Background

The draft Model Tenancy Act (MTA) was released in 2019 and has been cleared by the Union Cabinet on June 2 nd , 2021. The move had been backed up by Pradhan Mantri Aawas Yojana (PMAY-U) and the report of the 2011 Census. The housing scheme (PMAY-U) aims to provide affordable housing to different sections of people and one of the ways to fulfil the aim is by unlocking the vacant houses across the Country. According to the 2011 census report, there were about 24.67 million vacant houses of which around 11.09 million houses were in Urban parts of India. That is, over 1.1 crore houses were vacant in Urban areas and making these houses available for rent would complement the vision of ‘Housing for All’ by 2022.

Introduction

The MTA is a draft model for all the States/UTs to amend the existing local rent control laws to meet the current needs of the real estate market. As per the memorandum of understanding signed between the states and union territories under PMAY-U, the states and union territories would legislate or amend the existing rental laws on the lines of the Model Tenancy Act. The MTA however, is prospective and applies only to the future tenancy agreements and not to the existing ones.

How to enter a Tenancy Agreement?

The major change brought by MTA is the mandatory requirement of entering into a Tenancy Agreement by the tenants and landlords. Both the parties are required to inform the Rent Authority jointly, by submitting the form given in Schedule 1 of the MTA along with the prescribed documents on the website/digital platform announced by the Rent Authority. The said submission has to be made within 2 months from the date of execution of the agreement. In case, parties fail to inform jointly then they shall do it separately within 1 month from the expiry of 2 months period.

The rent authority shall after receiving information of the execution of the said agreement along with the documents, provide a unique identification number to the parties and upload the details of the tenancy agreement on their website in vernacular language or language of the State/UT within seven working days.

• The Rent shall be paid by the tenant as mutually agreed in the agreement.
• The Landlord cannot revise the rent without seeking the tenant’s approval.
• The Security Deposit shall be paid in advance but cannot exceed two months’ rent in case of residential premises and six months’ rent in case of non-residential premises.
• The Security Deposit shall be refunded to the tenant on the date of taking over vacant possession of the premises after making required deductions.

What are the rights and obligations of the Landlords?

To get receipt/bank acknowledgment for the payment of rent.

To get rent and other charges as per the tenancy agreement.

To pay the rent via postal money order to the landlord or to pay to Rent Authority, in case the Landlord refuses to accept rent.

To enter the premises for inspection, maintenance, reasonable cause after giving 24 hrs notice but not before sunrise and after sunset.

To abandon the uninhabitable premises after giving 15 days’ notice to the landlord .

To deduct charges from security deposit if the tenant fails to maintain the premises .

Maintenance of premises like drain cleaning, changing of tap washers and taps, washbasin repairs, switches and socket repairs, etc. (Schedule 2)

Structural Repairs, the whitewashing of walls, changing plumbing pipes, maintenance of electrical wiring. (Schedule 2)

Take reasonable care of the premises and inform the landlord about damage.

Not to hold a supply of essential services.

Under what circumstances can the landlord evict you?

The tenant cannot be evicted by the landlord during the continuance of the tenancy agreement. However, the Landlord can file an application for eviction to the Rent Authority based on the following grounds:

• If the tenant does not agree to pay the rent as mentioned in the tenancy agreement.
• If the tenant has not paid the rent as well as other charges for two consecutive months.
• If the tenant takes possession of any part of premises without the written consent of the landlord.
• If the tenant misuse (includes immoral, illegal, public nuisance activities) the property even after receipt of notice by the landlord.
• If the landlord is necessitated to do some construction work in the premises which cannot be possibly done without vacating the premises.
• If the tenant has given a written notice to vacate the premises and the landlord would suffer a loss if not granted the possession.
• If the tenant has carried out any structural change without the written permission of the landlord.

Can the tenant/landlord file a complaint/appeal?

Yes, both the parties can file an application or appeal before the Rent Court or Rent Tribunal as the case may be along with affidavits and documents. The Rent Court/Tribunal acts under the Code of Civil Procedure for various purposes like issuance of summons, evidence on affidavits, examination of witnesses, etc. However, the Court/Tribunal is guided by the principles of natural justice and are allowed to regulate their own procedure.

Can a tenant be evicted if the landlord is dead?

Yes, in the case of death of the landlord, an application can be filed for eviction by the legal heirs of the deceased landlord to the Rent Court and if the court is satisfied that there is a bona-fide requirement of the said premises by the applicant/legal heirs, then an order shall be passed against the tenant for handing over vacant possession of the said premises to the legal heirs of the deceased landlord.

What if the Landlord makes structural changes during the tenancy and increases the rent?

Many times, the landlord commences construction work during the tenancy period and incurs costs on making alterations, improvements, structural changes which are not necessary repairs to be carried out in the premises occupied by the tenant, hence stresses on a revision of rent. Under Section 9(2) of MTA, rent can be increased in such cases, only if there is a written agreement between the landlord and tenant before the commencement of such work. Also, the said rent would be applicable after one month from the date of completion of such work.

Need for Model Tenancy Act

• Rising Vacant Houses: The number of vacant houses in urban India has been rising exponentially in the recent past. The lack of suitable legislation for the stakeholders in the rental housing market could be the real motivating factor for the government to pass the said bill. The percentage of vacant houses in major cities in India remains very high. While Gurugram has 25.8 % of the total vacant houses in India, Pune holds the second position holding 21.7%, and Mumbai at no. 3 holding 15.3% of the total vacant stock in India. Once the said bill sees a green signal from all the States and UTs, the said vacant stock can be brought within the ambit of organized rental housing as the stakeholders – tenants and landlords might find it easier to bridge the trust deficit and unlock the true utility of this housing stock.
• The new framework for Dispute Resolution: The tenancy disputes between landlord and tenant are not uncommon in India. Although there have been rent control laws in every state, conflicts have been unavoidable. The absence of regulation has been one of the biggest deterrents for the landlords to let out their properties. With the advent of the MTA, a three-tier disputes redressal structure has been created which comprises of Rent Authority, Rent Courts, and Rent Tribunals which would help to reduce the burden of the Civil Courts by diverting the burden on these authorities. The Rent Courts/Tribunals having personnel, not below the rank of Additional Collector/ Additional District Judge shall endeavour to dispose of cases expeditiously, and within 60 days from the date of receipt of the application or appeal.
• Role of Property Managers: The MTA is not silent about the role of middlemen/brokers/Property Managers/ Rental agents in the rental housing market. It provides the definition, their roles, and consequences of violation. Any person or legal entity who is authorized by the landlord to manage the premises or acts on behalf of the landlord or tenant or both in a transaction of renting of any premises and receives remuneration or any fees or any other charges for his services will be included here . Also. the MTA fixes accountability for property managers and they will be required to furnish details such as name, address, PAN number, Aadhar number, and contact information for submission to rent authorities. The MTA is welcomed with open arms by the property managers as it will provide them with more opportunities while going forward in the residential sector.

Challenges

1. Force Majeure: The definition has included any situation of war, flood, drought, fire, cyclone, earthquake, or any other calamity caused by nature affecting the habitation of the tenant in the premises let out on rent. Although the MTA talks about both residential as well as commercial tenancy, it is quite ambiguous, how the definition after expressing the types of events has linked to residential tenancy in the end. The states must make some alterations and should make it lucid as to the responsibilities and the holder of risk during force majeure events.
2. Digitalization: The MTA provides for the uploading of information and documents submitted by the applicants/parties on the portal formed by the Rent Authority. So, as it appears from the words of the statute every district would be having a Rent Authority and hence would be required to put in place a digital platform. There is certainly a need for a unified portal across the country which should be arranged by the Central government to save time and money instead of having a different portal for every Rent Authority. In the age of digitalization, the availability of information is a well-established tenet of informed decision-making. Any delay in setting up of digital platforms or Rent Authorities might have serious implications.
3. Exclusion of certain property: The MTA does not include property like premises owned or promoted by the Central Government/ State Government/ Union Territory Administration/local authority/ Government undertaking/ enterprise / statutory body/ Cantonment Board/ company/ University/organization/ religious institutions notified by state govt./ charitable trusts/ Auqaf under Waqf Act, 1995 or any building specifically exempted for the public interest. Such exclusion will keep a large part of vacant stock out of the regulatory framework and stakeholders will still have to rely on other legal resources available for dispute resolution.

Conclusion

The intent of the central government seems to be in the line of progress and formalization of the real estate market. The MTA aims to create a vibrant, sustainable, and inclusive rental housing market in the country. It will help to eliminate the fears from the stakeholders and will enable the landlords to unlock the vacant premises and create adequate housing stock for all income groups thereby addressing the issue of homelessness. However, the act is in a nascent stage and has to deal with tedious processes before it gets implemented. Identification and appointment of personnel for Rent Authority/ Rent Courts/ Rent Tribunals would be a cumbersome process and would also require adequate time for the on-ground implementation of the MTA.

A good start is however made by the state of Karnataka by showing a green signal to the MTA and has asked for public opinion on the same. There are also states like Maharashtra that think the new act will create a problem for the people living in chawls and slums who are the backbone of the government’s vote bank. From learnings of the past, RERA implementation on the ground level has been impactful since it passed in 2016 and most states have already adopted it in full letter and spirit. The future of the Model Tenancy Act is also bright and will go a long way in the history of Indian real estate market.

References

• https://www.moneycontrol.com/news/business/real-estate/model-tenancy-act-how-will-it-help-how-will-it-be-implemented-and-other-questions-answered-6980011.html
• https://www.mondaq.com/india/landlord-tenant–leases/1086586/model-tenancy-act-2021-gets-approved-by-the-cabinet-key-features#:~:text=India%3A%20Model%20Tenancy%20Act%2C%202021,By%20The%20Cabinet%20%E2%80%93%20Key%20Features&text=Under%20the%20seventh%20schedule%20of,are%20subjects%20regulated%20by%20states.
• https://www.thehindu.com/news/national/karnataka/govt-proposes-model-tenancy-act-to-balance-interests/article35224756.ece
• https://content.knightfrank.com/research/2264/documents/en/a-new-era-for-rental-real-estate-in-india-indian-real-estate-residential-office-8206.pdf

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