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Friday, July 17, 1998

New Rent Act will be a please-all

Pranati Mehra andSwati Deshpande-Aguiar  
MUMBAI, July 16: The draft Maharashtra Rent Control Bill may not, after all, make rental accommodation more attractive, if that's what the new act is meant to do. While finalising some key proposals, the state Housing Department has tried to please all sections but not really helped rental housing.

The key changes will be legalising of pugree (the traditional premium paid when a tenant finally takes a premises on rent), raising rents for old buildings, and defreezing rents for tenancies in buildings constructed after October 1, 1987.

The practice of demanding pugree is illegal but it is as prevalent in Mumbai as pav bhaji. Its proposed legalisation will also regularise illegal subtenancies. It will work a follows: Pugree can be demanded to let out or transfer a tenanted premises and if the landlord and tenant come to an agreement, even in the case of subletting. Consider the following scenario: `L' is a landlord, `T' is his tenant since the last 20 years in whose name the rent receipts are issued. T hassurreptitiously let out the premises to a sub-tenant, `S'. If all three agree, then the tenancy can be transferred in the name of S following payment of pugree to L and T. Though pugree will be legalised, the transfer itself will have to be registered with the sub-registrar of assurances per the existing practice.

The government believes the new system will work well because registration will fetch it some revenue and all transactions will be subject to scrutiny, including income tax. Housing Department officials also say pugree will facilitate the entry of market forces which will decide housing prices.However, senior advocate Mulraj Shah, who specialises in Rent Act matters, says pugree is not such a good idea for middle class and low middle class tenants, who can pay, say rent of Rs 400 per month, but not a lump sum of about Rs 15 lakhs as pugree. ``This is pushing them to slums, where the rent is Rs 4 or 5 per sq ft, whereas in buildings in South Mumbai it is 8 to 10 paise per sq ft.'' Besides, theentire amount will not be paid in `white'.Also, tenants associations should lobby to place the onus of repairs on landlords in case pugree is allowed in new tenancies.

Shah also thinks some provisions like those applicable in Delhi, should be considered. In the capital, the concept of limited period tenancy has been introduced, where the landlord is assured of return of his property after the agreed period. Plus rents are defrozen, introducing more flexibility in the system.

The Maharashtra Joint Select Committee (JSC) of the Legislature, which finalised the draft bill on June 24, appears to have spared the tenant the danger of eviction on flimsy grounds. In Delhi, for instance, the new Rent Act stipulates that on the death of a tenant, the tenancy survives only two years. The landlord is not obliged to transfer the tenancy in the name of the tenant's heirs.

In Maharashtra, the JSC has rejected this provision, and all provisions of the old Bombay Rent Act protecting tenants from eviction will beincorporated in the new act. In fact, when landlords reclaim their flats on the ground that the landlord needs `bonafide' the premises for his own need, the new act is likely to provide that even if the tenant has acquired new premises, ostensibly for a growing family etc, the protection from eviction would continue. Of course, the bonafide needs of either party would be decided by the courts.

While raising rents frozen in 1940, the draft bill has also stipulated a rise of five per cent in the standard rent in the first year from the day it is passed and a subsequent rise by four per cent every year. The state government has seemingly linked it to a minimum expected inflation rate of four per cent in the coming years.

However, landlords are piqued with the `meagre' hike and the Property Owners' Association has decided to file a contempt petition in the Supreme Court soon, says B R Bhattad, its executive president. However, the JSC considers the rent hike reasonable and in consonance with the SupremeCourt's 1997 order. Tenancies created in buildings constructed on or after October 1, 1987, are exempt from the provision of standard rent.

More importantly, the changes will enable tenants to go ahead with minor repairs without a no-objection certificate from their landlords. Even if tenants get together and decide to install a lift, for instance, subject to sanctions from the local authorities, they can proceed without permission from the landlord. The new bill also seeks to remove big companies from the purview of the Rent Act. It will not apply to public limited companies with paid-up capital of over Rs 1 crore, nationalised banks, multinational companies, Life Insurance Corporation and other insurance companies, as well as foreign consulates. However, small companies will be protected by the act.

...will replace three Acts

The final draft of the new Maharashtra Rent Control Bill, 1998, will be tabled during the Monsoon Session of the state legislature commencing on July 20. It is proposed tobe a unified Rent Control Act for the state, replacing three separate acts - the Bombay Rents, Hotels, and Lodging Houses Rates Control Act, 1947, the Central Provinces and Berar Letting Out Houses and Rent Control Order, 1949, and the Hyderabad Houses (Rent Eviction and Lease) Control Act, 1954, (applied in Marathwada at present).

Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.


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