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MC Explains | Can apartment owners arbitrarily hike rent in 11-month rental period?

Bengaluru is seeing rising instances of landlords increasing rents in the middle of the contract period. However, lawyers say they cannot do so and even cannot mention the hike percentage for renewal of the contract.

Last December, Anwesha Ray, an IT professional, rented a 1BHK in Munnekolala, Bengaluru, for Rs 11,000 per month. However, the landlord increased the rent to Rs 13,000 in March and then again to Rs 16,000 in October 2022, she claims. "When I asked him about the increase, he asked me to vacate after a notice period," she says.

Nikitha Mane, a photographer in Bengaluru, is shifting to a new house after staying in a 2 BHK flat in Indiranagar where she paid rent of Rs 18,000 per month. "My rental agreement lapsed a year back and the owner did not renew it. However, this time, the owner spoke of renewing the contract but later he wanted to hike the rent to Rs 25,000 and asked us to vacate," Mane added.

Mane says the rent for the 1BHK apartment where she is looking to move now, is equal to what she pays for the 2BHK now.

Why rentals are shooting up in Bengaluru?

With more people returning to Bengaluru and a mismatch in demand and supply for new inventories, India's IT capital is witnessing an unprecedented demand for rented apartments, local realtors told Moneycontrol.

Rents in prime locations have jumped by 20-30 percent and rentals in locations relatively far are catching up quickly.

This has led to several apartment owners hiking rentals in the middle of the year or at the end of the 11-month rental agreement. In several instances, tenants who cannot pay are being asked to vacate.

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Aishwarya (name changed upon request), who is visiting her hometown currently, said her landlord in Bengaluru wants her to pay Rs 44,000 from Rs 26,000 she is paying now for an apartment in the Outer Ring Road location. "When we declined, he asked us to serve the notice period and vacate. Right now, we have no clue how to find a new apartment," she added.

Moneycontrol spoke to several experts to understand the process and whether landlords can arbitrarily increase rent in the middle of the contract period.

What stamp paper is required for rental agreements?

Srinivas V, a lawyer, said any rental agreement with more than 11 months of tenure needs to be registered at the sub-registrar's office and both parties need to pay stamp duty based on the rent and the deposit amount. However, agreements less than 11 months or less do not require registration. According to the Registration Act, 1908, clause (d) of sub-section (1), registration is mandatory for a property that is on lease for one year or more.

Abhilash Naik, an advocate said, "For agreements of 11 months or less, a stamp paper of Rs 100 or Rs 200 is enough."

Srinivas said that any agreement which has to be used as evidence before the court needs to be registered. For unregistered 11-months agreements, if legal disputes happen, both parties have to pay stamp duty to the court, he added.

Can apartment owners suddenly increase the rents mid-year?

Srinivas said if the agreement mentions 11 months, then within that period the tenant and landlord are in a contractual agreement. If the tenancy continues after the agreement expires, we call it tenant at sufferance, he added.

Legal experts say every rental agreement is "mutually decided" between the parties involved and largely depends on the terms and conditions mentioned in the contract. The renewal of the rental agreement means entering into a new contract and agreeing to fresh terms, Srinivas added.

"However, in an 11-month contract, there is a mention of rent for the entire period. There is no question of apartment owners suddenly hiking it before the agreement expires," Amith Amarnath, an advocate who deals with consumer forum cases, said.

Fliestone Joseph Rebello, a lawyer, said the landlord can increase rents when the 11-month contract concludes, however, it is unlawful to hike the rent during the 11-month contract period.

Almost all rental agreements Moneycontrol came across mention, "The monthly rental charges will be revised every year with an escalation of 5 percent (or 10 percent in some agreements)."

Interestingly, Amarnath says an 11-month contract is not supposed to include any enhancement percentage.

He explains, "It is an un-registered agreement and is not supposed to go beyond 11 months without paying stamp duties. If we say the terms of the lease can be enhanced next year, by legal interpretation, the duration goes beyond 11 months. It is a grey area today."

Advocates say if the apartment owners increase the rent of a contractual agreement, then the tenants can either approach the civil court for relief or serve the notice period and exit. However, they also caution that court cases may go up to one or even two years, for an agreement with 11 months tenure.

Is Model Tenancy Act 2021 a solution?

Approved by the Union Cabinet on June 2, 2021, the Model Tenancy Act (MTA) provides for regulating the tenancy terms and conditions while bringing transparency between the parties. The Act establishes a Rent Authority and Rent Court in every state and Union Territories to address grievances and solve disputes.

Amarnath said today that apartment owners take arbitrary security deposits with some more than 10 months of the rental cost. "However, the Model Tenancy Act caps the rental deposit, hence protecting the tenants," he added.

Chapter III, subsection 11(1) of the Act mentions the rental deposit should "not exceed two months rent in the case of residential premises; and not exceed six months rent in the case of non-residential premises."

Chapter II, subsection 5(1) of the act mentions, "Every tenancy entered into after the commencement of this Act shall be valid for a period as agreed upon between the landlord and the tenant and as specified in the tenancy agreement." Advocates say this can stop sudden rental hikes, as seen in Bengaluru today, and the Rent Authority set up by the Act will look into the disputes without burdening the civil courts.

However, land and urban development are state subjects and only four states have revised the tenancy law in line with the new Act.

In July 2022, Minister of State for Housing and Urban Affairs Kaushal Kishore said in a written reply to a question at Rajya Sabha, "As per information available with MoHUA, the States of Andhra Pradesh, Tamil Nadu, Uttar Pradesh and Assam have revised Tenancy Acts on the lines of MTA."

The Karnataka government was mulling legislating MTA in the state, however, advocates say the process has been delayed.
Souptik Datta Sub Editor at Moneycontrol
first published: Nov 25, 2022 07:51 am