India: New Laws Relating To Lease/Rent

Last Updated: 29 July 2002
Article by Vatsala Dhananjay

THE NEW RENT CONTROL ACT, 2001:
The old Karnataka Rent Control Act 1961 had expired on 31.12.1999. The new Karnataka Rent Control Act 2001 has now been passed. No provision in the new act shall apply to any residential property where the monthly standard rent is Rs. 3500 within the town planning limits and Rs. 2000 per month in other areas. This act shall also not apply to any commercial property which has a plinth area of more than 150 sq. ft. The act is not applicable to properties which are less than 15 years old.

What this means is that in the bigger cities like Bangalore, the provisions contained in The Transfer of Property Act shall apply in all cases of lease. The termination of lease is now bound by contract between the parties and not by law. Upto now, the law had defined the conditions whereby a landlord can evict his tenant. Under the new act, protection of tenants against eviction by statute is now applicable only for properties having low rental values and for properties in interior parts of the state.

Standard rent means the rent calculated at 10% per annum of the aggregate amount of the cost of construction and the market price of the land on the date of construction. In many cases, this standard rent exempts the property from the provisions of this act.

OTHER SALIENT FEATURES OF THE NEW ACT:
The act has abolished oral tenancies for properties to which this act is applicable and has made it compulsory to enter into written lease deeds.

  1. All estate agents are to register themselves with the rent controller and give information of all transactions
  2. Although any rent can be agreed upon at the commencement of the lease, enhancement of rent is governed by the schedule appended to the act.
  3. Charges for amenities can be decided by the landlord and tenant. If no such provision is made, the act provides for 15% of the rent to be reserved for amenities.

MARKET PRACTICE:
The usual market practice in the matter of renting an office or a house has so far been to enter into a lease agreement either for 11 months and frequently for more than 11 months. Most of these agreements are not properly stamped. They are usually not registered. The market seems to follow its own rules in this matter and the laws relating to lease are often ignored. This was because the mere payment of rent to the landlord by the tenant was enough in the court to establish a tenancy relationship. The courts could then be moved to protect such a tenancy under the old law. An unregistered or under stamped lease deed or lease agreement could not take away such a right. The right of the landlord to demand his property back on the termination of the lease continued to operate on trust and not law. It is submitted that this state of affairs need not continue any longer as the statutory protection of tenants from eviction is now no longer available in most cases.

REGISTRATION AND STAMP DUTY:
The Transfer of Property Act mandates that lease deeds for a period of more than one year should be registered. (Leases for periods less than a year do not require registration.)

LEASES FOR LESS THAN A YEAR:
The best practice is to enter into a lease deed for a period of 11 months with a conditional option to renew it at the end of that period by another 11 months, provided certain conditions are fulfilled. Such leases should also be properly stamped. The stamp duty is about 5% of the total amount of rent payable under such a lease. This duty is applicable even to an agreement of lease. However under stamping of a lease agreement or lease deed does not by itself make the lease void. In case of dispute, the court will demand that the excess stamp duty be paid along with penalty prior to hearing the case.

LEASES FOR MORE THAN ONE YEAR:
All leases for a period of more than one year should be compulsorily registered. The stamp duty payable on such lease deeds and lease agreements are high and is computed on the average annual rent along with deposit payable. The amount of stamp duty is almost equal to that of a sale deed. The usual practice is to split up the rent into two halves and make out one of them as an amenity agreement, which does not require registration. The amenity agreement will have to be stamped as per the article relating to lease of movables.

CONSEQUENCES OF NON REGISTRATION OF LEASE DEEDS:
Non registration of leases for more than one year is a serious offence. It does not establish any rights between the landlord and the tenant. It cannot be produced in court for want of registration. While under stamping a document is excusable, non-registration simply makes the document inadmissible as evidence. As the statutory protection of tenants has been removed in most cases, registration of a lease for more than one year is advisable in all cases where the lease value is large and protection of the contract by law is deemed necessary. On the other hand, even in cases of lease for more than one year, an agreement of lease can be entered into and possession given to the lessee by a later act. The lease deed remains pending for registration. This transaction will be protected by the doctrine of part performance. The stamp duty will remain high, but the serious consequences of non-registration does not arise. Under stamping such an instrument is not an un-rectifiable offence.

LEAVE AND LICENCE:
Documents that are styled as leave and licence, also require a similar type of stamp duty as a lease, but they do not have to be registered. In case of dispute, if the matter goes to court, then the courts will look into the true nature of the transaction and if it is determined that notwithstanding the language of the deed, a lease had in fact been entered upon, then the laws relating to lease will be deemed to apply.

USUAL CLAUSES IN THE LEASE AGREEMENT OR DEED:
The amount and time of payment of rent, lessor’s right to inspect the property, lessee’s obligation to keep the property in good condition, use of the property for the purpose for which it was given, yielding possession of the property to the lessor on the termination of the lease, are usual clauses contained in the document.

TITLE OF THE LESSOR:
Last but not the least, checking up the title of the lessor, the validity of the sanctioned plan and the zonal regulations of the area are important precautions to be taken before entering into any lease.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Vatsala Dhananjay
 
In association with
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.