Tenancy Laws: Much Ado About Nothing

Over time, the legislature has vowed to legislate for the recognition and enforcement of rights of the downtrodden classes of society. An uptick in legislation pertaining to tenancy and small businesses has been witnessed, primarily aiming to strike a balance between the rights and liabilities of both landlord and tenant but failing to make an unadorned distinction between the two major types of tenancy (commercial and residential), as can be seen under the Transfer of Property Act 1882. However, it has been suggested that these laws have been promulgated to cast harmony among all stakeholders in a tenancy relationship as well as assuage the predicament suffered by tenants.

The Indian jurisdiction has described the need for residence in an apt way by holding the following:

“The Court noticed craving for a home – a natural human instinct, intensified by post-war migration of human beings en-bloc place to place, the partition of the country and uprooting of the people from their hearth and home as vital factors leading to acute housing shortage persuading the legislatures to act and enact rent control laws. The Court emphasized the need of making the landlord and tenant laws rational, humane, certain and capable of being quickly implemented. Benefit of society at large needs an equalistic balance being maintained between apparently conflicting interests of the owners of the property and the tenant by inducing and encouraging the landlords to part with available accommodation for reasonable length of time to accommodate tenants without unreasonably restricting their right to have the property being restored to them, more so, when they genuinely require it. Such limited safeguarding of landlords’ interest ensures a boost to construction activity which in turn results in availability of more houses to accommodate more human souls with a roof on their heads. Sabyasachi Mukharji, J., as His Lordship then was, articulated the empty truism in such words as have become an oft quoted quotation, “…tenants are in all cases not the weaker sections. There are those who are weak both among the landlords as well as the tenants.””[1]

Having said so, it needs to be analyzed whether such protection is available to tenants and whether the long-awaited eviction of a tenant is a pyrrhic success for landlords.

Tenants have been afforded safeguards as landlords have been enabled to seek their eviction on specific grounds only. However, before the enforcement of any right or liability of the landlord and the tenant, it is essential that both parties have acknowledged the landlord-tenant relationship and endorsed and accepted their relationship to be regulated under rent control laws. The existence of a landlord-tenant relationship is sine qua non for the exercise of jurisdiction by tribunals constituted under rent control laws. Hence, inquiry in rent petitions has been limited to the determination of a tenancy relationship between the parties. In the absence of any such relationship, an eviction petition is likely to be dismissed and a landlord is likely to seek remedy from a court of plenary jurisdiction under the relevant laws.

The law does not recognize tenancy deemed under morality or fiction of law, as opined by the honourable Sindh High Court on one occasion.[2] Therefore, in the hopes to obtain an early decision, a trespasser or illegal occupant should not be brought under the protection of tenancy laws and should instead be prosecuted under the relevant criminal and civil legislation.

To cater to such anomalies, older laws have directed the creation of a tenancy relationship by way of a written agreement but have failed to provide any penal consequences in case of non-adherence to such direction. The Punjab Tenancy Act 2009 has now made it mandatory to register a tenancy agreement under Section 5. Failure to observe such a mandatory requirement entails consequences[3] in the form of payment of fine whenever redressal is sought from a court of law.

The courts, in the absence of any consequences provided within special legislation, have resorted to general legislation such as the Transfer of Property Act 1882 and held that tenancy emanating from an unregistered agreement is to last for eleven months only,[4] after which it will run month to month.[5] This discussion has led to the fact that to procure protection for a tenancy tenure, a rent agreement must be registered. It has also been observed that a landlord often hesitates to register a lease agreement in order to avoid stamp duties and evade taxes. In such situations, tenants are advised to get their agreements registered in order to secure the tenure of their tenancy.

On the other hand, under the Transfer of Property Act 1882, the mere determination of a lease period by way of notice constitutes sufficient grounds to seek ejectment of a tenant from the leased premises. However, such liberty has been curtailed in order to strike a balance between the rights and liabilities of a tenant and a landlord by virtue of rent control laws. The legislature seems to have enacted laws for rent control while burdening the landlord to seek eviction of a tenant solely on the grounds provided under these rent control laws. It has often been commented that such protection can be found in the words of the enactment, unfortunately, these words have been interpreted under rules favouring one segment of the society over another and have therefore failed to receive succor from judicial dictum.

For instance, it had been settled a long time ago that a landlord was not under any duty to serve notice of eviction to a tenant under rent control laws, rather a tenant could be taken by surprise by mere court summons issued in pursuance of an eviction petition preferred by the landlord. As far as the expiry of a tenancy period is concerned, Punjab tenancy laws acknowledge the expiry of a lease agreement as valid grounds for the eviction of a tenant from the premises. Other provincial laws and judicial pronouncements over time have already considered the expiry of a lease agreement as a sufficient reason to seek ejectment of a tenant.

The honourable Supreme Court has recently struck another blow to the tenancy period issue while deliberating over Section 6 of the Islamabad Rent Restriction Ordinance 2001 in the following words:

“…we conclude that as after expiration of the tenancy period, a tenant, though can continue to hold over the possession of the rented premises, but his tenancy is rendered invalid, in that, it has come to an end and if there is no express consent of the landlord to extend the tenancy period the tenant shall be guilty of having infringed the conditions of tenancy, rendering him liable to be evicted under Section 17(2)(ii)(b) of the Ordinance, 2001.”[6]

Thus, it is vividly clear that for a tenant to have tenancy tenure protection, the tenancy agreement must be registered so that its terms and conditions can be enforced through the court.

Having overcome the hurdle of tenancy tenure protection, a tenant has also been obligated to observe the time period provided under the terms and conditions of the lease agreement vis a vis payment of rent on time. The legislature has mandated that defaulting on a payment of rent is subject to whether a willful nature of the default can be established, however, judicial verdicts have expanded upon the definition of “willful” and it appears that any slight negligence in the payment of monthly rent and through a tentative rent order of the court can land a tenant into the quagmire of eviction on the grounds of willfully defaulting on a payment of rent.

In case the landlord refuses to receive rent, it may be sent through money order. In case of refusal to receive rent even through this mode, rent must be deposited with rent control tribunals to signify the bona fide intent of the tenant.

Another controversy surrounds the advance payment of rent which has been set at naught by the Supreme Court of Pakistan. It has been recommended that guidance in this regard must be sought from the terms and conditions of the lease agreement and the intention for advance payment of rent must be gathered from there as well. Rent payment through cheque has been discouraged and held to be an invalid tender.[7] As far as an increase in rent is concerned, adherence must be made to the terms and conditions of the lease agreement and the manner in which the parties have agreed to increase rent.

Similarly, the bona fide need of a landlord, constituting grounds for the eviction of a tenant, has been liberally construed by the apex court over time. Punjab’s rent control laws do not recognize the personal need of a landlord before the expiry of tenancy. Nevertheless, dicta of the apex court have loudly considered and enforced this right of the landlord.

In case of commercial premises, the personal bona fide need of the landlord has been discouraged from being enforced before the expiry of the tenancy period. However, it has otherwise been emphatically argued that the mere entry of a landlord into the witness box and the expression of desire to have the premises vacated due to a personal need can be considered valid for the purposes of establishing personal need, unless serious aspersions can be cast by the tenant upon the bona fide need of the landlord.

While the word ‘bona fide’ requires stricter interpretation, the courts have recognized the need of the landlord to include the desire to sell the demised premises or set up own business or an offspring’s business. There is no obligation on the landlord to express his or her business plans or the suitability of premises for the proposed business. Lessors enjoy the freedom and right to choose more suitable premises from among the alternative accommodations available but it cannot be dictated by the tenant.[8] The events subsequent to or during the pendency of a matter before a tribunal will have no effect on the bona fide need of the landlord.

It has also been observed that a tenant cannot be considered a perpetual occupant of the demised premises and the right of possession must be restored to the landlord. Any amount of hard work, investment or goodwill that a tenant has put in cannot surmount the right of the landlord emanating from freehold rights to premises. Even the payment of pagri has not been given consideration over the bona fide right of the landlord to have his or her premises back. The tenant has instead been recommended to seek recovery of the pagri amount through recourse to ordinary laws. This can leave the tenant vulnerable to the travail of litigation stretching over decades. Similarly, a tenant is expected to refrain from making any structural changes to the demised premises which is likely to diminish the utility of the premises. A tenant desiring to procure any premises for business purposes and subsequently constituting a corporate entity within the premises will be considered to be subletting the premises, which may lead to eviction of the tenant.

The Supreme Court has also been approached to limit commercial activities within residential areas on the basis of rights of individuals to live in a peaceful environment, which has led to regulatory bodies driving forceful closure of businesses in residential areas. The astute drafting of tenancy agreements has invariably led landlords to seek eviction of tenants on the grounds of unauthorized use of demised premises, while knowing and charging exorbitant rents on the very basis of the commercial activities within residential areas. As luck would have it, landlords complicit in these illegal acts get off scot-free whereas tenants get subjected to unrequited love. The activism of regulatory bodies, triggered by court decisions, has led landlords to believe that they can get away with forceful closure of businesses and led tenants to relocate to more expensive commercial areas causing further inconvenience.

The recent tribulations emanating from the coronavirus pandemic and the stringent measures adopted to contain it have exposed businesses to greater hardships, thus requiring liberal approaches towards tenants. Attempts have been made by the relevant local administration to ameliorate the suffering of tenants while barring landlords from evicting tenants on the pretext of non-payment of rent. Such endeavours by the local administration have been hailed as positive steps but at the same time have also faced legal criticism. It has been contended that the notifications issued against paying rent during COVID-19 conflict with primary legislation and serve as mere appeasing tools with no legal effect. However, in the current circumstances, guidance can be sought from a celebrated pronouncement of the English courts laying down the principle of promissory estoppel enshrined in the glorious High Trees case.[9]

A careful consideration of the eventualities discussed above in light of judicial pronouncements and legislation shows that charitable legislation for rent control has failed to achieve protection for tenants. There is a need for better social legislation which must strike a balance between the interests of both parties, landlord and tenant.

“A legislation impregnated with tendency to give undue preference to one section, at the cost of constraints by placing shackles on the other section, not only entails miscarriage of justice but may also result in constitutional invalidity.”[10]

Additionally, in the wake of the economic conditions of the country and to provide solace to disgruntled tenants, there is a need to establish alternative mechanisms for dispute resolution for cases involving commercial leases. Courts, as well as lawyers, must encourage litigants to resort to mediation and negotiation in order to save time and costs of litigation.


References

[1] Joginder Pal vs Naval Kishore Behal 10 May 2002; Prabhakaran Nair and Ors. Vs. State of Tamil Nadu and Ors. (1987) 4 SCC 238
[2] PLJ 2003 Karachi 134
[3] Section 9, Punjab Tenancy Act 2009
[4] Section 107 Transfer of Property Act 1882, Ss.17 & 49 Registration Act 1908
[5] 1993 SCMR 200, 1991 SCMR 1158, PLD 1957 W.P Peshawar 50, PLD 2015 SC 380
[6] Waqar Zafar Bakhtawari and others vs Haji Mazhar Hussain Shah Civil Appeals No.300, 346, 812 And 851 To 854 Of 2017
[7] 2015 SCMR 642
[8] Bhupinder Singh Bawa v. Asha Devi, (2016) 10 SCC 209
[9] [1947] KB 130
[10] Malpe Vishwanath Acharya and Ors. Vs. State of Maharashtra and Anr. (1998) 2 SCC 1

The views expressed in this article are those of the author and do not necessarily represent the views of CourtingTheLaw.com or any organization with which he might be associated.

Syed Sabee ul Hassan

Author: Syed Sabee ul Hassan

The writer serves as a Civil Judge at Islamabad High Court. He holds an LLM degree in Corporate and Commercial Litigation from University College of London.

1 comment

By reading through the article by Sabee ul Hassan; I must say a brained literally drained by serving the Subordinate judiciary

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