Owner vs Renter: How to Make It Work !

9/10/2015 FlatGradings 4 Comments

It was 9 PM on a Tuesday night and I heard some noise from outside. At first, I was hesitant to go out and check what was going on outside. But then the noise started to increase and I finally decided to go take a peek from my balcony window. I saw a fairly old person quarrelling with another mid-aged guy across the street.I normally do not interfere in others affairs but this one time I made up my mind to find out what was going on. Went down but I couldn't get much info that night. Next morning my neighbour told me the reason for last night issue i.e. "landlord had cut huge chunk from Security deposit".

I have always heard my friends (Both landlords & tenants) complaining about some tenancy issues especially in Bangalore. Also, we recently saw few reviews written by tenants about the issue they had faced while renting in Bangalore. Few such reviews:

Check out all reviews here: http://www.flatgradings.com/latest

FlatGradings - Owner vs Renter

So, we at “http://www.flatgradings.com” took this opportunity to speak with few random landlords and tenants, with a vision to somehow find out the solution for this issue. Our idea was to find a common ground for both landlords & tenants so that they never end up with fights during move out. 
"Never burn the bridges because you may need to cross them again".
First we spoke to few Tenants – A Student, IT Professional and a Professor.
  • Manju – A student from Hyderabad pursuing his BE in CMRIT college, says paying 10 month security deposit upfront for an house in Marathahalli was not at all easy for him. He had to ask his father - A florist, to help him pay the deposit. With lots of difficulties they were able to pay the deposit. Manju mentioned that his father had to do extra hours at his shop & lend money from his relative to arrange the money. He also mentioned that “10 months deposit doesn't prevail in his home town” and it's not at all Practical for a student to pay such huge amount upfront. He just prays landlord returns his security deposit in one piece.

  • Biplav – An IT professional hails from Kolkata had paid 10 months security deposit which was whopping 2.5 lacs for his previous residence in Koramangala. He mentioned arranging 2.5 lacs was an herculean task since his owner did not compromise on the 10 month security deposit. At that time he thought the money is kind of refundable amount when he decides to move out. When he actually decided to move out, the owner started acting very smart and cut almost 3 months rent which was Rs. 75,000 in the name of painting and other maintenance. He mentioned that there was no need for any painting since he had maintained the house like his own, No nails on the wall except for few airline cracks which happen due to climatic changes. Also, during his stay, the rent was revised every year without any kind of logic behind it.

  • Mahesh – Professor by profession stays in A Narayapura. He mentions that he had the best landlord because they had settled for 5 months deposit and a very reasonable rent. But everything changed when he decided to move out of the house. Landlord cut 2 months of rent as maintenance and he got just 50% of the remaining deposit even when he had given the landlord a one month notice as per agreement. Mahesh had to run behind the landlord for almost 6 months to get his remaining money.

FlatGradings - Strong Rental laws

To summarize the conversation, below were the pain points for tenants:
1Paying 10 month security deposit upfront.There should be strict law to govern this.
2. Exploiting tenants by cutting huge chunk of security deposit as part of maintenance & painting charges while moving out.
3. Setting unrealistic rent.
4. Hiking rent every year without any prior notice.

Till now it was just one side of the story. Next we spoke with few owners and everyone's answers were pretty much on similar lines:

1. Why do you ask for 10 month security deposit ?
[Owner] Bangalore is a costly city and we have invested lakhs together on the house. We pay high EMI's on loans every month. So, the only way to keep our property safe from any damage is to collect 10 month security deposit. Most of them asked us few questions : What if we agree to 1 month security deposit like other cities, and the tenant locks the house and absconds ? What if tenant causes too much of damage which would cost us hefty cheque to repair them ?

2. What kind of damages are you talking about ?
[Owner] At times we have seen too many nails hit on the wall which leads to many cracks. My tenant kid had drew on many walls . Geyser was not working. Few floor tiles had cracks. There was an instance where tenants didn't pay electricity & water Bills before vacating.

3. How do you justify cutting hefty amount from security deposit while moving out ?
[Owner] We do not cut hefty amount rather it's just a reasonable amount. Fixing the cracks on walls is not easy since filling cracks, painting two coat and then the painter labour comes at high cost. I would suggest every tenant to go check the cost of paints & painters labour before fighting with us. Fixing electrical fixtures and other things also comes at a great cost.

4. Why do you charge high rent per month ?
[Owner] We have enquired most of our neighbours about how much they charge as rent and then we decided on pretty much the same amount. So, in our opinion it's not high rather it's a normalized amount.

FlatGradings - Property Damage

To summarize the conversation, below were the pain points for Owners:
1. Damage to the property
2. More damage to the Property
3. And some more damage to property.

Based on the pain points from both Tenants & Landlords, a team from FlatGradings tried to research on the best possible means to solve it. 

Many tenants are taking the social media by storm to cut down the 10 month security deposit in Bangalore city with an "online petition" urging Honourable Chief Minister Mr. Siddaramaiah to enact the Model tenancy act in the state. Please sign if you support the cause.

Also, recently the NDA government has readied "The Draft of Model Tenancy Bill, 2015" which might strike the right balance between landlord & tenants to an extent with few highlights:
FlatGradings - Model Tenancy Act, 2015

But it may not cover two important points which are often the reason for conflicts:
1. Interest of landlord protecting his property from damage during the tenant's stay.
2. Landlord deducting some part of security deposit as part of damage maintenance.

We are proposing couple of solutions to above problems:
1. Insurance - Is the best way to cover any kind of damage. And in this case Home insurance can give the owners a sense of relief. But insurance comes at a reasonable cost - So who pays the premium every year ? Tenant & owner can come to terms about this and it should be mentioned in the Rental Agreement. A small fee every year can save the huge security deposit cut at the end of tenure. This will be a win-win situation for both parties.
FlatGradings - Landlord Insurance

2. Property Managers -  Consider both parties do not opt for insurance and now tenant vacates the premises. Landlords cut some part of security deposit as part of maintenance without providing any kind of justification. So, what if Third party companies like cozee.in, Zenify.in (Property managers) which can make detailed study of the house (Before tenants occupies & after tenant vacates) and provide the exact quote of damage with receipts. With so much of transparency, tenants won't think the landlords are being unreasonable because these property managers are not biased towards any party and they also provide receipts for every repair they make. This will strike the right balance and both parties will never have to break the "So-called" bridge !
FlatGradings - Property managers

And if you have any better suggestions to tackle this landlord-tenant fiasco then please leave it as comments.

Please share your experiences living in an apartment on our platform http://www.flatgradings.com/write-review-form and help others make an informed decision before moving into new apartment !


The Draft Model Tenancy Act 2015 - Key to Unlock India’s Rental Market

9/04/2015 FlatGradings 14 Comments

The Draft Model Tenancy Act 2015 is all set to encourage the rental market, as it promises to safeguard the interests of both landlords and tenants.

FlatGradings - The Model tenancy Act, 2015

The housing and urban poverty alleviation ministry has readied the draft of the Model Tenancy Bill, 2015, doing away with some archaic rules that govern this sector. The draft will soon go to the cabinet for its approval.
"Currently, almost all states have their own rent laws. But many of them have become archaic and failed to serve their purpose. The opaqueness has not only made renting out properties a tricky affair for landlords but taking a house on rent has become a nightmarish experience too. Many tenants are forced to cough up arbitrary rent hikes or face eviction," said an official.
Draft Model Tenancy Act, 2015, if accepted, could unlock the doors of huge number of properties that are lying vacant currently, thus providing a solution for India's housing problem. But it is easier said than done.
The Draft proposes several reforms to the earlier Rent Control Act, 1948, which was seen as outdated and partial to tenants.
FlatGradings - The Model tenancy Act, 2015

The new Draft seeks to balance the needs of both tenants and landlords. For instance, as per the provisions of the Rent Control Act, rents of properties were capped and landlords could not raise rents despite the jump in property rates. Thus, many tenants ended up paying a paltry rent of about Rs 100 despite living in prime locations.
The Draft proposes reforms that will enable landlords to charge market rates and make it easier for landlords to evict tenants who default on rent without getting into long drawn out legal proceedings.
This move is expected to give a boost to the rental housing market. "Earlier, property owners avoided giving their property on rent out of the fear that tenant will never vacate their property. With the proposed changes, house owners can relax and a huge number of properties lying vacant can be used to not only generate additional income for them, but also solve the housing problem of millions,'' says Ashwinder Raj Singh, CEO - Residential Services, JLL India.
"There was a need to unlock the greater potential of the housing sector,'' says Ashwinder. Speaking on the impact on property prices, he feels that the move will not bring down property prices. "The landlord can now give the property on rent. He will earn an income on his investment, so there will be an incentive to invest in property,'' he adds.
The Draft also has provisions to protect the interests of the tenants. Currently, the security deposit paid by tenants is an ad-hoc amount. As per the draft, the security deposit cannot exceed three times the monthly rent. Besides, tenants can claim a reduction in rent if the quality of services deteriorates. "It's a win-win situation for both house owners and tenants if they play by the rule book,'' says Ashwinder.
While the Draft permits landlords to raise the rent, the tenants need not fear arbitrary hikes. This is because the Draft has proposed a ceiling on the rent that is to be fixed in consultation with the state government. Besides, landlords cannot evict tenants as per their whims and fancies, but have to follow the terms of a written agreement.
Also, tenants below a certain threshold are protected in that the terms of the Draft are not applicable to these select categories. "Senior citizens who are actual residents, widows and single women, persons released or retired from the armed forces, are among the special categories of persons,'' - as per The Draft Model Tenancy Act 2015.
Among the many reforms included in the Draft is the proposal for an independent authority for registration of all tenancy agreements and a separate court for rent related disputes and litigation cases. The rent agreements need to be registered with the Rent Authority. Further, the Draft has proposed that all disputes will be heard at the Rent Courts set up by the states. The Civil Courts will no longer hear rent related cases.
As land is a state subject, it is up to each state government to decide if they wish to adopt the proposals of the Draft Model Tenancy Act. However, given the resistance of the tenants to any changes in the rent laws and due to vote bank politics, it is unlikely that the proposed Draft will replace the old Rent Control Act in a hurry.

We at FlatGradings.com have started petition on change.org to Regularize Security Deposit. This petition will give a push for the State Government to implement The Draft Model Tenancy Act 2015. Please sign if you support the cause.

Also, please share your experiences living in an apartment on our platform http://www.flatgradings.com/write-review-form and help others make an informed decision before moving into new apartment !