The Sri Lankan Law is for the Landowner

Sri Lankan law is per landlord for properties not covered by the rental law. Otherwise, it's pro-tenant.
The difference between a rental contract and a monthly lease is important in Sri Lanka. The term "rental agreement" has a slightly different meaning than is usual elsewhere, as it means that the use of one property for rent for successive periods is subcontracted to another. Tenancies can be terminated by landlords with one month's notice without giving reasons, which may be followed by an action for eviction, unless the premises are protected by the Rental Act (see below). Rental agreements are not subject to stamp tax, unlike rental agreements which are stamped with 1% of the total rent for the expired term.
However, a lease is common for high quality, fixed term contracts as it provides more security of ownership and duration. A rental agreement must be concluded by means of a deed signed in the presence of two witnesses and a notary public and registered at the land registry. Leases, such as rental agreements, may contain other terms and conditions that the parties may agree upon.

Rent: Can landlords and tenants in Sri Lanka agree on rentals freely?

If the premises, whether rented or leased, are not covered by the Rental Act (see next paragraph), there is no restriction as to the amount of rent that can be agreed between the landlord and the tenant or between the landlord and the tenant.

The rental law applies to all premises that are OTHER:

• Residential premises occupied by the owner on 1 January 1980 and rented out on or after that date;
• Living quarters in the occupation of:
  (i) a person who has been issued a valid visa under the Immigration and Emigration Act and whose total income exceeds one thousand rupees per month; or

(ii) a non-resident enterprise, unless the accommodation was rented out before 12 December 1980, in which case the exemption from the Rental Act is subject to certain conditions, including an exemption from the provisions of the Act granted by the Commissioner for National Housing

• Dellings built after 1 January 1980 and rented on or after that date.
• Exempt premises, which includes all premises in specified areas where the annual value of such premises, as stated in the tax assessment, exceeds certain prescribed amounts, and premises where the lessor is a company registered under the Companies Act No 17 of 1982

If the premises are covered by the Rental Act, Section 4 prescribes 'the standard rent to be paid' and Section 5 provides for certain permissible increases. The sum of the standard rent and each permitted increase is the "approved rent". It is an offence to pay, demand or receive an amount in excess of the approved rent.

Security deposit

If the premises, whether rented on a rental basis or rented monthly, are not covered by the rental law, the amount of the deposit is freely negotiable between the landlord and the tenant.

If the premises are regulated by the rental law, no one may demand, receive or pay or offer to pay for premises as a condition for the granting, renewal or continuation of the lease:

• As an advance on rent, any amount exceeding the approved rent or, where applicable, the rent to be demanded, for a period of three months
• Any premium, commission, gratuity or other similar payment in addition to the rent of such premises

What are the rights of landlords and tenants in Sri Lanka, especially with regard to the duration of the contract and eviction?

Rental agreements usually do not have a fixed term. A monthly lease (which is normal) can be terminated at will by either party with one month's notice, and rent is usually paid monthly.

Where the Rental Act applies, the law weighs heavily in favour of tenants, who can terminate a monthly lease at any time by giving one month's notice, while the landlord can only do so for the reasons set out in the Act, which include the following:

• The rent is in arrears for a period of more than one month. The premises are used by the tenant for immoral or illegal purposes.
• The premises are being used in a way that leads to significant deterioration.

An amendment to the rental law in 2002 introduced several new grounds.

After the termination of a monthly rental or lease, an action for eviction becomes necessary if the tenant or lessee does not leave the premises as required by the notice of termination.

In the case of a rental agreement for premises not covered by the Rental Act, there is no restriction on the period of notice which the parties may agree, either with regard to termination by the landlord or the tenant. And unless one of the parties breaches the terms, commitments or obligations or the lease itself provides for termination, the lease cannot be terminated by either party without the consent of the other party.

A rental agreement for a certain period of time should be concluded by a notarially certified deed. If it is not carried out in this way, it will amount to a monthly lease and can be terminated by either party with one month's notice.

TENANCIES AND LEASE AGREEMENTS - THE DIFFERENCE

The difference between a rental and a lease contract is important in Sri Lanka:

Lease
The concept of the lease is recognised in Sri Lanka's common law (the Roman-Dutch law). Case law has recognised a valid lease agreement as a pro tanto sale of the land by the landlord for the duration or period of the lease agreement, and the lease of property is the surest means of securing the right to own, use and enjoy another's property in all cases, except where the rental law applies.

The parties to a rental agreement are generally free to agree on the terms they consider appropriate to be included in the rental agreement, subject to the provisions of the rental law, if applicable.

In general, a rental agreement provides for the following points:

• Term of the rental contract) Security deposit) Rent and how and when to pay it) Responsibility for repairs) Responsibility for payment of instalments) Assurances of the tenant) Assurances of the landlord
• Mutual alliances

Certain legal formalities must be observed in the case of rental agreements. The Regulation on the prevention of fraud provides that no promise contract or agreement establishing rights over land (other than a lease at will or for a period not exceeding one month) shall enter into force or be legally enforceable unless in writing, signed in the presence of a notary and two witnesses.

In order to protect the leaseholder with regard to the priority rules contained in the Regulation on the Registration of Deeds, it is necessary for the lease to be duly registered at the Land Registry.

As leases often provide for an annual advance payment of the rent, it is prudent and advisable that before signing the lease, each lessee instructs a lawyer to carry out a search at the relevant land registry office to check whether the property is encumbered or not and whether the property actually belongs to the landlord.
It should be noted that in most cases a tenant or lessee should also request a copy of the certificate of conformity to ensure that the premises can be lawfully used before taking possession of the lost premises.

The Land (Foreigners' Restrictions) Act has set a maximum limit of 99 years for the lease of land to foreigners and also introduced a lease tax for land leased to foreigners.

Tenancy Contracts

Such agreements do not need to be notarised, but should be recorded in writing for evidential purposes.

A lease is an agreement in which one person undertakes to give the use of a property to another person in return for rent for successive periods of time until the lease is terminated by notice from one of the parties. The person who agrees to use the property is called the landlord and the person who promises to pay the rent for the use of the property is the tenant.

A monthly lease can be terminated at will by either party with one month's notice, and rent is usually paid monthly.

A rental agreement generally regulates issues such as the amount of rent, responsibility for repairs and contains obligations on the tenant to take care of the property in a tenant-like manner.

How effective is the Sri Lankan legal system?

The court system works, but there can be considerable delays before a decision is made. Recovery of the unpaid rent will take about nine to twelve months, provided that the summons can be served and the defendant does not use delaying tactics.

It could take a year and a half or more to get a court order for eviction, and up to ten years or more if there is an appeal, as there is a huge backlog of appeals that need to be argued and decided in the appellate courts. This also applies in the case of a temporary rental agreement if the tenant does not leave the premises after the expiry of the rental agreement and legal proceedings for eviction have to be initiated.

Legislation

The Rent Act No 7 of 1972 and its subsequent amendments.

Regulation No 7 of 1840 on the prevention of fraud, as amended.