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Thursday, December 21, 2017

Landlords with hidden rental agreements will now have to pay cess to govt

Now landlords, who have been shielding their rent agreements against levy of Stamp Duty and Registration Fee, will now have to pay the cess as the new Rent Act mandates the registration of lease agreements with the Registration department and Rent Authority.

Under existing legal provision of Indian Evidence Act, Indian Registration Act and Stamp Act, rental agreements beyond a period of 12 months are required to be registered for them to be admissible as evidence in legal proceedings.

Most of the landlords either enter into agreements for a period of 11 months or not enter into any written agreements at all to avoid registering the agreements and paying due stamp duty and registering fee.

This could now soon end as under provisions of Model Tenancy Act, the lease agreements have to be registered with the registration department as well as Rent Authority.

Interestingly, the state housing department is opposing requirement of registering with registration department given the statutory requirement of mandatory registration with Rent Authority. Official sources felt that since Rent Authority may be authorised to collect applicable stamp duty there is no need to duplicate the process by registering with the registration department.

This comes as the state has highlighted the shortfalls in Model Tenancy Act when the Prime Minister’s Office reviewed the Act earlier this week.

Official sources said that some of the clauses put up in the Act are confusing and the state has urged some clarity on it.
Sources indicated that the state has opposed the contradiction between Section 4 and Section 8 of the Model Tenancy Act which stipulates registration of pre-existing tenancy. Under section 4, the act mandates the lease agreement executed prior to commencement of the Act be informed to Rent Authority while Section 8 (b) stipulates that within 12 months from the commencement of the Act, the parties shall execute a fresh agreement.

This raises questions like whether any agreement entered prior to the coming into force of this act is not valid 12 months after the commencement of this act. Does it also mean that the present agreement which has to be revised will continue till the mandated 12 months when the fresh agreements are drawn. Sources feel there should be clarity in the Act in duration as well as terms of tenancy so that undue authority should not be provided to landlord to revisit the rent fixed for agreements which have already been executed in consensus.

The state has urged the Centre for introducing provisions to create a Record Keeping Agency to maintain records submitted for registration with Rent Authority in a dematerialised form as the volume of work relating to registration of tenancy is large. It was also suggested bringing in provisions to protect the privacy of tenancies and only the name of the parties and details of leased premise and tenure of the lease should uploaded in the website.

The state government has also suggested the appeal from Rent Court should be preferred directly before High Court instead of having Rent Tribunal as another intermediate appellate authority. This comes after the clause giving ultimate powers to rent Tribunal has been removed from Model Tenancy Act which suggests High Courts would continue to exercise appellate jurisdiction over orders from the Rent Tribunal

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