Imagine you rent a property for a year, but just four months into the tenancy, you’re told that the house has been sold to someone else. Is the sale legal, and does a change in ownership automatically end your rental agreement? In India, a landlord is legally allowed to sell a rented property. However, the sale does not strip tenants of their legal rights, and certain protections continue to apply even after ownership changes.
Continuation of tenancy
A new landlord doesn’t mean the end of the tenancy agreement. According to Section 109 of the Transfer of Property Act, the buyer acquires all the rights of the landlord relating to that property, unless there is a clause in the sale deed that states otherwise.The tenancy continues on the same terms and conditions unless it is lawfully terminated or the lease has expired.
Can the new landlord increase the rent?
A change in ownership does not automatically give the new landlord the right to increase the rent. If the written tenancy agreement specifies a fixed rent for a fixed period, the purchaser is bound by those terms. Rent can only be increased if an escalation clause exists in the written agreement.However, in the absence of a formal written agreement, Section 106 of the TPA treats residential tenancies as month-to-month agreements. Here, a landlord may propose a higher rent for the next month. Upon disagreement, either of them can end the tenancy by giving a 15-day notice period.
What if the tenant doesn’t know about the sale?
In case the tenant isn’t informed about the sale and hence pays the due rent to the old landlord, the new owner cannot force them to pay again.In such a situation, the new owner must seek that amount from the previous landlord. Then, with the tenant’s knowledge of the change in ownership, the new owner can charge rent for the remaining tenancy period.
What happens to the security deposit?
The tenant’s right to recover the security deposit is not affected by the sale of the property. While the Transfer of Property Act does not specifically deal with security deposits, Section 109 provides that the purchaser succeeds to the rights and, in appropriate cases, the liabilities of the original landlord in relation to the tenancy.At the end of the tenancy, the security deposit must be refunded after adjusting any lawful deductions, such as unpaid rent or damage beyond normal wear and tear, in accordance with the tenancy agreement. Any dispute between the previous and new owner over the transfer of the deposit should not deprive the tenant of this right.
