Boostrapping : Improving resolution of civil disputes
Proposed administrative procedure - CIVIL.02
Improve resolution of rent related disputes
- CIVIL.02.001 --- Short term rent of flats
- CIVIL.02.002 --- Long term rent of flats
- CIVIL.02.003 --- Renting land
- Draft of the act to create procedure CIVIL.02
The civil courts in India are clogged with crores of cases. For India to compete against west, and create a military that can deter an Iraqi-style liberation, it is pre-requiste that India's civil courts can dispose the cases speedily and fairly.
There are three main reasons why pour civil courts are clogged
My proposed procedure CIVIL.02 deals with a class of civil cases --- cases related with rental and eviction. The proposes laws/procedures makes it possible for flat-owners and tenants to administer renting easily so that chances of disputes reduces. And CIVIL.02 also enables Jurors to decide disputes, in case they occur, speedily as well as fairly.
- our defunct PM/CM and Law Ministers at Central as well as State level allocate negligible funds to courts, and as a result the State's High Courts find it impossible to spawn new courts.
- the judges are defunct, and too nexused with local lawyers. The judges end up wasting most of their time in catering the demands of lawyers with whom they have nexuses, and so courts proceedings move at sluggish pace.
- the laws/procedure are too cumbersome and complicated, making it difficult for resolve the dispute as per laws. To worsen, the governments keep records in such a disorganized way that it becomes very difficult and time consuming for parties to get information and present information.
CIVIL.02.001 --- Code for short term rent of flats
- This code CIVIL.02.001 will apply only on renting of flats (word flat will include offices, tenaments, bungalows etc) which are already constructed, and will NOT apply on renting of open land plots with no construction. (For renting of open land, please see CIVIL.02.003). Also the length of lease MUST be smaller than 3 years, or else CIVIL.02.002 will apply.
- The code will apply ONLY on the buildings of residential/commercial units, leased/rented AFTER passing this Act.
- The officer in-charge, titled as Rental Officer, will keep information on rental contracts in the district. In case of disputes, the disputes will be resolved by the Jurors. The Rental Officer or an officer appointed by him will provide guidance to the Jurors.
- The Rental Officer will be appointed by the Mayor, after approval of City Council. He can be removed by the Grand Jurors after a Jury Trial in which over 8 out of 12 Jurors declare him as "not fit to serve the citizens".
- The owners of the flat MUST register the flat with the rental Officer, and obtain a serial number before it can be rented (in most cases, the municipality has already issued a serial number to flats). The serial number must be used in the rental contract to identify the flat properly.
- If the flat owner is renting part of the flat, the contract must specify the part.
- If a flat has multiple owners, ALL owners MUST register themselves with the Rental Officer, and obtain an ID. If the owner alreay has an income tax ID, the Rental Officer will use the income tax ID as ID, or else he will issue a new ID. The tenant must ensure that all owners registered in municipality have signed the contract as flat-owners.
- Alternatively, other owners may tranfer the responsibility related with renting to any other owners, in which case only those owners will need to sign the document. eg a flat may be owned by husband and wife; the wife may give renting responsibility to the husband ; in this case, husband CANNOT use the authority to sell the flat, but he may rent the flat for a duration of less than 3 years.
- If the book value of property is above Rs 500,000/- ALL owners MUST obtain Income Tax ID and register their income tax ID, or else Rental Officer will NOT allow that flat to be rented.
- The rent agreement can be at most 36 months and at least 7 days. If it longer than 36 months or shorter than 7 days, this code will NOT apply. The minimum deposit amount will be 1 month of rent and maximum will be 6 months of rent.
- The flat owner will need to open an account in a bank associated with flat in the district in which the flat is located. The tenant MUST deposit the deposit and monthly rent ONLY in that account. Any payment made other than this account will NOT be considered as rent paid.
- The tenant may link his personal bank account with that of the flat. In such case, the tenant only needs to visit his own bank and provide the bank name and account number of flat to his (i.e. tenant's bank) and tenant's bank and transfer the amount within 2 days. If there are more than 1 owners, the bank will transfer the sums as %-of their ownerships.
- Likewise, the bank which holds the flat's account will transfer the money to flat-owner's account within 2 days. This way, the flat owner need NOT visit tenant to collect rent, nor does the tenant need to send the check by mail or anything.
- The tenant must deposit the sum in flat's account between 1st and 10th of the month. The late penalty will be 2% of the rent plus 0.1% of rent per day.
- The flat owner, and NOT the tenant, will pay ALL expenses which occur due to the flat such as society's maintainance expense, municipal tax, wealth tax etc. The owner cannot put this responsibility on the tenant.
- If the tenant is renting the whole flat, the tenant will pay the electricity, phone and other expenses due to his presence. If the flat has water meter, the tenant will pay the bill, but if there is no seperate water meter, the flat owner will pay the water bill, and he cannot shift the responsibility to the tenant.
- If the tenant is renting part of the flat, the flat owner will pay the electricity bill, and he may put an electricity sub-meter.
- At the end of 6 months, the flat owner may raise rent ONLY by following amount :
The factors such as change in market value, change in society maintaince, change in electricity rates etc will NOT suffice to be a reason.
- Pro rated increase in municipal taxes : eg say when flat was rented, municipal tax was Rs 2400/yr i.e. Rs 200/mo on the day flat was rented. Say it changes to Rs 3000/mo i.e. Rs 250/mo. Then owner may increase the rent by Rs 50/mo.
- 50% of the increase in wholesale price index as published by RBI : eg say a flat was rented in Jan-2004 and price level was 100. Say in July-2004, price level as published by RBI is 112 i.e. there is a 12% increase. Then the flat owner can increase the rent by 6%.
- NO other factor
- The flat-owner cannot ask for avacuation before the lease term ends. But the tenant will be free to evacuate the flat anyday after paying the rent due till the date he has lived, and a fine not exceeding 1 month of rent.
- After evacuation, the flat-owner will refund the deposit within 2 months.
- At the end of the lease, if the tenant refuses to evacute, the flat-owner can approach the Rental Officer, who will summon the Jurors to decide the dispute. The Jurors will read and interpret the contract.
- The Rental Officer can charge upto 1% of the rent to cover the expenses. The bank which keeps the flats' account will cut the 1% of the rent paid and send the funds to Rental Officer.
- The bank, which keeps flat's account, will also generate a report of rent paid by the tenant and rent recieved by individual flat-owners by at the year's closing. The bank will send copies of report to tenant, flat-owners and the income tax dept.
CIVIL.02.002 --- Code for long term rent of flats
The long term rental will be when the duration is longer than 3 years, but shorter than 30 years. The Rental Officer will NOT allow rent for a duration longer than 30 years.
The code is similar to code for short term rental. Following are the main exception
- that flat owner can demand a rent increase based on increase in market value every 3 years.
- to calculate the changes in market value, at the time of renting, the contract MUST have following 4 parameters
- land area associated with the flat
- construction area of the flat
- price of the land
- price of the construction
- The new market price will be old market price multiplied by price index in construction industry, less 3% depreciation per year
- The new market price of land will be as disclosed by the local authorities for that area based on sales in past 6 months.
Example: Say a building is rented for 30 years. On the day of renting, say building price is Rs 10,00,000 and land price is Rs 20,00,000, and say rent was Rs 30,000. So rent is 1% of market value. Now after 3 years, say constuction price has increased by 15%, and depreciation will be 3%/yr i.e. 9% for 3 years. So new construction price will be 6% higher i.e. Rs 10,60,000. Say land price in that area has increased by 12%. So new land price is Rs 22,40,000. So new price of the house is Rs 33,00,000/-. So new rent will be Rs 33,000.
- In case of dispute, the Jurors will decide the new rent.
- The tenent can evacuate the property any day by paying rent of 3 months. The owner cannot ask the tenant to evacuate the flat, till the lease ends.
- In case of long term rentals, the tenant will ALWAYS have right to buy the property at 150% of the higher of the two : prevailing market price or indexed price stated in the contract.
CIVIL.02.003 --- Code for renting of agricultural land
I have NOT been able to finish this code yet
CIVIL.02.004 --- Code for renting of non-agricultural land
I have NOT been able to finish this code yet.
Draft of the act to create procedure CIVIL.02
One law needs to be passed in Assembly to enact CIVIL.02.001 and CIVIL.02.002. To see the draft, please click here.
Now citizens can ask MLAs to pass this Act. But IMO, it will be wiser for citizens to first enact procedure LM.02 then use LM.02 to pass this CIVIL.02 draft WITHOUT any help from Councilors. To know about procedure LM.02, please click here.
If you have any other question, please mail it to MehtaRahulC@yahoo.com. Thousand thanks in advance.
Next - CIVIL.03 : Resolving loans/default related issues