Standard Rent Under the Delhi Rent Control Act, 1958: An Overview

The Delhi Rent Control Act, 1958 (hereinafter referred to as DRCA) is applicable to all premises let out on a monthly rent of Rs 3500 or less in Delhi. A tenant may sometimes feel that he is paying more than what the reasonable rent should be. On the other hand, the landlord may be of the opinion that he is getting rent at an abysmally lower rate. To thwart away such feelings of disgust in a landlord or tenant, as the case may be, the DRCA provides for fixation of standard rent. Standard rent can be termed as the upper limit of rent that a landlord can charge from his tenant. The purpose of the fixation of standard rent is to bring the rent to a fair and reasonable level.

Section 4 of the said act states that no tenant shall be liable to pay a rent more than the standard rent fixed for such premises. This rule does not apply in case of periodical increase of rent in case of an agreement entered into before the 1st day of January, 1939. the rule is also not applicable also in the case where the standard rent is increased by taking recourse to the provisions of the act. Sub section 2 of section 4 also states that an agreement to pay rent at a higher rate than the standard rent shall be construed as an agreement to pay the standard rent. Much has been said about standard rent. Now, I shall explain in brief, the concept of standard rent. As mentioned earlier, standard rent is the maximum rent that a landlord can charge from his tenant. In order to fix the standard rent, an application for the same has to be made before the rent controller under section 9. This application can be made either by the landlord or the tenant. On receiving such an application, the rent controller shall fix the standard rent in respect of the premises. For calculating the standard rent of the premise, the controller shall take help of section 6, which provides the manner in which the standard rent is to be fixed.

For the purpose of fixation of standard rent, premises have been broadly divided in the following two heads:

• Residential premises
• Premises other than residential premises

After having distinguished between the two types of premises, the act further makes a subdivision in these divisions, namely

• Premises let out any time before 2nd day of June, 1944
• Premises let out on any date on or after 2nd day of June, 1944

STANDARD RENT FOR RESEDENTIAL PREMISES

The term ‘premises’ has been defined under section 2(i) to mean any building or part thereof, which is , or is intended to be, let separately for use as a residence or for commercial use or for any other purpose and includes gardens grounds and outhouses appertaining to such building. Judicial interpretation of the term has made it quite clear that the characteristic or shape of the building/premises does not make it a residential or a non residential premise. What is necessary is the intention of the landlord and the tenant. If the tenancy a premise has been created for residential purposes, then, the fact that the premise has been architectured  in such a manner so as to render it most suitable for the purpose of a shop will not affect the purpose of tenancy. In other words, the tenancy for a shop for residential purpose will be treated as for residential purposes irrespective of the fact that the shop might not be suitable for healthy living.

Section 6(1) (A) (1) states that in cases of residential premises let out before the 2nd day of June, 1944 the standard rent means:

• The basic rent of the premises in case it does not exceed Rs. 600 per annum
• In case the basic rent of the premises exceeds Rs. 600 per annum, then, the basic rent plus 10 percent of such rent 

Section 6(1) (A) (2) states that in case where the premises have been let out on or after the 2nd day of June, 1944, the standard rent means:

(a)    If the rent of such premises have been fixed under the Delhi and Ajmer-Merwara Rent Control Act, 1947, or the Delhi and Ajmer Rent Control Act,1952

·        The rent so fixed in case it does not exceed Rs. 1200 per annum

·        In case the rent so fixed exceeds Rs. 1200, then, the rent together with 10 percent of such rent

(b)   In every other case, the rent shall be calculated on the basis of 10 percent of the aggregate of the actual cost of construction and the market value of the land comprised in the premises on the date of the commencement of the construction.

It is pertinent to mention here that fixing the rent under point (b) as mentioned above, the actual cost of construction shall be taken into consideration. The landlord will have to furnish the rent controller with the accounts of expenses incurred in the construction of the premises. In case the landlord does not furnish the said records due to its unavailability or for any other reason, then, in such a case the rent controller can take help from a contractor or an architect in ascertaining the cost of construction.

STANDARD RENT FOR NON RESEDENTIAL PREMISES

Section 6(1) (B) (1) states that in cases of non residential premises let out before the 2nd day of June, 1944 the standard rent means:

The basic rent plus 10 percent of such rent

In case such rent calculated exceeds Rs.1200 per annum, then the basic rent plus 15 percent of such rent.

Section 6(1) (B) (2) states that in cases of non residential premises let out on or after the 2nd day of June, 1944 the standard rent means:

(a)    If the rent of such premises have been fixed under the Delhi and Ajmer-Merwara Rent Control Act, 1947, or the Delhi and Ajmer Rent Control Act,1952

·        The rent so fixed in case it does not exceed Rs. 1200 per annum

·        In case the rent so fixed exceeds Rs. 1200, then, the rent together with 15 percent of such rent

(b)   In every other case, the rent shall be calculated on the basis of 10 percent of the aggregate of the actual cost of construction and the market value of the land comprised in the premises on the date of the commencement of the construction.

INCREASE IN STANDARD RENT

Section 7 of the Act provides for situations when the standard rent fixed under section 9 can be increased. It states that where the landlord has incurred expenditure for any improvement, addition or structural alteration in the premises not being expenditure in decoration or tenantable expenses, and the expenditure has not been taken into account in determining the rent of the premises, the landlord may lawfully increase the rent per year not exceeding 10 percent of such cost. This improvement, alteration or addition has to be with the consent of the tenant or the rent controller in case it has been carried out after the commencement of the DRCA.

Sub section 2 of section 7 provides that a landlord may also recover from the tenant any payment the former makes for payment of water, electricity or any other charges levied by any local authority having jurisdiction in the area. However, the landlord is precluded from charging from the tenant any tax on building or land imposed in respect of the premises occupied by the tenant.

It is also necessary that the landlord makes an application to the rent controller under section 9 before he actually increases the rent.

On an application made to him by either the landlord or the tenant, the rent controller shall fix the standard rent in accordance with the provisions mentioned under section 6. however, if for any reason, it is not possible to determine the standard rent of any premises on the principles set forth under section 6, the controller may fix the such rent as would be reasonable having regard to the situation, locality and condition of the premises. He shall also look into the amenities provided therein and where there are similar or nearly similar premises in the locality, having regard also to the standard rent payable in respect of such premises.

The standard rent under section 9 shall be fixed for a period of 12 months.

It will not be out of context to mention here that the provisions of this law have become quite archaic and needs to be amended. It has provisions that totally prejudice the interests of the landlords by leaving no scope for them to exploit commercially the premises they have built or acquired for themselves. In order to strike a balance between the conflicting interests of the landlord and the tenants, the policy makers have become pro tenants and anti landlords. The same needs to be changed and efforts should be made to amend the law in such a manner that would allow a landlord to commercially exploit his premise and at the same time ensuring that the interests of the tenant are not prejudiced.