Premises Rent Control Act 1991 : Avoiding the unavoidable – (May 2012, Issue 1)

May 13, 2012, by Junayed Chowdhury

Section 18 of the Premises Rent Control Act 1991 (“the PRCA”) provides a tenant what is legally called ‘security of tenure.[i] Now let us consider a hypothetical situation – A, a landlord who owns a commercial building, enters into a lease agreement with B, a private company, for a lease term of 5 years. A and B agree in the lease agreement that the provisions of Section 18 of the PRCA shall be inapplicable to the lease agreement. In other words, after 5 years term, B, the tenant, shall be contractually bound to vacate the leased premises. The question is can A and B contractually agree to such an understanding?

 

Section 18(1) of the PRCA opens with the following words: “Notwithstanding anything contained in the Transfer of Property Act, 1882 or the Contract Act, 1872, no order or decree for the recovery of possession of any premises shall be made as long as the tenant pays rent to the full extent allowable by the Act and perform the condition of the tenancy.”[ii]

 

The above non-obstante stipulation gives Section 18 of the PRCA supremacy over any other law in Bangladesh. Therefore, at the outset, it would appear that the lease agreement between A and B may not stand before the prohibition of Section 18 of the PRCA.

 

However, we should consider the opening line of Section 18 of the PRCA which starts as “Notwithstanding anything contained in the Transfer of Property Act, 1882 or the Contract Act, 1872”. It could be argued that the supremacy of Section 18 of the PRCA has been given only over two statutes – that is, the Transfer of Property Act, 1882 or the Contract Act, 1872. Also, it could be argued that Section 18 is silent with respect to any contract or agreement executed between commercial parties. Thus, it would follow that parties by any contract or agreement may contract out of the operation of Section 18 of the PRCA and in such case the prohibition of Section 18 may be inapplicable.

 

But the problem of this line of argument is that it does not take into account the effect of Section 23 of the Contract Act 1872, which states, amongst others, that a contract would be void if the object of such contract is forbidden by law or of such a nature that, if permitted, it would defeat the provisions of any law.

 

Now, it could be safely assumed that the lease contract between A and B is not forbidden by law. But the issue is whether the lease contract between A and B would be regarded as of such a nature that, if permitted, it would defeat the provisions of any law – that is – Section 18 of the PRCA which guarantees a tenant’s security of tenure.

 

One way to look at this issue to consider the legal proposition that everyone has a right to agree to waive the advantage of a law made solely for the benefit and protection of the individual in his private capacity. Thus, it could be argued that B, a private company, having entered into a lease contract in its private capacity with A, another private person, is entitled to contractually waive the benefit afforded to it by Section 18 of the PRCA. In this context it could be argued that the words “if permitted it would defeat the provisions of any law” as used in Section 23 of the Contract Act should be interpreted to refer to performance of a lease contract which necessarily entails the violation of the Section 18 of the PRCA. What makes a contract, which is otherwise legal, void is that its performance is impossible except by disobedience of the law. Clearly no question of illegality can arise in the lease contract between A and B as the effect thereof does not necessarily give rise to an unlawful act.

 

There is no reported Bangladeshi case law that deals with this important issue. Given the rapid development in the real estate sector in Bangladesh, perhaps the time has come to review Section 18 of the PRCA in a new light and pave the way to allow business people to enter into commercial tenancies without having to worry about the protectionist philosophy that underlies Section 18 of the PRCA.

 

Written by Junayed Chowdhury, Managing Partner  

 

† Disclaimer: The opinions and comments expressed in this Blawg are not to be regarded or construed as legal advice by and from Vertex Chambers or any of its members. It is highly advisable that any person should seek independent legal advice before relying on any of the contents of this Blawg.