TN. Rent Act & Valuation

[amibrahim]

 

 

 

 

Tamilnadu Buildings (Lease and Rent Control) Act 1960 (TN Act 18 of 1960 & as amended by Act 23 of 1973 and Act 1 of 1980)

 

4. ¹(1) Fixation of Fair Rent in accordance with the principles set out in the following sub-section:

 

2. The fair rent for any residential building shall be nine per cent gross return per annum on the total cost of such building

 

3. The fair rent for any non-residential building shall be twelve percent gross return per annum on the total cost of such building.

 

4. The total cost referred to in sub-section (2) and (3) shall consist of the market value of the site in which the building is constructed, the cost of construction of the building and the cost of provision of anyone or more of the amenities specified in Schedule I as on the date of application for fixation of fair rent.

 

Provided that while calculating the market value of the site in which the building is constructed, only that portion of the site on which the building is constructed and of a portion upto fifty percent, thereof the vacant land, if any, appurtenant to such building the excess portion of the vacant land, being treated as amenity.

 

The cost of provision of amenities specified in Schedule I shall not exceed fifteen percent for any residential building and twenty five percent for any non-residential building.

 

5. (a) The cost of construction of the building including cost of internal water supply, sanitary and electrical installations shall be determined with due regard to the rates adopted for the purpose of estimation by the Public Works Department of the Government for the area concerned. The controller may, in appropriate cases, allow or disallow an amount not exceeding thirty percent, of construction having regard to the nature of construction of the building.

 

   (b) The controller shall deduct from the cost of construction determined in the manner specified in clause (a), depreciation, calculated at the rates specified in Schedule II.

 

SCHEDULE – II (See Section 4) RATE OF DEPRECIATION

 

Type of Building                                                      Rate of Depreciation/Annum

1. Building built in lime mortar and in which

Teak has been used throughout                                        1.0 percent

 

2. Building built partly of brick in lime mortar

And partly of brick in mud and in which teak

Has been used                                                                     1.5 percent

 

3. Building built in brick in mud and in which

Country wood has been used                                             2.0 percent

 

4. Buildings which are inferior to those of class 3

With brick in mud unplastered walls and mud

Floors and in which cheap country wood has been

Used                                                                                       4.0 percent

 

Explanations. - 1) The depreciation shall be calculated for each year on the net value arrived at after deducting the amount of depreciation for the previous year.

 

2). The amount of depreciation shall in no case be less than ten percent of cost of construction of the building.

 

3). The actual depreciation of building aged “n” years is calculated by using the formula-

 

P = A (100 – r / 100)ⁿ

Where             A = Total cost of construction of the building

                        r = Rate of depreciation per annum

                        n = Age of the building (i. e. the number of years)

                        P = The final depreciated value of the building

 

The amount of depreciation will be equal to (‘A’ – ‘P’) subject to a minimum to ten percent of ‘A’.

 

¹ Substituted by Section 6 of Act 23 of 1973

 

(Source: The Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, Published by C, Sitaraman & Co. Pvt Ltd - 2008.

Case Study – I

 

Fixation of fair rent as per TN. Rent Act:

 

I. A G+2, RCC framed structure in Chennai Periamet Area, confirming to Schedule – II, Rate of depreciation, Building type 1 and rate of depreciation 1.0 percent can be adopted; Age of the building is about 35 years old. Fair Rent is assessed per one sq. ft of Residential & Non Residential in the First Floor as per TNPWD Plinth Area Rate & TN Rent Act.

 

BUILT-up area Calculation			Construction		Fair Rent
Floor	Width	Depth	GBUA	Deduct **	BUA ft2	**
GF	50	73	3650	340	3310	Car Park
FF	50	73	3650	84	3566	2 Light Wells 2 LW)
2 Floor	50	73	3650	983	2667	2 LW + Terrace
Head RM	28	17	(476-84)392	244	148	Stair Headroom
Rest Room (148)			10,275		9,691

(3,650 + 3566 + 2667 + 392 = 10,275)

 

 

 

 

Floor	BUA considered for Cost of Construction sq. ft	BUA considered for Fair Rent sq. ft
Ground	3,650	3,310
First	3,566	3,566
Second	2,667	2,667
Second floor headroom	392	148
Total	10,275	9,691

 

Extent of land: 4,080 sq. ft, the market value of the site: Say Rs 4,000/ft2

• Building foot print area: 3,310 ft2 on a floor plate size of 50 x 73 feet.

 

Extent of Land: 4,080 sq. ft; total built-up area: about 10,275 sq. ft.

Non-residential: 6,191 sq. ft; Residential: 3,500 sq. ft

Land Valuation:

 

(Provided that while calculating the market value of the site in which the building is constructed, only that portion of the site on which the building is constructed and of a potion upto fifty percent, thereof the vacant land, if any, appurtenant to such building the excess portion of the vacant land, being treated as amenity.)

 

JP I While computing the market value of the site, the following two factors are to be taken into consideration viz., 1). The portion of the site on which the building constructed and

 

2) A portion upto fifty percent, thereof the vacant land, if any, appurtenant to such building. The remainig fifty percent of the vacant land is to be treated as amenity. (Kaliammal & Others Vs. Athi V. Ramachandra & Others. Reported in 1983 (II) MLJ 252).

 

JP II The actual area of the site over which the construction has been put up has to be determined. From the total area of the site, the area of the site over which the building has been put up has to be deducted and the balance if any will be the vacant land.

 

If the area of the vacant land thus arrived at is equal or less than 50 percent of the area of the site over which the construction has been put up, such extent of vacant land has to be added on the area of the site occupied by the construction and the market value of that area.

 

If, however, the vacant is in excess of 50 percent of the area over which the construction has been put up then the extent to be added to the area of the site occupied by the construction will be only 50 percent of that area and no more and market value of the site will be market value of that area. In the latter case, the vacant land remaining after so adding 50 percent of the area of the site over which the construction has been put up to the area of the site occupied by the construction is treated as an excess portion and amenities (Reported in Veeman Pillai Vs. Jindal 94 LW 21)

 

JP III In case of building having more than one floor, the principle ought to be one of apportionment in accordance with the number of storeys. If there are two or more storeys, the market value of the land for the first floor will be half. If there are more than two storeys it will be proportionately distributed in accordance with the number of storeys in the buildings. (A. C. Charities Vs. Sadhana Aushadalaya, reported in 1968 (2) MLJ 406)

 

JP IV In case of a flat to fix the Fair Rent, the Court should take into account the total cost of the building, including staircase and then decide it by number of flats if the flats are identical. The land around the building will be treated as common to all the tenants and then fair Rent is to be fixed. ( Reported in Banu & Another Vs. P. Venkatewaran 100 LW 389).

 

(Source: Land Laws of Tamil Nadu Reprinted in 2005 by C. Sitaraman & Co. Pvt. Ltd

JP: Judicial Pronouncement

 

 

 

 

 

Market value of site: Building foot print / Floor plate Area: 3,650 sq. ft; Balance: (4,084 – 3,650 sq. ft = 430 sq. ft & 50% of Bldg footprint area is 1,825 ft2; vacant land is less than 50 percent of foot print area. Therefore add the vacant land with bldg foot print area. Therefore, land considered for rental valuation is 4,080 sq. ft) Market Value of site: 4,080 x Rs 4,000 = Rs. 1, 63, 20,000; First Floor Land Value:

Rs 1, 63, 20,000/3: Rupee 54, 40,000; BUA: 3,566 sq. ft; therefore Land Rate per BUA sq. ft: Rupee 1,526 / ft2.

(Guideline Rate (GLR) as on September 2009: Say Rs 4,000 per sq. ft)

 

Rental Valuation:

 

TN PWD Plinth area rates (PAR) for the Year 2009 – 10 as per Circular No. HDO (A)/48518/2003, dated 06-07-2009 by Chief Engineer (Buildings) for works in Chennai Corporation Limits is applied: First Floor Residential PAR complete Rs. 9,080 / sq. m & Non residential Rs. 7,300 / sq. m

 

Depreciation as per formula: (100-r/100)^n: 0.99^35 = 0.703448;

   

Type

Depreciated building value Rs / sq. ft

Apportioned Land Value Rs / sq. ft

Fair Rent - VW.doc  Description: Download  Filename:  Fair Rent - VW.doc  Filesize:  105 KB  Downloaded:  143 Time(s)

[amibrahim]

 

Wednesday, 27 June 2012 More Information: file:///D:/supreme-court-lays-guidelines-to-reduce.html

 Provided by: A. M. Ibrahim

Supreme Court Lays Guidelines to Reduce Landlord Tenant Litigation:

 

We deem it our duty and obligation to fix some guidelines and norms for such type of litigation, so as to minimise landlord-tenant litigation at all levels. These are as follows:-
(i) The tenant must enhance the rent according to the terms of the agreement at least by ten percent, after every three years and enhanced rent should then be made payable to the landlord. If the rent is too low (in comparison to market rent), having been fixed almost 20 to 25 years back then the present market rate should be worked out either on the basis of valuation report or reliable estimates of building rentals in the surrounding areas, let out on rent recently. 

(ii) Apart from the rental, property tax, water tax, maintenance charges, electricity charges for the actual consumption of the tenanted premises and for common area shall be payable by the tenant only so that the landlord gets the actual rent out of which nothing would be deductible. In case there is enhancement in property tax, water charges, electricity charges then the same shall also be borne by the tenant only.

(iii) The usual maintenance of the premises, except major repairs would be carried out by the tenant only and the same would not be reimbursable by the landlord.

(iv)But if any major repairs are required to be carried out then in that case only after obtaining permission from the landlord in writing, the same shall be carried out and modalities with regard to adjustment of the amount spent thereon would have to be worked out between the parties.

(v) If present and prevalent market rent assessed and fixed between the parties is paid by the tenant then landlord shall not be entitled to bring any action for his eviction against such a tenant at least for a period of 5 years. Thus for a period of 5 years the tenant shall enjoy immunity from being evicted from the premises.

(vi) The parties shall be at liberty to get the rental fixed by the official valuer or by any other agency, having expertise in the matter.

(vii) The rent so fixed should be just, proper and adequate, keeping in mind, location, type of construction, accessibility with the main road, parking space facilities available therein etc. Care ought to be taken that it does not end up being a bonanza for the landlord. 

Supreme Court of India

Mohammad Ahmad & Anr. vs Atma Ram Chauhan & Ors. on 13 May, 2011

Author: D Verma

Bench: Altamas Kabir, Cyriac Joseph