MODEL TENANCY ACT

Model Tenancy Act is Approved by the Union Cabinet

The Union Cabinet, on June 2, 2021, approved the Model Tenancy Act, in a move that is likely to revive India’s rental housing market by initiating a multitude of reforms.

The government issued a statement that said, “The Model Tenancy Act aims at creating a vibrant, sustainable and inclusive rental housing market in the country. It will enable the creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness.”

States and union territories can adopt the Model Tenancy Act by enacting fresh legislation or they can amend their existing rental laws suitably.

As the government pursues its ambitious dream to provide ‘Housing for All by 2022’, it unveiled a draft tenancy law, in order to boost supply in the rental housing segment. The Model Tenancy Act 2019, aims to make renting more lucrative for both, landlords and tenants, by plugging the many gaps that currently exist in policies regulating the rental housing segment.

A Comprehensive Regulatory Framework

The Model Tenancy Act has proposed to create a regulatory framework, which will be just for both the landlords and the tenants.  However, the Act will be applied prospectively and will not affect existing tenancies.

States could set up rent authorities in cities. After its establishment, landlords and tenants would have to be present before the authority to get the rent agreement registered. For its part, the authority would set up a website, to maintain all the data it receives in the form of rent agreements.

After the commencement of the Act, letting out any premises will be done by way of a written agreement, which will be submitted by them to the rent authority within two months from the date of the agreement.

In the case of any discontent, the tenant and the landlord would first approach the rent authority for an amicable solution. If the disputing parties are not satisfied with the order of the rent authority, they could approach the rent court/tribunal to seek relief. These courts would have to pass an order within 60 days of receiving a complaint.

After the rent courts are set up, civil courts would have no jurisdiction over disputes pertaining to rental agreements. ‘Only the rent court and no civil court, shall have jurisdiction, except the jurisdiction of the rent authority under Section 30, to hear and decide the applications relating to disputes between landlord and tenant’, states the Act.

The Act stated that the state government and union territories, in consultation with the jurisdictional high court can appoint a district judge or additional district judge as ”Rent Tribunal” in each district.

However, as land is a state subject, the states are within their rights to accept or reject the Act partially or fully.

How the Model Tenancy Act will Protect the Interest of Tenants

Security deposit: For residential premises, tenants will have to submit a security deposit of a maximum of two months’ rent, while in the case of commercial property, six months’ rent will have to be deposited.

Essential services: The Act says that no landlord or property manager can withhold any essential supply to the premises occupied by the tenant.

Eviction of a tenant: Any tenant will not be evicted during the continuance of the tenancy agreement unless otherwise agreed to in writing by both parties.

Increasing the rent: Landlords cannot hike the rent at any time during the rental agreement period unless there is a provision, which is clearly mentioned in the rental agreement. The landlord will have to give three months’ notice to the tenant, before increasing the rent.

Intrusion by landlords: Landlords cannot march into a tenant’s premises any time they want. A landlord needs to give a written notice to visit the premises, 24 hours in advance. Additionally, they cannot visit the rented premises beyond 7 am to 8 pm.

Repair and maintenance: Under the Model Tenancy Act, unless otherwise agreed in the tenancy agreement, the landlord will be responsible for activities like structural repairs except those necessitated by damage caused by the tenant, whitewashing of walls and painting of doors and windows, changing and plumbing pipes when necessary and internal and external electrical wiring and related maintenance when necessary.

How the Model Tenancy Act will Protect the Interest of Landlords

Repair and maintenance: On his part, the tenant will be responsible for drain cleaning, witches and socket repairs, kitchen fixtures repairs, replacement of glass panels in windows, doors, and maintenance of gardens and open spaces, among others.

Additional structural changes: Where the landlord proposes to make any improvement in or construct any additional structure on any premises, which has been let out to a tenant and the tenant refuses to allow the landlord to make such improvement or construct such additional structure, the landlord may make an application in this behalf to the Rent Court.

Overstay of tenants: Tenants would be liable to pay the landlords double the rent for two months and four times the rent in the consequent months, in case they stay after the expiry of the rental agreement.

Sub-letting of the premises: Tenants would not be allowed to sub-let whole or part of the rented accommodation without the prior permission of the landlords.

Eviction of tenants: Landlords can approach the rent court asking for eviction if the tenants fail to pay the rent for two months in a row.

Will the Act Give a Fillip to the Rental Housing Market?

It is expected that the Act, as and when implemented by the states, will give a boost to the rental housing market in the country. It can also formalize the market and potentially open up vacant houses for rental housing purposes.

A statement by the government stated, “The Model Tenancy Act aims at creating a vibrant, sustainable and inclusive rental housing market in the country. It will enable the creation of adequate rental housing stock for all the income groups, thereby addressing the issue of homelessness.”

However, the smooth implementation will depend on the co-operation of all stakeholders and if the Act is implemented in the right letter and spirit, it will go a long way to stimulate the housing market.

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