The Indian rental market was reliant on the obsolete Rent Control Act, 1948 for decades before the Draft Model Tenancy Act, 2011 was finally passed by Parliament. This act was upgraded to give the country the Draft Model Tenancy Act, 2015.
(Land is a state subject, not a central subject; therefore, the adoption of the Draft Model Tenancy Act, 2015 is left to the states, which is why it is a “Draft”.)
The Act governs the commercial relationships between a landlord and a tenant and has largely been hailed for its proposals to protects tenants’ rights.
One aspect of the Act that is particularly progressive is its provision on rental deposits. Under Section 11 of this Act, it is provided that no more than three months’ rental amount should be collected by way of security deposit by a landlord.
While renting out any premises, a landlord expects a deposit amount which is usually certain months of rent. This amount is commonly known as “rental deposit” or “security deposit”. This deposit is refundable once the rent/lease period is over. A predetermined amount is usually deducted from the rental deposit by the landlord to compensate for any damages to the property or as painting charges – either way, as mentioned in the initial rental agreement.
The amount collected as security deposit usually varies from city to city. In Bengaluru, for example, 10 months’ rent is often taken as security deposit; in Delhi it is three months, in Chennai, six months and so on. It may also vary from landlord to landlord depending upon the prevailing norms.
This irregularity would seem peculiar for any reader. However, there is a Supreme Court judgement regarding the same. In 1996, the Supreme Court, in K Narasimha Rao v. TS Nasimuddin Ahmed, held that the landlord is entitled to receive only one month’s agreed rent by as an advance and any amount paid in excess of agreed rent of one month by way of advance shall be refunded by landlord to tenant or adjusted towards rent.
In 2015, a Chennai Small Causes Court cited the apex court’s 1996 ruling and ruled that only a month’s rent can be taken as security deposit by landlords. But landlords continue to demand 12 months’ rent and the law is rarely followed or even heard of.
The Draft Model Tenancy Act, 2015 seeks to clear all doubts over rental deposits by making it clear that rental deposits cannot exceed three months’ rent. But this Act has not been adopted by all states.
The most glaring exception is Karnataka. Bengaluru is a highly sought-after destination for software engineers, students, entrepreneurs etc from around the country and the world. This is why it is important to highlight Bangalore’s rental deposit woes.
In the Silicon Valley, rental deposits can be as high as ten months of rent.
Now, activists in the city are taking a stand against the archaic rental laws. They are demanding that the state government adopt the Draft Model Tenancy Act, 2015 and put a cap on the amount that can be charged on the tenant as the rental deposit.
Mr Memon’s profession involved extensive travelling. It was a transferable job so he had to shift homes continuously around the country. Hubli, Hyderabad, Delhi, back to Hyderabad, then Bengaluru – he was regularly on the move. This state of constant displacement acquainted Memon with India’s road tax anomalies and then the discrepancies when it comes to norms regarding rental deposits.
Mr Memon took to Facebook to highlight the need to alert the government about rental deposits.
In January 2016, he wrote, “10 months rent Advance deposit;We are exploring the possibilities of filing a PIL on this.This PIL will be to seek direction and instruct the govt to amend the Karnataka Rent act and incorporate three months rent deposit as specified in the Model Tenancy Act, 2011 which is proposed by the central govt.”
Mr Memon and his fellow-activists approached the National Consumer Court and the Karnataka High Court. They faced the lengthy lassitude of Indian bureaucracy but did not despair.
Speaking to The Logical Indian, Mr Memon said, “Renting buildings of flats is not a part of someone’s living: it is a business, it is a need. And needs need to be controlled. Tamil Nadu and most other Indian states have different rent control Acts to control the extent of security deposits. Everywhere the deposit cannot be more than three months’ rent but in Bengaluru it can go up to ten months’ rent.”
This is clearly wrong, Mr Memon protests. “It is an interest-free deposit and in most cases the client does not get the entire amount back. Since Bengaluru sees a lot of people from other states – students, teachers, employees – there are many more people affected in Bengaluru than in other districts. It is high time that Karnataka adopts the Draft Model Tenancy Act, 2015.”
Mr Memon is now confident of the Act being adopted by Karnataka in the coming weeks. “Our representation was referred to the Deputy Commissioner from the Secretary of Housing and the Deputy Commissioner has in turn written a letter to the Additional Deputy Commissioner, who has now written a letter to the rent controller to take appropriate steps and implement the order of the Honourable High Court.”
The Logical Indian community thanks Waseem Memon and his team for their efforts in directing the Karnataka government’s attention to the state’s lack of rent deposit regulations. It is high time that the state adopted the Draft Model Tenancy Act, 2015 so that tenants will be protected from any exploitation by landlords.