Tuesday 11 August 2020

How to ascertain standard rent of tenanted premises?

10.1. So far the determination of standard rent is concerned, there are two main methods of determining the same, namely the theory of comparables and secondly the investment theory. In the first theory, the exercise can be carried out by comparing the premises in question with the other similarly situated premises in the locality of which the rent is already fixed. Ofcourse while making the exercise of comparison the following factors can be kept in view :-

(a) Premises should more or less be similarly situated in the same locality with the same user,

(b) Relevant period of letting of the comparable premises.

(c) Whether the rents of the comparable premises are fair and reasonable or on the low side due to a number of extraneous circumstances.

(d) the amenities and facilities provided in such building.

By carrying out such exercise the standard rent of the concerned property can be fixed without much difficulty. So far the other method is concerned, it would depend on provisions meant for fixing the standard rent as contained in section 11 of the Bombay Rent Act and also the guidelines laid down by the Apex Court in the case of Dr. Balbir Singh (supra). This again will be subject to the outgoings in the nature of maintenance expenses, expenses for having basic facilities such as making provision for water, the municipal taxes, the required annual repairs, insurance, etc., which may be required to be taken into account even after deduction of sum equal to ten percent towards the allowance for repairs, etc. as envisaged under sub-rule (3) of rule 7 of the Rules. However, as stated earlier the theory of comparables can be adopted provided there is no considerable disparity between the premises. At this juncture more recent decision rendered in the case of Lt. Col. P.R. Chaudhary (Retired) v/s. Municipal Corporation of Delhi reported in MANU/SC/0315/2000by the Apex Court is required to be seen. These observations are vis-a-vis method of fixing the standard rent and they are helpful in determining the Gross Rateable Value in the case of hypothetical tenant. It has dealt with the disparity that may prevail between two premises of same kind because of the disadvantage and it has also pointed out that even in the cases where there is comparison between two buildings one being old and other being newly constructed, there would be great disparity on account of the rising cost of construction, the land prices, etc. and in that case such comparison would be irrational and illogical and, therefore, the factors regarding the increase in cost of construction, land prices, etc. will have to be kept in mind. It has observed as under :-

"Law as interpreted by the Supreme Court cannot be brushed aside by saying that it is not in conformity with statutory provisions. The law laid down by the Supreme Court is explicit and admits of no doubt. For the purpose of arriving at the rateable value the basic principle is the annual rent which the owner of the premises may reasonably expect to get if the premises were let out to a hypothetical tenant. It would depend on the size, situation, locality and condition of the premises and the amenities provided therein. All these and other relevant factors would have to be followed in determining the rateable value. That, however, cannot be in excess of the standard rent which would be the upper limit. 

Decided On: 31.03.2003

 A'Bad Municipal Corporation Vs.  Dena Bank

Hon'ble Judges/Coram:
J.N. Bhatt, Acting C.J. and Akshay H. Mehta, J.

Citation: MANU/GJ/0255/2003,(2004) 2 GLR 1117

Read full judgment here: Click here
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