What is Rent Control Act & House Rent Increase Rules in India

When it comes to letting out a property on rent, it is always advisable to follow the laws. In this regard, the Government of India passed the Rent Control Act in 1948. It underlines the rights of both property owners and tenants. It further aims to give individuals a better idea of the legal requirements while renting a property or letting it to tenants.

Are you willing to learn more about this law? You will obtain a clear understanding of the same from this piece. Read on!

The central Rent Control Act was introduced to oversee letting out properties in rent and avoiding any kind of exploitation on parts of tenants or property owners. While each state of this nation has its own Act, they hardly differ from each other. It ensures that property owners or tenants are not exploiting each other’s rights in any way. 

As the 1948 act was extremely stringent and favourable towards tenants, the real estate industry has forced the government to make some amendments. The 1992 amendments include introducing a new model to ensure a property is not devalued. However, it is yet to take effect.

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To understand more about this law, the following salient features of the Rent Control Act will benefit you. 

• This law mainly sets the rules and regulations regarding property renting. 
• It ensures that fair and standardised rentals are established and that tenants are not charged beyond their agreement. 
• Tenants can easily find rental accommodations based on the accepted standards according to this law. 
• It protects tenants against unfair or forceful eviction by property owners. 
• The responsibilities and obligations of landlords are properly underlined in this law. 
• It also outlines tenant obligations while living within a rented property.

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The Rent Control Act in India looks after the interests and rights of tenants when they move into a rented property. Here are some of the rights they have under this law. 

• Right Against Unfair Eviction

According to the provisions of this law, a property owner cannot evict a tenant without sufficient cause. Its rules can be different across states. While some require landlords to approach courts to evict a tenant, others indicate that tenants cannot be evicted if they agree with the new regulations of their owner. 

• Right to Fair Rent 

This law states that the valuation of rent of a property depends on the overall value. While setting the rent, an owner should keep it close to his or her property value and avoid charging an extraordinary amount from tenants. It should be within the range of 8% to 10% of the property value, including construction costs and fixtures. Tenants can approach the court if they feel the rent exceeds this value. 

• Right to Essential Services 

Every tenant should be able to enjoy basic essential services in a rented property. These include water supply, sewerage, electricity, gas, septic tank, etc. A property owner should not withdraw the above-mentioned services even if a tenant fails to pay rent. Withdrawal of these services violates the legal rights of tenants.

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While the Rent Control Act 1948 might seem more favourable towards tenants, it will be wrong to presume that it is all about tenants. Here are the rights of property owners and landlords that they get to enjoy. 

• Right to Evict 

The provisions of this law regarding an owner’s right to evict tenants might differ from one state to another. In some, an owner can evict tenants for personal reasons, such as if they want the property. However, it might not be an acceptable reason to evict tenants in other states. Here, an owner must approach the court and provide sufficient notice before evicting tenants for personal reasons. 

• Right to Change Rent 

According to this law, landlords have the right to change the rent, being owners of their property. As there is no specific law regarding an upper limit on the rent, landlords can constantly raise the rent as per their choice. Usually, it increases annually by 5%-8%. However, the stipulated increment percentage should be a part of the legal agreement. 

• Right to Temporarily Repossess Property

A landlord has the right to temporarily repossess his or her property. It can be for improving the property’s quality or modifying any part. However, such changes and modifications should not affect the agreement or tenancy of the current tenant.

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Now that you know what the Rent Control Act is, you should know the areas where it does not apply. Here are the instances that are exempted from this law. 

• If a property is let out to public limited or private limited companies, the case will be exempted from this law. In this case, it should have a paid-up share capital of ₹ 1 crore or more.
• If properties are let out or sub-let to banks, public sector undertakings, or corporations that come under state or central acts, this law will not apply to their activities. 
• This law will not apply to properties let out to international missions, foreign companies, or international agencies. They do not follow the rules and regulations under this act but under the respective acts under which they are registered and governed.

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If you plan to rent a commercial property to move in, you should follow the below steps to avoid missing any vital activity. 

Step 1: Validate Title Ownership

Start with ensuring that you have all the details regarding property ownership and access to the title deed. It should authenticate the rent. Moreover, it would help if you considered more research to ensure that there is no sub-rent associated with a property before moving in. 

Step 2: Verify the Title Deed and PoA

If you are renting a property building under construction, you must verify the commencement certificate and title deed from the relevant authorities. Moreover, you should confirm if there is any Power of Attorney associated with the case of indirect rent. 

Step 3: Create a Rental Agreement

Make sure there is a proper legal renting agreement based on mutual decisions. You must ensure that there are specific inclusions of the rent, lease agreement and other requirements that your owner previously agreed to avoid future legal complications. 

Step 4: Verify the Financial Background

It is advisable to verify the attributes like income tax and mortgage backgrounds of a property. You should check for any illegal proceedings or pending disputes surrounding a property. It will help you avoid associating with any disputed property.

Step 5: Check the Validity of Your Rental Agreement

A rental agreement must include information like the dates, location, rental and deposit amount, terms of lease, payment intervals, name and details of parties involved, etc. It can also include other clauses. 

As you can see, the Rent Control Act is essential for tenants and property owners. It details the rules and regulations regarding renting property across India. If you know these rules while renting or letting out your property, you are less likely to face legal interruptions.