• Govt. seeks to dismantle 1972 Rent Act
• New legislation targets forced evictions, utility cut-offs, extra-judicial removals
• Justice Ministry says reforms strengthen rule of law, not defaulting tenants
• Critics fear responsibility is being separated from protection

The Sri Lankan housing market is poised for its most significant legislative transformation in over half a century as the Government moves to repeal the Rent Act No.7 of 1972.

In a major shift away from the pro-tenant statutory tenancy model that has governed the island since the socialist reforms of the 1970s, the Ministry of Justice has gazetted two accompanying pieces of legislation that are said to be aimed at liberalising the market while simultaneously imposing strict new safeguards against arbitrary eviction.

The proposed repeal of the 1972 act marks the end of an era for property laws in the country. For decades, the 1972 act provided extensive protection to tenants, often freezing rents at historical rates and making eviction notoriously difficult. While this protected vulnerable families, economists and property developers have long argued that it stifled the rental market, discouraged maintenance, and led to a decay in housing stock.

The bills, titled the Rent (Repeal) Bill and the Protection of Occupants Bill, were published in the gazette on 18 September 2025, and are currently the subject of intense debate.

Protection of Occupants Bill

The Protection of Occupants Bill establishes a comprehensive legal safety net for any individual who qualifies as an occupant. Under the proposed law, an occupant is defined as any person who has been in lawful occupation of a premises for a continuous period of not less than three months. Once this threshold is met, the individual acquires a statutory right to protection from extra-judicial eviction. 

The bill explicitly prohibits landlords from resorting to self-help remedies, such as changing locks, physically removing the tenant, or severing essential utilities, to recover possession of a property. Instead, the legislation mandates that all evictions must be carried out exclusively through a court order, regardless of whether the underlying lease agreement has expired or been terminated.

Minister of Justice and National Integration Harshana Nanayakkara, speaking to The Sunday Morning, vigorously defended the bill, claiming that the intention of the Government was not to shield defaulting tenants but to uphold the rule of law.

“This act focuses on the specific reality that there are instances where lights, electricity, and water are disconnected to unlawfully compel a tenant to leave,” Nanayakkara said, emphasising that the legislation targeted a specific type of landlord behaviour that bypassed the judicial system. By criminalising these acts, the Government hoped to professionalise the rental sector, he said.

The penalties for non-compliance are severe. According to the draft bill, any landlord who is found guilty of obstructing a court order or attempting to forcibly eject an occupant can be cited for contempt of court. The bill also prescribes a fine of up to Rs. 500,000, a prison term of up to one year, or both for such offences, highlighting the seriousness with which the administration views the violation of housing rights.

The ‘moral hazard’ critique

The bill has, however, drawn sharp criticism from the legal fraternity and property owners who fear it creates a moral hazard. Leading the charge against the current draft is former Minister of Justice Ali Sabry, PC, who took to social media to warn that the bill, while well intentioned, could have disastrous consequences for the very market it seeks to regulate. 

Sabry argued that the proposed law risked undermining the significant progress made by recent legal reforms, specifically the Recovery of Possession of Premises Given on Lease Act No.1 of 2023, which was designed to expedite legal proceedings for landlords with formal lease agreements.

“The proposed Protection of Occupants Bill is clearly well intentioned. Preventing harassment and unlawful eviction is a legitimate public objective. Yet good intentions do not always produce good law. If enacted in its present form, this bill risks being deeply counterproductive, undermining both the rental market and the very tenants it seeks to protect,” Sabry said.

The former Minister noted that Sri Lanka had only recently begun to emerge from the shadows of the 1972 Rent Act, moving towards a framework that respected contractual autonomy. Concerned that the new bill attempts to reintroduce rigid controls that ignore the economic realities of modern property management, he specifically highlighted a common scenario where the proposed law could force property owners to subsidise tenants who had knowingly breached their contracts.

“Consider a scenario that is neither hypothetical nor rare. A tenant lawfully enters a condominium unit under a written lease. Within months, the tenant defaults on rent, fails to pay Condominium Management Authority charges, and neglects utility bills. Acting within their legal powers, the authority and service providers disconnect services. 

“Under the proposed Protection of Occupants Bill, however, the landlord may nevertheless be compelled to restore utilities and maintain the tenant at his own expense while court proceedings run their course. In effect, the law obliges the property owner to finance a tenant who is in clear contractual default. This is not protection of occupation; it is protection of non-compliance,” Sabry explained.

This specific criticism strikes at the heart of the debate: whether the State should intervene to maintain essential services for a tenant who has ceased to pay for them. Under the current draft of the bill, the prohibition on disconnecting utilities is absolute, meaning a landlord could face criminal charges for cutting off water or electricity, even if the tenant is thousands of rupees in arrears. Sabry argued that this disconnect between rights and responsibilities created a dangerous precedent.

“Tenant protection cannot be divorced from tenant responsibility. No modern legal system can function rationally where rent need not be paid, common expenses may be ignored, and utilities are left unpaid, yet statutory protection continues uninterrupted. Such a framework creates moral hazard, encouraging strategic default and abuse of legal safeguards,” he said.

Sabry’s criticism is particularly acute regarding condominiums, where the financial burden of a defaulting tenant affects not just the landlord but the entire Condominium Management Authority and other unit owners.

“The problem is particularly acute in condominium living, which is not a simple bilateral relationship between landlord and tenant. Condominium occupancy involves management corporations, shared services, and statutory obligations to other unit owners. When a tenant defaults, the consequences extend beyond the landlord. Transferring the entire financial and legal burden onto the property owner, while insulating the defaulting tenant, is neither fair nor sustainable,” Sabry noted.

Dispute over legislative origins

The public exchange on the bill took a contentious turn when Attorney-at-Law Aritha Wickramasinghe challenged the narrative presented by the former Minister. In a detailed rebuttal, Wickramasinghe pointed out that the Protection of Occupants Bill was not a new invention of the current administration but had, in fact, originated during Sabry’s own tenure in the Cabinet.

“The Protection of Occupants Bill was first approved by the Cabinet of Ministers in 2023, when Mohamed Ali Sabry himself was a Cabinet Minister. It was then published in the gazette and submitted to Parliament in 2024. The 2024 and 2026 bills are substantially similar,” Wickramasinghe said.

He argued that the criticism of the bill often ignored the existing legal context, highlighting that the current law governing these matters was the Protection of Tenants (Special Provisions) Act of 1970, a piece of legislation that arguably offered even broader and less defined protection to tenants than the proposed new law. He posited that the new bill was actually a modernisation effort that imposed necessary structure and timelines on the eviction process.

In response to Wickramasinghe’s assertion that the bill had been approved under his watch, Sabry issued a subsequent clarification. He did not deny the timeline but sought to distinguish between the initial policy intent and the drafted legislation.

Addressing the specific claim that he had been part of the Cabinet that approved the text, the former Minister stated that he was likely absent during the session in question due to official duties abroad. “If my recollection is correct, subject to verification, I did not attend the Cabinet meeting at which this version was discussed, as I was likely out of the country on official visits to Japan and Singapore,” he said.

Conflict with 2023 recovery act

Beyond the political crossfire, there is a technical legal concern that the new bill conflicts with the Recovery of Possession of Premises Given on Lease Act, No.1 of 2023. The 2023 act was hailed as a landmark reform that introduced a fast-track eviction process for landlords with notarised lease agreements. 

As per the act, a landlord can obtain a decree nisi, or a provisional order, relatively quickly if a tenant holds over after the expiry of a formal lease. Sabry warned that the broad protections in the new occupants bill could override these streamlined procedures, dragging all disputes back into a protracted legal mire.

Wickramasinghe, however, dismissed this concern, arguing that the two laws had distinct purviews. 

Meanwhile, Minister Nanayakkara acknowledged the divergence of legal opinion on this matter, but assured stakeholders that the final version of the law would provide clarity. He noted that the ministry was aware of the potential conflict and was taking steps to resolve it before the bill was presented to Parliament.

“There are two schools of thought. One is what Ali Sabry said, and the other argues that the 2023 act will not be overridden by this bill. Since there are differing views on the clarity of the law, this is exactly why we are calling for the new committee to look into all these representations,” Nanayakkara said.

Judicial delays and statutory timelines

To address the notorious delays in the Sri Lankan court system, the Protection of Occupants Bill includes provisions for expedited hearings. 

The draft legislation mandates that courts must hear and determine applications for relief within a specific timeframe. If the respondent, the landlord, fails to file objections, the court is required to conclude the matter within three months, while in contested cases, the timeline is capped at nine months. 

Despite widespread scepticism among many  practitioners about the feasibility of these deadlines, Nanayakkara remained firm on the statutory obligation, given the existing backlog of cases in the district court. “When a law mandates that a matter must be concluded within three months, it must be done, regardless of any backlog. It has to be given priority, similar to the mandate in the 2023 act,” he said.

Despite the Minister’s assurances, the economic warnings from the Opposition remain stark. Sabry predicted that if the bill were passed without significant amendment, it would trigger a rational but damaging response from property owners, ultimately hurting the very demographic the Government aimed to protect.

“The economic consequences are predictable. Faced with increased risk, prolonged litigation, and diminished control over their property, rational landlords will respond in a rational manner. Many will withdraw their properties from the leasing market altogether. Others will demand higher deposits or resort to informal arrangements. Rental supply will contract, prices will rise, and tenants, especially young families and middle-income earners, will find it increasingly difficult to secure affordable housing,” Sabry warned.

Proposing a specific solution to resolve the impasse, Sabry suggested that rather than scrapping the bill, the law should simply require tenants to be in good standing to claim its benefits, making the protections conditional. 

“What makes this outcome particularly troubling is that it is entirely avoidable. The problem does not require a new statutory regime. It can be addressed through a simple and sensible amendment to Act No.1 of 2023. Statutory protection should be conditional upon compliance. Before an occupant is entitled to protection, there should be a clear requirement that rent is paid or deposited in court, utility bills are settled, and condominium management charges are cleared. No payment, no protection,” Sabry proposed.

Transitional measures and public consultation

The Government has also built in a transitional mechanism to manage the repeal of the 1972 Rent Act, with the Rent (Repeal) Bill including a savings clause that effectively delays the full impact of the repeal for one year from the date of certification.

Accordingly, during this grace period, existing statutory tenants cannot be evicted solely on the grounds of the repeal, and rent increases are capped. This transitional year is intended to allow the market to adjust, and for landlords and tenants to negotiate new lease agreements under the standard contract law regime. Furthermore, any pending cases before local rent boards or the Board of Review must be concluded within this one-year period.

In response to the mounting criticism and market fears, Nanayakkara announced an extension of the public consultation period. He emphasised that the draft was not final and that the Government was actively seeking input to ensure a balanced outcome.

“We decided to extend the consultation for another month to gather ideas, ensuring that both the tenant and the landlord have equal protection under this law – protection against unlawful eviction on one hand and against tenants unlawfully overstaying on the other. We intend to redo the draft. I have appointed a new committee to reconsider the act entirely, and I can assure you that the law will not be passed in this Parliament in its current form,” Nanayakkara said.

In a culture where informal lodging arrangements have become common, property owners worry that the three-month threshold is too low and could inadvertently grant tenancy rights to short-term guests, licensees, or friends who overstay their welcome. 

When pressed on whether the ministry would refine the definition of an occupant to exclude guests and licensees, Nanayakkara said: “All aspects are going to be considered. The minister does not make the law alone; a panel of experts will deliberate on these matters. All submissions will be considered to ensure that the rights of landlords are not compromised.”

The ministry has invited the public, the Bar Association of Sri Lanka (BASL), and other stakeholders to submit their observations and proposals to the Secretary of the Ministry of Justice by 4 March.