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Thursday Jun 14 2018

The existential struggle between landlords and tenants in Pakistan

Photo: File

If you and I had a discussion on the rights and obligations of tenants and landlords in Pakistan, chances are that you, fed on a diet of pop culture and questionable films, would conjure up the image of landlords as malevolent, pot-bellied tyrants, evicting poor, defenseless tenants on the streets. 

Throughout history, landlords have been the quintessential evil capitalists, the kind Karl Marx warned you about in Das Kapital; who own land, rent it out at exorbitant rates, and make the law bend to their will. 

Tenants, on the other hand, would be the unsuspecting and naïve simpletons subservient to the landlord. Their legal rights on the tenancy would be tenuous at best; they could be served with a notice of eviction at any time, and be physically evicted on a whim by the landlord.

As is usually the case, the law is never this clichéd but far more nuanced as to their respective relationships.

Traditionally, tenancy law, applicable to foreign jurisdictions, has aimed to strike a balance between a landlord committing excesses, such as prematurely evicting the tenant, or tenants unlawfully extending their possession of the premises long after the tenancy has expired. 

The logic behind the evolution of the law is obvious; the landlord has title of the premises and the tenant possesses it for a limited period of time. Both parties’ interests need to be adequately secured within the period of the lease.

Pakistan has had a litany of rent laws, stretching as far back as to the West Pakistan Urban Rent Restriction Ordinance 1959. In the ensuing years, each provincial assembly legislated to create its own special law relating to tenancies; Punjab Rented Premises Act 2009, Sindh Rented Premises Ordinance 1979, and the Islamabad Rent Restriction Ordinance 2001 are a few examples.

The laws envisage the creation of a tenancy agreement, payment of rent and its periodic increase, subletting and other obligations for both the landlord and the tenant. They also deal with circumstances and procedure for eviction of a tenant and establishment of rent tribunals and their procedures. They further require that the tenancy agreement must be in writing, witnessed in accordance with law and have a commencement and expiry date. It should also contain clear provisions as encompassing security deposits and events of breach by either party.

The black letter of the law is one thing, but how does the legal relationship between a landlord and tenant pan out in practical life?

In reality, few prospective landlords or tenants bother with legal advice on tenancy matters. Property agents take the lead in drafting tenancy agreements rather than lawyers in standard; one size fit all templates. Such agreements more often than not, fail to encapsulate the specific needs of the tenancy in question. 

The tenant in several cases does not even bother reading the terms of the tenancy and the matters that could be contentious later on, such as terms regarding rent increase or the landlord’s right to enter and inspect the premises.

More pertinently, how do landlords or tenants play the system? Landlords have the obvious advantage of ownership of the premises and they may have terms inserted in the tenancy agreement that allow for an early termination of the tenancy prior to the expiry of the term. If all else fails, intimidation and threats to the tenant are usually the modus operandi of rouge landlords, who will use their ostensibly superior bargaining chip of either arbitrarily increasing the rent or pressing for an early eviction.

The law, however, has proceeded to curtail the powers of the landlord. The Sindh Rented Premises Ordinance 1979 and Punjab Rented Premises Act, 2009 prevent the landlord from exercising a crude, but time-honoured step against the tenant; gratuitously cutting of the tenants’ utility supplies such as electricity, water or gas without just or sufficient cause. A landlord may also not enter a tenant’s premises, without giving the tenant reasonable notice. The Sindh Ordinance further stipulates that the landlord must charge a rent that is fair such as in line with the prevalent market rate based on an intelligible criteria of the location and neighbouring areas as well as the size of the premises/rented area.

Buoyed by these statutory fetters on the landlord, various tenants, aided and abetted by like-minded lawyers, have used the system to their advantage, sometimes through patently unlawful means. One example is the eviction of a tenant upon the lawful expiry of a tenancy agreement. 

Under the law, a landlord may only initiate proceedings for eviction, if the tenancy has expired or upon failure of the tenant to pay rent. There are other grounds, such as material breaches of the tenancy agreement, but they require proof through material evidence, which can only be possible through a trial and witnesses. A conscientious landlord will then have no option but to wait either for the expiry of the tenancy or non-payment of rent.

In certain cases, tenants will wait for the expiry of the tenancy, and before a notice of eviction by the landlord is served, obtain a temporary stay order/interim injunction against eviction by the landlord. Stay orders from courts or rent tribunals, as most lawyers can attest to, are discretionary orders predicated on a nebulous term called “balance of convenience”. In plain speak, a judge has to make a quick decision on the party likely to be more adversely affected if the stay order is not granted. In most cases, this is overwhelmingly in the tenant’s favour. The landlord is not present at the hearing for the injunction, and the stay shall invariably be granted without notice to him. In theory, this is a correct approach, as a judge may not want to see injustice occur if the tenant is forcibly evicted, without honouring his constitutional right of a hearing.

The practical consequence of this approach is that tenants use temporary stay order to their advantage and then ply on adjournments and delays through their lawyers by refusing to appear and defend the matter. They will also deposit the monthly rent in court rather than directly to the landlord, thereby nullifying any grounds for eviction for non-payment of rent. Even after multiple adjournments, if the case is heard and a decision is rendered in favour of the landlord, the tenant will always have the right of an appeal and may obtain another “temporary” stay order in the appellate court, where the process invariably repeats itself, till the tenant exhausts his legal remedies and by default, extends their possession of the premises way beyond what was reasonably agreed. By this time, landlords would be at the end of their tether, as they cannot enforce the eviction and may be stuck at a tenant paying the same rent without any increase, sometimes for years, depending on our lumbering legal system. Small wonder that landlords would invariably always refuse to take on members of the legal community as tenants, who are minutely aware of the gaping deficiencies in the system and certainly not gun shy in exploiting the same.

It’s quite instructive that tenants, like other litigants, employ delay, the bane of our legal system, for their benefit. Ironically, one finds that private individuals are more likely to adopt the method of getting a stay order against eviction as opposed to commercial tenants like companies or banks. This is because that the latter are subject to regulatory checks and audits and are averse to having unnecessary litigations on their books. They would rather settle with the landlord and vacate the premises, rather than contest untimely or unlawful evictions.

There is a further issue of penny-pinching landlords not bothering to register their tenancy agreements. The law requires tenancy agreements in excess of one year to be registered with a Rent Registrar; the logic being which is that a creation of tenancy puts the general public, including prospective buyers of the premises on notice, as well as contributing to the national exchequer. The reality, particularly in Punjab is that landlords create tenancies for a period of eleven months and renew them for a similar period immediately after expiry, so as to circumvent the law regarding registration.

Some provinces have become wise to this tactic and have legislated against it accordingly. The Punjab Rented Premises Act of 2009, for example has created a provision that disallows Rent Tribunals from adjudicating a claim brought by either the landlord or the tenant, unless the tenancy agreement is registered and a penalty is paid in the local treasury. The penalty is higher for the landlord than the tenant, as the onus on the landlord to register the tenancy is greater. Thus, no judgment will be given in a case, no matter how airtight it is, unless the requisite tenancy is registered under law.

There are various other legal scenarios applicable to tenancies that would be beyond the province of this piece. However, for all you prospective landlords and tenants, be cognizant of certain issues before signing off on the dotted line. If you’re a landlord, get your tenancy agreement drafted or vetted by a lawyer. Further, get the agreement registered; it saves the heartache of registering it later with a penalty that could be up to 10 percent of the annual rent. If you are the tenant, carefully review the tenancy agreement and resist onerous provisions that are impossible to achieve later. Insist on having a signed copy of the tenancy agreement and keep it at all times and be especially aware when the landlord makes a matter of fact reference about needing the premises for “domestic use”. It is likely that an eviction notice may follow.

As always, there is a duty on courts and rent tribunals to suss out frivolous claims by landlords and tenants; to not allow adjournments and delays, if a stay order has been granted on the property. Above all, they should be cognizant of the fact that this is a special law created to safeguard interests in property, where delays should not be allowed to metastasize, otherwise the litigant's trust in an already beleaguered legal system shall continue to be on life support.

-Ali is a barrister in Lahore. He tweets at @RezaAli1980

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