LANDLORD’S DILEMMA: Tenant not paying rent? Know your options

Real estate investment primarily serves two purposes to many people. One is to live in the house with your family, and the second is to earn some income from it if you are not occupying it. When you rent out your property, you wish to make some money or use it to help repay your existing loan in case of a mortgage. However, there are many disputes which may arise when you rent out your property — the most common is when a tenant refuses to pay you the rent or delays it.

As a landlord, it is crucial to know your rights and the legal options available to you when faced with such a situation.

Review the rental agreement

The first step is to carefully review the rental agreement signed between you and the tenant. The agreement should clearly outline the terms and conditions of the tenancy, including the rental amount, due date, and consequences for non-payment. This document will serve as the foundation for any legal action you may pursue.

Security deposit

It helps recover the money in case of unpaid rent. Landlords commonly collect a security deposit from tenants before they move into a rented property. This deposit acts as a form of security against any damages or unpaid rent during the tenancy period. The amount of the security deposit is typically equal to two to three months’ rent, although this can vary depending on the agreement.

Adhil Shetty, CEO, Bankbazaar.com, says, “Security deposits provide landlords with financial protection against non-payment of rent or damage to the property caused by tenants during the tenancy. The requirement of a security deposit or rental bond encourages tenants to take care of the property and fulfil their obligations under the rent agreement. On the other hand, landlords are also expected to fulfil their obligations as per the terms of the rent agreement.”

Issue a legal notice

If the tenant fails to pay rent on the due date, send them a legal notice demanding payment. The notice should include details of the unpaid rent, a deadline for payment, and consequences for non-compliance. Ensure that the notice complies with the legal requirements specified under the Indian Contract Act, 1872, and is served through a registered post or delivered in person with an acknowledgment receipt.

“You can send the tenant a statutory notice underlining the breach of contract/ rent agreement. If the tenant refuses to pay the rent even after the period of 15 days has elapsed, then you can start proceedings against the tenant in the rent control court or in the civil court as the case may be,” says James Daniel David, a Delhi-based lawyer and Panel Counsel, C-Dac & PNB.

Mediation and negotiation

Consider engaging in mediation or negotiation before escalating the matter to court. These alternative dispute resolution methods provide an opportunity to reach a mutually acceptable resolution.

Filing a case in the appropriate court

If the tenant continues to refuse payment despite the legal notice and negotiations, you can file a case in the appropriate court. The relevant court will depend on the value of the

outstanding rent. For smaller amounts, you may approach a civil court, while for larger amounts, you may need to approach a district court or a high court.

Obtain decree from the court

Once the case is filed, the court will examine the evidence and hear both parties. If the court finds it in your favour, it will issue a decree directing the tenant to pay the outstanding rent. This decree can then be used to enforce the payment.

To enforce the decree, you may need to approach the court for execution. The court can use various methods to recover the unpaid rent, such as attachment of the tenant’s property, garnishment of their wages, or even eviction from the premises. It is important to follow the legal process diligently and seek guidance from a lawyer to ensure proper execution.

Eviction proceedings

In extreme cases where the tenant consistently fails to pay rent, you may consider initiating eviction proceedings. Eviction laws vary across states in India, and it is crucial to follow the specific legal provisions applicable to your jurisdiction. Consult with a lawyer to understand the eviction process and the grounds on which eviction can be sought.

Dealing with tenants who refuse to pay rent can be a frustrating experience for landlords. However, it is important to approach the situation legally and follow due process.

Take legal advice to navigate this process successfully.

HOME RULES

* The rent agreement serves as the foundation for any legal action you may pursue

* Security deposit can be used to pay for any damages or unpaid rent during tenancy period

* In case the tenant consistently fails to pay rent, you may consider initiating eviction proceedings