SALIENT FEATURES OF MAHARASHTRA RENT ACT 1999

THE MAHARASHTRA RENT CONTROL ACT, 1999

(MAH. XVIII OF 2000)

HOUSING AND SPECIAL ASSISTANCE DEPARTMENT

Mantralaya, Mumbai 400 032 WITH EFFECT FROM about 30th March, 2000

Popularly known as Maharashtra Rent Act of MRC Act, is a benevolent legislation for the benefit of Landlords & tenants all over Maharashtra.

1. This Act replaces the erstwhile THE BOMBAY RENTS, HOTEL AND LoDGING HOUSE RATES CONTROL ACT, 1947 which was in force from 19th January 1948, popularly known as Bombay Rent Act or BRC Act.

2. Majority of provisions of MRC Act are adopted from BRC Act, with a few exceptions like :

- increasing standard rent by 4% annually

- no protection from eviction in certain cases like tenancy for open land, Companies whose PAID-UP CAPITAL is over ` 1 crore, etc.

- tenant cannot be evicted even if he has alternate & suitable residential accommodation elsewhere

- interest rate increased from 9%to 15% per annum

- total prohibition against assignment of tenancy as incidental to business with Good-Will & stock-in-trade

- Mandatory registrations of Tenancy & Leave Liscence Agreements - etc.

3. Rent Act is aimed to resolve common disputes arising between warring Landlords & tenants. Each state has a different Rent Act modified as per the prevailing circumstances & environment factors in each State. Tenancy can be INHERITED under circumstances enumerated in Rent Act, but CANNOT BE BEQUEATHED OR 'WILLED AWAY', as per Apex Court Dictum as tenancy is NOT property of tenant.

4. The only exclusive Court having jurisdiction to entertain disputes under this Act is SMALL CAUSES COURT. Usually tenant's eviction order having drastic effects of ejecting tenants, under this Act, there is a 4 tier trial in courts allowed to each party, either Landlord or tenant, to check if the party has been given a fair trial & no injustice done. The 1st trial is before a SINGLE JUDGE who conducts the trial IN DETAIL [ & NOT IN SUMMARY FASHION], where both parties are allowed to give oral & documentary evidence & examine witnesses, then detailed arguments follows which culminates in a judgment.
   There after the loosing party can go in appeal or revision against order of single judge / trial court. Revision is to be filed in 90 days & Appeal is to be filed in 30 days. 1st stage in Revision / Appeal is admission stage, wherein if court finds some prima facie error in judgment of lower court, admits the case & if admitted, full hearing in nature of only arguments take place again. THIS REVISION / APPEAL IS HEARD BY 2 JUDGES. After decision in Revision / Appeal, matter can be carried forward to a single Judge in the Bombay High Court by way of CIVIL REVISION APPLICATION or WRIT PETITION & thereafter to SUPREME COURT in S.L.P. i.e. Special Leave Petition.
   All these stages ensure that no injustice is done to any party.

5. If Landlord increases Rent in excess of Standard Rent, then tenant has option to file for STANDARD RENT. Similarly if tenant has breach terms of tenancy or dis-obeyed the provisions of Rent Act, he can be evicted.

Some common circumstances for eviction are :

- sub-tenancy without landlord consent after 1 FEB 1973.

- non - user of premises for more than 6 months without reasonable cause,

- changing user of premises

- making permanent additions & alterations in premises [ standing kitchen & air-conditioners, TV antenna are allowed ]

- tenant being a nuisance & annoyance

- tenant is PROFITEERING from the premises by charging HIS tenant i.e. lawful sub-tenant, more than STANDARD RENT.

However, in case if tenant is in arrears of rent, some relaxation is granted in the sense that, no suit for eviction on ground of arrears can be filed unless 90 day advance written notice is served on tenant demanding rent. It so happens, tenant may not have received the notice. so tenant again gets a chance to pay all arrears in 90 days from receipt of court summons with 15 % simple interest & costs of suit

Tenant can also be evicted even if he has not breached any provisions of Rent Act if Landlord needs the premises of his own BONAFIDE NEED & REQUIREMENT which includes his family's needs

If Landlord need his property for demolition as ordered by B.M.C., Repairs & reconstruction, there are certain conditions for temporary eviction of tenant, if Landlord has got plans approved & given undertaking to court to re-house tenant, etc

6. As per FULL BENCH RULING OF APEX COURT IN SUPERMAX CASE, tenant has to deposit in court, the MARKET VALUE, [which is much more than standard rent & contractual rent,] from date of ordering his eviction by Trial Court, if he is granted STAY from eviction pending his appeal

7. As per another Apex Court judgment, Landlord & tenant can agree on market value & then tenant can enjoy 5 year eviction holiday if tenant pays that market value every month

8. There are penal provisions for which Landlord can be fined or imprisoned for changing user of premises, non issue of rent receipts, withholding essential supply like electricity & water, etc

9. There are also special section for personnel in Armed Forces, Scientists, to recover speedy possession of their properties & also for summary eviction of licencees under LEAVE AND LICENCES agreements who don't enjoy protection from eviction & such rights cannot be inherited.

1. Since 13th February, 1948 when the (Bombay Act, LVII of 1947 received the assent of the Governor General and the) Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (Bombay Rent Act) came into force; till io" March, 2000 when the (Maharashtra Act No. XVIII of 2000 received the assent of the President and the) Maharashtra Rent Control Act, 1999 (Maharashtra Rent Control Act) came into force repealing the Bombay Rent Act, not only the law but even the purpose of the legislation has undergone a sea change.

2. As opposed to controlling the rents and rates of premises and to prevent the unreasonable eviction of tenants / lodgers then, the broad policy and purpose of statute has shifted focus to encouraging construction of new houses and assuring a fair return on investment to the landlords. This is an attempt to broadly bring to light the provisions of the Acts, which are constantly queried to professionals on a day to day basis in the changing scenarios.

3. To further the purpose and intent, certain provisions of the Bombay Rent Act have been amended and certain new provisions have been introduced in the Maharashtra Rent Control Act. The most important of these, is the introduction of Section 3(1) (b) in the Maharashtra Rent Control Act, whereby the premises let or sublet to banks, or any Public Sector Undertakings or any Corporation established by or under any Central or State Act, or foreign missions, international agencies, multinational companies, and private limited companies and public limited companies having paid up share capital of rupees one crore or more are exempted from the applicability of the provisions of the Rent Control Legislation.

4. By the introduction of this section, a large portion of the landlord community which was heretofore, the oppressed lot, heaved a sigh of relief. There is now no need to specify any ground. The tenancy can be simplicitor terminated. After a month of receipt of notice, if the ex-tenant does not vacate the premises, it is deemed to be an unlawful occupant. Pursuant to short term litigation, a lot of landlords were at long last, able to recover their premises or negotiate for market rentals with the existing tenants.
   
   Not only recover possession, the landlords are even recovering huge sums of money as damages or mesne profits for unlawful occupation, since termination of tenancy till actual handing over of possession.

5. This exemption is however, available only to premises where, either the tenant or sub-tenant belong to any of the categories mentioned in Section 3(1) (b) of the Maharashtra Rent Control Act. Premises given on leave and license are in any event, not protected under the rent control legislation.

6. However, under the definition of Section 7(14) of the Maharashtra Rent Control Act, if premises are let post I" October, 1987, then the provisions of standard rent do not apply to such premises. Thereby, even if the tenant is protected from eviction, (except under grounds specified) the landlord is not bound to demand only standard rent or permitted increases. The return on the investment of the landlord is secured as per the negotiated terms and conditions. This also applies to premises constructed post 1987.

7. Whilst on this topic it would be relevant to note that, while drafting leave and license agreements with entities mentioned in the protected category, it would be necessary to take declaration and indemnities; declaring that, the company has a paid up share capital of one crore and above, an indemnity that, the said paid up share capital shall not be reduced without the written consent of the landlord or; should the paid up share capital for any reason be reduced, then and in that event, the permission to occupy the premises given by the landlord under the leave and license agreement, shall be deemed to have come to an end one, day before the effective date of reduction of share capital. These declarations and indemnities will safe guard the interest of the licensor when dealing with their licenses. The Licensor must also insist on necessary resolutions being passed by licensee company before executing leave and license agreements.

8. A lot of us assist clients in drafting Partnership Deeds. There is a misconception among us that, if partnership firm is a tenant or a licensee, there is no difficulty in changing the constitution of the firm by changing partners. This analogy is often drawn from the concept of change of directors or share holder of a company not affecting the constitution of a company. There is a vast difference between a partnership firm and a company in this regard. Whilst a company is an independent entity, divest from its directors or share holders, a partnership firm is merely a coming together of people.
   
   Thus, if a rent receipt stands in the name of a partnership firm, it is actually the partners on that day, who are the real tenants. A change of partners of the firm in the name of which a tenancy or license stands, shall give a right to a landlord to seek eviction of such tenant or licensee on the ground of subletting, Thus, change of partners while continuing the name of the firm is not advisable. However, changing the name of the firm, with the same partners is not a ground for eviction.

9. So, at the time of drawing up partnership deeds, it is necessary to safe guard the tenancy, while introducing new partners in the firm. It would be prudent, not to include the tenancy rights of the premises as an asset of the firm and to specify that incoming partners shall not be entitled to the tenancy rights. Thereby, no interest in the tenancy rights shall be passed on to the incoming partners, although for business purposes, the reconstitution is necessary and may be done.

10. As a measure of precaution, it would be necessary to note that, heirs and legal representatives of existing partners be introduced into the firms if necessary without the retirement of the original partner i.e. the existing tenant. So far as devolution of tenancy is concerned, under section 7(15) (d) of the Maharashtra Rent Control Act, in case of commercial properties such family member who was using the premises with the tenant at the time of his death shall for the said purpose, be entitled to the tenancy rights.
    
    In case of a residential premises a member of the tenant's family who was residing with the tenant at the time of the tenant's demise, in the suit premises, is entitled to the tenancy rights, in exclusion of the others. If no such family member(s) was doing the business or residing (as the case may be) with the tenant at the time of his or her demise, then, any heir of the deceased tenant shall be entitled to the tenancy, if there in consent of the other heirs, if not, the court will decide to whom the tenancy rights should go.

11. There is another myth or misconception that, as in contracts, a claim of money beyond a period of 3 years is barred by the law of limitation, so also a landlord is not entitled to arrears of rent, if remained unclaimed for over 3 years. It is settled law that, 'though a remedy may be barred by law, a debt does not get wiped out. So, should a tenant want to continue to occupy the premises, no matter the period of arrears; the tenant is required to pay all arrears including time barred claim of rent or permitted Increases.

12. As per the provisions of section 11 of Maharashtra Rent Control Act, a landlord can make an increase of 4% per annum in the rent of the premises. On the other hand, it is also made penal for a landlord to demand anything in excess of the standard rent or permitted increases as per Section 10 of Maharashtra Rent Control Act. So read harmoniously a landlord can make an increase of 4% per annum in the rent of the premises or on standard rent if any fixed. In order to curb the transactions of tenancy or leave and license being entered into on cash basis, Sections 31, 55 and 56 were introduced in the Maharashtra Rent Control Act, whereby leave and license agreement were made compulsorily executable and registerable, receipts were incumbent to be issued for any amount received and it was made lawful for a tenant to receive consideration for relinquishment of tenancy or for a landlord to receive premium for giving consent for creation, transfer or renewal of tenancy.

13. The legislation intended to reduce the parallel market transactions of leave and license or tenancy and it was effective. In the years 2000 to 2003, there was a spate of
    registration of tenancy and license agreements. However, thereafter owing to the taxation policies (property tax, service tax and income tax) once again the trend of non registration of part registration of the transactions has become the norm.

14. While some things have changed for the better, a lot more needs to be changed and in hope we live.