Tamil Nadu Regulation of Rights & Responsibilities of Landlords & Tenants Act, 2017

KEY TAKEAWAYS

• Ministry of Housing and Urban Affairs has prescribed TN Regulation of Rights and Responsibilities of Landlords and Tenants Act, 2017.
• This act excludes government bodies, where accommodation is offered by institutions as part of service contract, religious & charitable institutions, Waqf Board, etc.
• The issues presently in hand are regarding the Term of Tenancy, Succession, Subletting, and Rent fixation, among others.
• The Act requires disposition of disputes under it within 90 days.
• Section 43 of the Act primarily deals with the conduct of proceedings.

Introduction.

The new tenancy law viz. T. N. Regulation of Rights & Responsibilities of Landlords & Tenants Act, 2017, is based on the Draft Model Tenancy Act, 2015 prescribed by the Ministry of Housing & Urban Affairs, Govt. of India. This draft law is an attempt to restructure regulations relating to tenancy for commercial and residential realty. Since Land as a subject features in the State List i.e. List 2 of seventh schedule of the Constitution it is for the States to act here. In its implementation Govt. of Tamil Nadu seeks to allow market forces determine the rentals of the real property market, while subtly retaining a regulatory mechanism to fairly revise rentals when adjudicated. On perusing the provisions of the Act as published in the gazette one observes many interesting features. While admitting the prevailing law viz. Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 (i.e. the old Act) is tilted towards the tenant, this article seeks to analyse some of the provisions which could help understand certain measures taken to favour the landlord in the new law amidst a fine balancing act.

Some definitions of interest:

a. The definition of the term Landlord vide S.2(c) is inclusive. This includes not just the admitted Landlord but also a person entitled to receive for himself or on behalf of such others including Trustee, Guardian, Receiver and successors-in-interest. So also with the term of Premises vide S.2(f) which is fairly inclusive. Addition of a new term viz. the Property Manager is a welcome step here. The inclusive definition here in addition to the role of the Property Manager vide S.17 - 19 is noteworthy.

b. The definition of the Tenant vide S.2(n) is vast and applicable to implied situations also. In effect the definition is expansive to include even sub-tenants and any person occupying/ in possession of the property.

c. Formation of Authorities.

(i) By S.2(i) and S.38 a quasi judicial authority viz. the Rent Authority is now beingconstituted instead of the existing Rent Controller. The role of this Rent Authority is seen vide S.4, 9, 10, 14, 15 and 20. S.38 empowers the Collector to appoint an officer in the rank of Deputy Collector to be the Rent Authority. The process of appointment of this quasi judicial authority lacks clarity and could be controversial. Trust the State Govt. may retain the current Rent Controller/s appointment norms here too.

(ii) By S.2(j) the Act seeks to define and vide S.31 constitute a Rent court. Any Tenant or Landlord may approach the Rent Court in: a. seeking relief directly in certain matters; or b. on appeal from an order of the Rent Authority. S.31(4) states that the Presiding Officer of the Rent Court shall be in the cadre of a District Judge.

(iii) S.2(l) read with S.32 details on the constitution of a Rent Tribunal. This is the appellate forum for all matters arising on appeal from the Rent Court. The Rent Tribunal set up here is a multi-member body headed by a Principal Appellate Member (retd. High Court Judge).

Thus the Act here sets up a three (3) tier hierarchy in place of the existing two (2) tier.

Exclusion.

The exclusions under this law include govt. bodies, where accommodation is offered by institutions or company as part of the service contract, religious and charitable institutions as notified, Waqf property and Trusts regd. under the Trusts Act.

Tenancy - S.4-7:

Admission of Tenancy. S.4 (as in the old Act), makes it mandatory for the parties to intimate the Rent Authority in writing of any contract of tenancy. This applies to existing tenancy contracts too. Intimation here is to be given vide the prescribed form detailed in First Schedule of the Act. It is mandatory to record all tenancy contracts in writing vide an agreement i.e. Rental Agreement. Accordingly the Rental Agreement has to be filed with the Rent Authority. This in turn will be published on the website of the said authority. The registration here is evidence enough of the relationship between the parties. In the absence of a mandatory registration under S.4(5) the Rent Court is not expected to weigh the evidentiary value of the clauses in an agreement.

Issues on hand.

(i) Term of Tenancy.

On the period of Tenancy consequent to expiry of tenancy (i.e. as mentioned in the Rental Agreement), S.5(3) limits the implied tenancy to six (6) months only. However, since the law nowhere specifies the consequences of a non-renewal in express terms the implied nature of a continuing tenancy can be presumed. This provided the Landlord has not initiated steps to evict the Tenant under S.21(2) or insists on a renewal agreement being signed.

(ii) Succession.

On the right of the successors of the Tenant to continue the tenancy post the death of the Tenant, in both residential and non-residential tenancy vide S.6 a set hierarchy based on class 1 heirs inheritance viz. spouse, sons/ unmarried daughters; parents; and daughter-in-law being the widow of a predeceased son is to be followed. However, this is subject to the proviso that the successors had been living/ working at the said premises till the death of the Tenant.

(iii) Subletting.

A new introduction is on the right to assign the tenancy or sublet the premises. S.7 specifically requires the Tenant to obtain the prior consent of the Landlord for any such action. Further on the issue of rent payable for subletting S.9(5) of the Act puts a specific bar on the sublet rental that can be charged. The Tenant cannot sublet/ assign the premises for a rental that is higher than that being paid by the Tenant to the Landlord. Such a clause could dampen the profitability of shell structures that are leased and sublet by big players. However the section is silent on a situation where the Landlord consents to subletting the premises at a higher rental. Hence it may be presumed that where the Tenant acts in tandem with the Landlord, a higher rental can be charged while subletting the premises. This could however be subject to judicial scrutiny.

(iv) Rent fixation - S.8 - 11.

S.8 recognises the rent agreed upon in the Agreement to be the rental monies payable. S.8 and S.9 deals with Revision of Rents, which may be as per the Agreement. This is subject to compliance of the provisions of two (2) months prior notice vide S.8(b) and three (3) months prior notice vide S.9(2) being served on the Tenant intimating of revised rent. The former provision relates to existing rental agreements prior to commencement of the Act and the latter for Agreements entered into after commencement of the Act. The section however fails to expressly deal with situations where the said notices are not given. This goes to suggest that a judicial intervention here could allow the Tenant set off the revision period of either two (2) months or three (3) months respectively as the case may apply towards complying with the provisions.

The reasoning for the above judicial intervention gains importance from the fact that the S.9(3) categorically states that where the Tenant fails to give termination notice on receipt of such revised rental it is a deemed acceptance of the revised rent. Also S.9(6) read with S.15 are enabling sections in terms of justifying a revision by the Landlord. As against this a Tenant may if the situations elaborated under S.9(7), (8) be applicable, appeal to the Rent Authority for reconsidering the revised/ existing rent.

(v) Fair Rent.

Although the Act is silent on the term 'fair rent' the Rent Authority under S.10 is empowered to revise the rent, the charges and the date from which the same are payable by the Tenant. In other words this is similar to the fair rent provisions of the old Act. This gains significance in light of S.35(4) that provides for engagement of assessors and valuers by the Rent Courts and Rent Tribunals. The section, unfortunately, gives no time bound adjudicatory process in this aspect. Such an open-ended process could defeat the very intent of the provision. However, in the absence of the Rules under this new Act it is difficult to arrive at a conclusion here.

(vi) Security Deposit.

S.11 in effect conveys that the parties by Agreement may fix the security deposit as required. This open ended provision invariably allows market forces to determine the same. However where the Agreement is silent on this the provision categorically states that only three (3) months rent can be collected as security deposit.

d. Obligations of Parties.

Landlord.

1. S.12 casts onus on the Landlord to supply a signed and registered version of the Agreement to the Tenant. Thus there could be either two (2) originals or one (1) original and one (1) duplicate of the Lease Agreement being executed.
2. S.15 casts joint responsibility on both parties towards maintenance of the premises. This is to be read with Parts A and B of the Second Schedule.
3. S.17 - 19 details the role, functions of the Property Manager. This includes the right of premises inspection between 7 am - 8 pm after serving advance notice of at least 24 hours and the process for dispute resolution.
4. S.20 specifically prohibits the Landlord from cutting off or withholding any essential services. The term 'essential' is as per the Explanation mentioned therein and includes water supply, electricity, sanitary services etc.

Tenant.

1. S.13 -16, S.20 and S.29 details the responsibility of the Tenant/s.
2. S.14 deals with issues relating to Landlords refusal to receive rents. The options here are similar to those in the old Act save that the Tenant has to approach the newly constituted Rent Authority. The process applicable to situations where there is a bona fide doubt as to whom the rentals are to be paid is more or less the same as in the old Act. Failure to withdraw the monies deposited beyond a period of five (5) years leads to forfeiture.
3. S.15 casts joint responsibility on both parties (i.e. Landlord and Tenant) towards maintenance of the premises. This is to be read with Parts A and B of the Second Schedule. S.16 cast specific responsibility on the Tenant in safeguarding the premises.
4. The Tenant may approach the Rent Authority for relief if any essential service is affected under S.20. The Rent Authority is empowered to pass interim orders and is supposed to dispose of such representation within one (1) month. The Rent Authority is also entitled to levy penalty on the damage/ loss suffered and compensation for frivolous/ vexatious petitions too.
5. Notwithstanding any of these the Tenant may under S.29 always on its own vacate the premises by giving notice period as mentioned in the Agreement. In the absence of a subsisting Agreement a one (1) month notice of vacating to give up possession has to be given to the Landlord.

e. Repossession/ Eviction.

S.21 - 29 is on the process of eviction of Tenant, repossession by parties, repossession of vacant land, permission to build additional structures, compensation payable to parties, payment of rent on pendency of eviction proceedings etc.

Process of eviction - When can an eviction proceeding be maintainable?

Eviction is to be caused in the manner detailed in S.21(2). Repossession can be initiated on an application to the Rent Court by the concerned party. Eviction can be ordered in full or part at the option of the Landlord vide S.21(3). Where the Landlord opts for a recovery of premises here S.24 obligates refund of all excess advance/ security monies after deducting rental arrears and other charges payable. A default here would cause repayment with simple interest of the monies refundable to the Tenant. In addition S.25 read with S.8 and S.13(1) entitles the Landlord to obtain an order from the Rent Court towards payment of rent in the interim during pendency of eviction proceedings along with penalty for any default.

Eviction proceedings are maintainable when the conditions under provisions S.21(2) a. - h. are attracted. The same are as detailed infra. An application for repossession before a Rent Court is maintainable when under S.21(2):

a. the Landlord and Tenant fail to arrive at a mutually acceptable rental amount as envisaged under S.8 of the said Act;

b. the Tenant has defaulted in rental payment for minimum of two (2) months with applicable interest if any as per the Agreement, read with S.13(1) of the said Act. The cause of action here arises when the Tenant has failed to make payment of arrears within one (1) month of a statutory demand notice being served under S.106(4), Transfer of Property Act, 1882. Where the payment of all arrears (including interest as per demand notice) is made by the Tenant within one (1) month of receipt of the statutory demand notice, no eviction can be ordered by the Rent Court. The proviso adds that the Tenant cannot avail this option of paying arrears when demanded for subsequent defaults in rental payment within a one (1) year gap of availing such relief;

c. where the Tenant has parted possession of the rented premises in whole or part without the Landlords written consent;

d. the Tenant continues to misuse the rented premises even after receiving a notice on the same. The explanation for misuse (by an exclusive description) refers to encroachment of additional space by the Tenant or usage which causes public nuisance or damage to the property or is detrimental to the interest of the Landlord or for an immoral or illegal purpose. The cause of action evidently arises only upon the Landlord serving a statutory notice to this effect;

e. and f. the premises is required by the Landlord for carrying out repairs, addition, alteration, demolition etc. for which possession is vital and/or where the same is due to reclassification of the land use by such authority. The Tenant is entitled to the option of a re-entry into the building after aforementioned works are carried out provided there is a prior agreement to the same and a new rental agreement therein is submitted with the Rent Authority. The right to re-entry is not available in the circumstances viz. (i) mutual agreement detailing the same and is not filed with the Rent authority; or (ii) the Tenant has already been evicted by the Rent Court. [However independent of the above provisions is S.26. This allows the Landlord to proceed upon such modification or construction to the premises and the Rent Court here may allow the same by passing orders as required];

g. the Landlord is in need of the premises for their own usage provided they don't have other suitable accommodation in the same urban area. Where eviction is obtained on this ground S.22(2) makes the Landlord accountable to the such repossession. If the same is not adhered to and the Landlord rents the same to any person within three (3) years without permission of the Rent Court, then the Rent Court can penalise the Landlord upto Rs.10,000/-; and

h. where Tenant has already given a notice of vacating upon which the Landlord has acted upon, subsequent to which the Tenant fails to vacate, and where such failure would affect the Landlords interest, eviction can be ordered. This provisioning of where the interests of Landlord would seriously suffer vis-a-vis a situation where no suffering is caused is bound to be a contentious issue.

f. Duration of Proceedings.

It may be noted the Rent Court is to dispose off matters filed under clauses a, b, c, e, f, and h of S.21(2) discussed supra within ninety (90) days of filing the application. Matter under clauses d. and g. of S.21(2) are to be disposed off within thirty (30) days of filing the application.

S.22(1) allows the Landlord to obtain possession of a residential premises within one (1) month of the eviction order and within two (2) months for non-residential premises. This could stand hastened to immediate possession where the Landlord qualifies (as a special case) under the Third Schedule.

g. Other Features.

(i) Compensation.

S.23(3) allows the Landlord to claim compensation of double the monthly rent from the Tenant where the Tenant has failed to vacate the premises on termination of a rental agreement/ notice or failure to comply with such order to vacate.

(ii) Severance of Vacant site, Possession for Development.

The Landlord is entitled to severe the vacant portion of the tenanted premises and claim possession of the same for development. The Rent Court is entitled to pass orders allowing Landlord to severe such portion for developing the same under S.27 irrespective of the tenants refusal or the pendency of any eviction proceedings. The Rent Court would have to pass necessary orders while considering no hardship is caused to the Tenant, subject to determining the rent payable for the remainder space occupied by the Tenant.

(iii) Binding order.

S.28 of the said Act makes it clear that an order of the Rent Court would predominate any other order/ law applicable in the said instance to the said premises and be binding over all occupants at the said premises. This such that vacant possession should be delivered to the Landlord by evicting all occupants. The test to this provision may be seen in terms of action under the SARFAESI proceedings, Insolvency & Bankruptcy code, the Income Tax Act etc. for these are special laws and central enactments.

h. Appeal Process.

(i) Rent Courts and Rent Tribunals - S.30 - 39.

An appeal (under S.30) from the Rent Authority to the jurisdictional Rent Court is to be preferred within thirty (30) days from the date of order by the Rent Authority. The Rent Court set up (under S.31) is presided over by a District Judge and follows the usual set processes as other courts. The jurisdiction of the Rent Courts under S.33 is omnibus in nature. This specifically mentions that Rent Courts would have jurisdiction to handle all Landlord - Tenant issues covered under other laws such as Transfer of Property Act, 1882, Contract Act, 1872 etc.

(ii) An appeal from the Rent Court would lie before the Rent Tribunal as mentioned in S.36(1). The Rent Tribunal is being set up under S.32. This multi-member body headed by a Principal Appellate Member is vested with powers for intra-transfer of pending appeals, transfer of suits between Rent courts either on application or suo motu and direct further hearings as per S.36(6).

Common Procedures.

S.34 details on the procedural aspects of conducting the proceedings before the Rent Courts and Rent Tribunals. The pleadings in the applications or appeals filed is as per the proforma in forms vide S.34(4). While ousting the procedures under the Civil Procedure Code (C.P.C.), 1908, save those regarding service of summons (which is as per C.P.C.) in S.34(3), the Rent Courts and Rent Tribunals are to guided by the principles of natural justice. Additionally the procedural aspect entails that parties have to file applications accompanied by affidavits and documents relied upon, issue notice to other side with copies pleadings and documents being enclosed, reply to be filed with affidavits and documents and rejoinder as required. Rent courts on fixing the hearing date are to conduct a summary enquiry as necessary. The recording of evidence is by way of affidavit and where necessary in the interest of justice the court may call upon the witness for examination or cross-examination. The wordings here give discretion to the court to either call for or dispense with physical presence of the witness. Sub-sections (5) and (6) of S.34 mentions of not more that three (3) adjournments that may be availed by each party and upon exceeding the same reasons are to be recorded with costs to the other side. While so paradoxically S.35(1) bestows all powers of a civil court under the C.P.C. on the Rent Courts and Rent Tribunals. In addition S.35(2) deals with tackling false evidence and contempt etc. wherein the same are considered to be judicial proceedings (before a Magistrate's court) under the Penal Code, 1960 or that of a court under Criminal Procedure Code (Cr.P.C.), 1973.

Additionally, the Rent Court has powers under sub-sections (3) - (9) of S.35 to: a. enter and inspect or order any person to enter and inspect any premises during the day time after serving at least 24 hours written notice; b. order for inspection or production of books, documents etc., c. engage assessors or valuers as required; d. correct errors or mistakes in orders passed; e. exercise powers of a Magistrate towards recovery of fine (as per Cr. P. C.). Further the said section also highlights that the orders passed are executable as a civil court decree, with powers to set aside orders passed ex parte, and that orders by the Rent Court shall not be questioned by way of a suit, application or in the execution proceedings. In addition the Rent Court under S.37 is empowered to pass orders so as to: a. obtain delivery of possession; b. attachment and sale of movables/ immovable assets of the opposite party; c. attachment of bank accounts, satisfaction of monies paid from; d. appointment of such persons including advocates, local authorities, the Police (on payment of costs as determined) etc. for executing orders. S.37(3) specifically mentions that execution proceedings shall be disposed off within thirty (30) days from the date of service of notice on the opposite party.

(iii) As mentioned supra an appeal from Rent Court would lie before the Rent Tribunal, which should hear and dispose the appeal within thirty (30) days of receipt of appeal notice (with pleadings) by the Respondent. The Tribunal shall dispose off the same within 120 days of service of appeal notice on the Respondent. Interestingly sub-section (3) of S.37 here allows fresh appreciation of documents while restricting the same to a single occasion only and S.37(5) allows interim orders to be passed as required.

i. Miscellaneous - Court Fee etc.

The last chapter 7 deals with the jurisdictional aspects. S.40(2) specifically limits the powers of the Rent Court to that of the tenancy agreements only and not to indulge in deciding upon the title to the property. The computation of court fee payable under the Tamil Nadu Court-fees and Suits Valuation Act, 1955 for matters before the Rent Authority/ Rent Court/ Rent Tribunal vide S.41(2) makes it clear that the matter here would be dealt as a suit between Landlord and Tenant. Hence S.43 read with Schedule 1 of the T. N. Court-fees and Suits Valuation Act, 1955 may be applicable. The Rules under S.45 of this Act is awaited. Alongside is the window period of two (2) years vide S.46 for the state govt. (read Executive) to remove any difficulties in the implementation of this Act. The savings and repeal window vide S.47 gives an approximate six (6) months and nine (9) months time-frame respectively for purpose of withdrawal/ re-presentation and for the purpose of limitation from commencement of the Act.

Conclusion:

Having discussed the provisions of the state enactment here threadbare it must be said that few states viz. Haryana, Maharastra and Tamil Nadu have taken the initiative to implement the Draft Model Tenancy Act of 2015. The issues raised here could be addressed with appropriate changes/ safeguards prior to notification of the said Act. Given the feedback from various quarters the Ministry of Housing & Urban Affairs, Govt. of India is now in the process of making certain amendments to the 2015 draft and any considered change could be of relevance. Hence the delay in notifying the Rules being drafted under the said enactment may be justified. However an undue delay in notifying this new enactment may not be advisable considering the two (2) year window period reserved by the state Executive to remove difficulties in the implementation of the said Act.

Note: The said enactment having received the Governors assent was published in the GoTN Gazette Extraordinary No.261 dt.07.08.2017 for general information. Since the same does not mention the coming into effect date and considering that GoTN has not notified the same vide S.1(3) it is clear that the said Act is awaiting the implementation notification. This notification could be upon other considered amendments, drafting the Rules under the said Act and the same receiving necessary endorsements.