations give certain tribunals special authority to
handle disputes.
 Even when the rights of third parties aren’t directly involved, the
right in rem is affected by any dispute.
 Binding legislation has explicitly forbidden any mention of
adjudication in an issue area that has any connection to a state’s
autonomous or interests of society. Since there is no rent control
legislation covering the grounds, a disagreement between an owner
and a tenancy over the same could be referred to as non-arbitrary.
However, in order for an arbitration court to hear these issues, a
language requiring arbitration must be included in the lease
agreement.

Conclusion
Landlord and tenant disagreements are widespread, and they usually result
in a lengthy legal struggle that costs a lot of money and wastes both parties’
important time. It’s a joy to both landlords and tenants alike that the
Apex Court recently handed down its decision in Vidya Drolia case. Well
now they can quickly and easily go through all the arbitration proceeding.
However, it’s important to proceed with caution when interpreting this ruling
because it only applies to certain articles of the TOPA and not to all lease
disputes. Because of this ruling, not all disputes will be resolved through
arbitration. There is still no way to arbitrate disputes involving Right in Rem
or any of the other requirements specified above

References
1. Transfer of Property Act, 1882, No. 04, Act of Parliament, 1882
2. Natraj Studios (P) Ltd v. Navrang Studios & Ors. (1981 AIR 537)
3. Booz Allen & Hamilton. Inc v. SBI Home Finance Ltd & Ors., Civil
Appeal No. 5440 of 2002.
4. Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC
706 (India).
5. Vidya Drolia & Ors. v. Durga Trading Corporation Civil Appeal No.
2402 of 2019