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Standard Rent

1) The Maharashtra Rent Control Act defines standard rent as the rent determined by the courts or the rent charged on October 1, 1987. For existing tenancies, the standard rent is frozen with a 5% increase and then a 4% annual increase. 2) Landlords can increase rent up to 4% annually. Rent can also be increased up to 15% of expenses for repairs or improvements. Rent can also be increased to match increases in property taxes. 3) Court judgments have upheld standard rents set by lower courts and allowed evictions only for non-payment of rent according to the standard rent amount. Revisions to rent control acts aim to reduce restrictions on rental increases.

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5K views2 pages

Standard Rent

1) The Maharashtra Rent Control Act defines standard rent as the rent determined by the courts or the rent charged on October 1, 1987. For existing tenancies, the standard rent is frozen with a 5% increase and then a 4% annual increase. 2) Landlords can increase rent up to 4% annually. Rent can also be increased up to 15% of expenses for repairs or improvements. Rent can also be increased to match increases in property taxes. 3) Court judgments have upheld standard rents set by lower courts and allowed evictions only for non-payment of rent according to the standard rent amount. Revisions to rent control acts aim to reduce restrictions on rental increases.

Uploaded by

Anand marathe
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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  • Introduction
  • Determination of Standard Rent

Q) Standard rent under maharashtra rent ctrl act

Aishwarya Sandeep

FIXATION OF STANDARD RENT AND PERMISSIBLE INCREASE OF RENT

Introduction

All real estate transactions in India are governed by various laws enacted by the Central
Government of India and the respective State governments. The rental law is one such
example. These laws govern the rental of commercial and residential property and are
required to enforce the individual civil rights of both proprietor and tenant and to prevent
deception. The primary goal of rent control legislation is to protect tenants from exorbitant
rents and arbitrary rent increases, as well as to ensure tenure security. The legislation was
required as a result of scarcity conditions in urban rental housing markets. Because housing
is a state issue, various state governments have enacted rent control legislation. By 1972,
almost every state in the country had passed Rent Control Acts (RCA). This article will be
focusing on rental provisions as mentioned in Maharashtra Rent Control Act, 1999. The
Maharashtra state government passed the Maharashtra Rent Control Bill, 1999, to regulate
rental housing, and the Maharashtra Rent Control Act, 1999, went into effect on March 31,
2000. The Act aims to unify and consolidate rental housing in the state, as well as to
encourage the construction of new houses by ensuring property owners receive a reasonable
return on investment (RoI).

What is Standard Rent?

This is mostly applicable in India. In India, the Rent Control Act forbids the owner from
charging more than the prescribed rent, regardless of market rent. The standard rent is the
rent that is legally permissible to charge to a tenant. The standard rent has been defined in
the rent control act as a state act, and all states have definitions that may differ slightly in
meaning from one state to the next. According to the provisions of the rent control act, the
standard rent cannot be higher than a certain amount, regardless of the market conditions,
supply, and demand situation, or what the affording tenants can pay to a landlord. If there is a
disagreement between the proprietor and the tenant about the rent or an increase in rent,
either party can go to court. If the rent is excessive, the court will determine the standard rent.

1.1 Fixation of Standard Rent under Maharashtra Rent Control Act (MRCA), 1999
The provisions governing rent fixation differ depending on the type of tenancy. Tenancies can
be broadly divided into three categories for this purpose: existing tenancies where standard
rent is chargeable, newly let tenancies that are exempt from the provision of standard rent,
and tenancies that do not fall into the previous two categories. The property owner cannot
charge a rent that is higher than the standard rent for existing tenancies. The tenant may file
an application to the courts for the determination of standard rent without regard to time
constraints.
Standard rent (SR) is defined as the rent fixed by the court or rent controller under previous
enactments, or if the rent was not so fixed, the rent at which the premises were let on October
1, 1987, or if not let on that date, the rent at which the premises were last let before that date.
Except in the case of premises leased on October 1, 1987, the frozen rent will be increased by
5%. Following that, the SR can be increased by 4% per year. If there is a disagreement over the
rent between the landlord and the tenant, the court will set the standard rent. Existing
tenancies where the rent was not fixed by earlier laws and which were not leased on or before
October 1, 1987, but which were leased afterward, are not addressed by the act. If there is a
disagreement between the landlord and the tenant in such a situation, the court may
presumably fix the standard rent upon application from either party.
However, the act provides no formula or guidelines to the court for determining rent in such
cases. Most rent acts include a formula based on the cost of the house or a standard rent
fixation based on rents in similar premises. This oversight must be addressed. The
鈥檚
determination of standard rent is left to the court discretion as it sees fit.
Charging rent above the standard rent is prohibited in areas where the Act 鈥檚 rules apply.
Such an offense is punishable by imprisonment for no more than three months or a fine of no
more than Rs 5,000, or both.
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1.2 Permitted increase under MRCA,1999


Landlords have the right to raise the rent on any premises that has been rented for any
purpose by 4% per year. Rents can also be raised if repairs or alterations are made to the
rented property to improve its condition. The increase in the latter scenario, however, should
not exceed 15% per year of the expenses incurred due to special additions. The proprietor
may also raise the annual rent if he is required to pay higher government-imposed taxes. In
this case, the rent increase should not be greater than the increase in tax.

1.3 Judgments
a) It has been held by the Division Bench that once fair rent is determined, the same would
have prospective operation and such fair rent can be directed to be paid from the date such
application is moved in the case of Kewalchand Kastoorchand v. Samirmal Jaini and another
(1953).

b) In the case, Z.B. Mohd Ismail v. P.R. Kharwade (2016), the landlady had filed a suit for
eviction of the respondent and sought determination for standard rent. The appellate court
allowed the appeal filed by the respondent partly and set aside the decree for eviction. Both
the parties filed writ petitions challenging the judgement of appellate court. The landlady was
aggrieved for setting aside the decree for eviction and the tenant for extent of determination
of standard rent at Rs. 5000 per month. The court in its order upheld the standard rent being
Rs. 5000 per month payable, however the direction to pay interest amount on standard was
set aside and that the landlady is entitled for a decree of eviction of the tenant only on the
ground of arrears of rent.

c) In Malpe Vishwanath Acharya & Ors. vs. State of Maharashtra & Anr., (1998), a three-judge
Bench found and held that the provisions of the Bombay Rent Act relating to the
determination and fixation of 鈥榮 tandard rent 鈥� are no longer reasonable. The only
reason the Court did not strike down those provisions, despite the finding, was that the
Bombay Rent Act was set to expire on March 31, 1998, and the Court was informed that the
State was in the process of enacting a new Rent Control Act. Following the Court 鈥檚
decision in Malpe Vishwanath Acharya, the Bombay Rent Act was replaced by the
Maharashtra Rent Control Act, 1999, which went into effect on March 31, 2000.

Conclusion
The rent control act defines standard rent as the highest possible rent for a specific property.
Many support rent control laws, arguing that they prevent landlords from charging exorbitant
rents, while others argue that such laws cause deterioration of existing housing stock
because the rent paid is low. India鈥檚 rental laws must be revised. Special attention should
鈥
be paid to removing restrictions on rental increases. Amendments to several states � rent
laws are a step forward.

Common questions

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The Maharashtra Rent Control Act, 1999, aims to regulate rental housing in the state by unifying and consolidating existing laws. It protects tenants from exorbitant rents and arbitrary increases by setting a standard rent, thus ensuring tenure security. Meanwhile, it aims to encourage property owners by ensuring they receive a reasonable return on investment, promoting the construction of new housing . For existing tenancies, owners cannot charge higher than the fixed standard rent, although they can increase rent by up to 4% annually under certain conditions . The Act tries to balance the interests of both landlords and tenants but has been critiqued for lacking specific guidelines in certain scenarios, leaving much discretion to the courts .

The provisions for standard rent ensure that tenants are protected from excessive rents, potentially limiting short-term profits for investors. However, the ability to increase rent by 4% annually, and adjust for major repairs or tax increases, provides a predictable income stream, making rental properties a stable investment . While these controls may deter speculative investors seeking rapid returns, they can encourage long-term investments by ensuring a consistent tenant base and protecting against volatile rental markets . Balancing tenant protection with owner incentives can stimulate new housing construction and improve existing stock.

The definition of standard rent under the Maharashtra Rent Control Act provides a baseline for resolving disputes between landlords and tenants. It establishes the maximum rent that can be charged, shielding tenants from excessive demands and giving them legal recourse to challenge overcharges. Disagreements are resolved by the court, which has the authority to determine an appropriate standard rent when prior agreements or statutory guidelines do not exist, although this absence of explicit formulas can lead to varied outcomes and potential legal ambiguity . This framework balances interests but requires judicial interpretation for effective implementation.

The Maharashtra Rent Control Act, 1999, restricts rent increases and caps standard rent based on historical precedents, such as the rent on October 1, 1987, or the last let rate before this date plus annual increases . This can pose challenges for landlords wanting rents that match current market conditions, especially amid inflation or changes in demand. The lack of explicit criteria for determining rent in leases post-1987 may lead to judicial determinations that do not align with market realities, affecting profitability and landlords’ willingness to invest in property maintenance or upgrades .

Reforms could include developing a clear, quantitative framework for rent determination that reflects local market conditions, costs, and property features, to support equitable resolution of disputes . Allowing more dynamic rent adjustments, indexed against inflation or property value changes, could address critiques of fixed cap provisions. Enhancing incentives for property maintenance and improvements could also combat the decline of housing stock. Moreover, facilitating alternative conflict resolution mechanisms might reduce judicial backlog and promote fair outcomes. Revising restrictive clauses to accommodate economic changes would make legal frameworks more responsive and less contentious .

Key judgments affecting the interpretation of rent determination under the Maharashtra Rent Control Act include Z.B. Mohd Ismail v. P.R. Kharwade (2016), where the appellate court upheld a standard rent of Rs 5,000 per month while modifying other provisions like the interest amount . Additionally, in Malpe Vishwanath Acharya & Ors. vs. State of Maharashtra & Anr. (1998), the court found the existing rent determination provisions under the Bombay Rent Act unreasonable, influencing the enactment of the Maharashtra Rent Control Act, 1999 . These cases illustrate how judicial interpretation can shape the operational aspects of rent control laws.

The case Malpe Vishwanath Acharya & Ors. vs. State of Maharashtra & Anr. (1998) was critical in highlighting the inadequacies of the Bombay Rent Act's provisions regarding rent determination, which the court deemed unreasonable. Although the court refrained from nullifying these provisions due to the impending expiry of the Act, its findings prompted legislative changes leading to the enactment of the Maharashtra Rent Control Act, 1999. This act aimed to address the highlighted shortcomings, facilitating fairer rental practices and protecting both tenants' and landlords' rights .

Under the Maharashtra Rent Control Act, landlords can legally increase the rent by 4% annually . Additional increases are allowed if the landlord makes significant repairs or improvements to the property, but these increases cannot exceed 15% per year of the special addition costs. If government-imposed taxes increase, landlords may adjust rent proportionally to the tax increase . These measures provide a structured way to update rents while controlling arbitrary increases.

For properties leased after October 1, 1987, under the Maharashtra Rent Control Act, the standard rent is not explicitly fixed by earlier laws, and if there is a dispute between the landlord and tenant, the court will determine it upon application from either party. The Act lacks a precise formula for such determinations, unlike many other rent acts that might use costs or comparable premises rents as bases. Instead, it relies on the court's discretion to set what is considered reasonable rent .

Charging rent above the standard rent in areas where the Maharashtra Rent Control Act, 1999 applies, is prohibited. Violating this rule can result in imprisonment for up to three months, a fine up to Rs 5,000, or both . This provision aims to prevent landlords from exploiting tenants by demanding higher rents than what is legally permissible.

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