Arbitration Clause: Know how it can help Landlord and a Tenant

A tussle between the landlord and a tenant is not a new thing. But, sometimes this tug of war can lead to serious incidents that are enough to shake you deep down inside the mind and soul. But, remember that an arbitrator can handle the situation in a better way and thus today in this blog post we let you know everything about it. So, scroll the page down to know more.


Img : ipleaders

1. Who is an Arbitrator, Licensor & Licensee?

These all are the technical names of three important people involved in a renting deal. So, let us know each of them one by one.

The first one to know is an Arbitrator. He/she is a person or a committee formed with the aim to settle the dispute between both the licensor and the licensee. In case of a person, an arbitrator can be a retired judge or a practicing lawyer. In case of a committee it can be a bench of two judges. An arbitrator gives a decision only after listening to both parties.

Next is the Licensor. He/she is commonly known as the landlord who hires a tenant and offers his/her own property to accommodate for a fixed period of time in exchange of a said amount of money.

The third one is Licensee. He/she is commonly known as the tenant who accommodates in the property owned by someone else in exchange for a fixed amount of money on a monthly basis.

Usually, these terms are only used in legal documentation whereas the other words are used for their representation in general.

2. Requirement of Arbitrator Clause in Rent Agreement

Things go well in the beginning but they start to stumble in the mid-way and the inability to resist each other results in the termination of a rental agreement. But, this doesn’t happen in a calm and peaceful manner in every case and thus a need of an Arbitrator arises.

Well, you may not connect with an unhealthy relationship between the two but the law and real estate experts feel that one should add an arbitrator clause in the rental agreement as it gives both a fair chance to retain money on their respective parts.

3. Issues between Landlord and Tenant

The rent agreement is usually assured to have all the important aspects covered such as rental amount, rent tenure, charges a tenant is required to pay and more. But, some essential points get missed out of the rent agreement can create a ruckus as they become key issues at the time of vacating accommodation. These issues are as following:

  • Return or forfeiture of Security Deposit.

  • Damage/Misuse of the premises, fittings.

  • Premature termination of rent agreement.

  • Delay in payment of rent.

  • Unpaid dues and utility bills.

4. Legal Support of an Arbitrator

The addition of an arbitrator gives a sense of support to both the landlord as well as to the tenant. Hence, it is always beneficial to get an arbitrator clause added in the rent agreement. This clause is valid and stands legal under the Arbitration and Conciliation Act, 1996 (also referred to as the Arbitration Act). An arbitrator has to be decided with a mutual consent of both, the landlord and the tenant.

5. Fixed Fee Arbitrator to Deal with Rental Agreement Issues

The security-deposit can amount upto six months in case of high-value rental deals and the appointment of a fixed-fee arbitrator is a viable option. Under Section 29B of the Arbitration Act, a fast-track procedure is suggested in which the arbitrator decides the cases based upon the written pleadings and submissions from both the parties. After which the arbitrator can ask for more detailed information. If needed, the judge can direct both the parties to be present for an oral hearing.

The entire procedure including the passing of judgment should be completed within a period of six months. The dispute between both the landlord and a tenant stands close after the passing of judgment.

6. Future Possibility: Alternative Dispute Resolution

The amendments in Arbitration Act 2015 under Section 29A give both the parties a fair chance to avail benefit. The experienced lawyers, retired judges and addition of arbitration clause in the rent agreement ease the way to deal with dispute between a landlord and the tenant.

In short this a smooth path paved in a legal manner to give everyone a fair chance to retain their money.