The enactment of new legislation affecting landlords and tenants means that nearly half of Bermuda's residential units now fall under rent control, according to figures obtained from the Rent Commissioner's Office.

The Rent Increases (Domestic Premises) Control Amendment Act ("the Amendment Act'') came into force on August 22. It increased the number of units affected by rent control from 3,600 to 13,300 -- or 48 percent of the Island's residential units.

The Amendment Act updates the Rent Increases (Domestic Premises) Control Act 1978 ("the 1978 Act''), which applied to tenancies existing on or after July 1, 1978 with two notable exceptions.

Tenancies of any premises whose annual rental value ("ARV'') for land tax purposes exceeded $9,900 were excepted, as were those where the Department of Planning had issued a certificate of occupancy on or after June 30, 1983.

The Amendment Act raised the ARV under the first provision from $9,900 to $16,200, while the second exception was deleted altogether.

While the Amendment Act should improve the legal position of many tenants, it will not benefit landlords, many of whom will be more cautious in respect of letting rent-controlled premises.

That is particularly likely where landlords are addressing the formalities and conditions of rent control for the first time. These formalities and conditions are contained in the 1978 Act, which was introduced primarily to provide tenants of rent-controlled premises with security of tenure, and also to prevent such tenants from being subjected to arbitrary and potentially unfair increases in rent.

As its title implies, the 1978 Act is specifically intended to apply to situations where rent is being increased as opposed to situations where, for example, a newly constructed unit is being let for the first time.

In circumstances where a tenant occupying rent-controlled premises does not agree the rent increase that his landlord proposes, the landlord must apply to the Rent Commissioner for authorisation to increase the tenant's rent.

The Rent Commissioner is empowered by the 1978 Act to decide whether or not the proposed increase is acceptable and if not to specify an acceptable increase (if any).

Even if the landlord and tenant agree on a rent increase, the Rent Commissioner must be notified of this increase. If the tenant was pressured into agreeing the increase, the Rent Commissioner may render the increase void.

Landlords are prohibited from procuring mutually agreed increases before the commencement of, or within the first six months of, a rent-controlled tenancy.

Additionally, the termination of a rent-controlled tenancy by a landlord is only possible in limited circumstances, such as where: the tenant has breached the terms of his tenancy agreement, which would include the failure to pay rent; the landlord requires possession of the premises for use as a dwelling for himself or other members of his immediate family including his mother, father, or any child or grandchild; the landlord requires vacant possession of the premises in order to carry out renovations of a major character; the tenancy would otherwise terminate following a change in the identity of the landlord or the tenant as a matter of law.

The termination provisions contained in the 1978 Act do not apply to rent-controlled tenancies commencing after June 30, 1983 which involve buildings partially occupied by landlords, and which contain three or fewer living units, nor do they generally apply to tenancies entered into by landlords and tenants as a consequence of an employment relationship.

In terms of negotiating tenancy agreements involving rent-controlled premises, landlords have to be mindful of the restrictions involving rent increases.

They must also realise that they probably will not find themselves in a position to specify or negotiate the duration of any tenancies granted.

Landlords will, however, be able to negotiate the remaining terms of such tenancies including for example, when and by what means the rent should be payable.

Contravention of the provisions of the 1978 Act can result in criminal prosecution.

For that reason, any landlord who is unsure whether or not his premises are rent- controlled and/or is unsure about the formalities of rent control, should either contact the Rent Commissioner's office, or seek legal advice before entering into a tenancy agreement or receiving any rent.

*** Attorney Scott Swainson is a member of the Property Department at Appleby Spurling & Kempe. Copies of Mr. Swainson's columns can be obtained on the Appleby Spurling & Kempe web site at www.ask.bm.

*** This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.