- June 8, 2021
- Posted by: Maestro Legal
by Kumari Sonam
Almost two years of announcement, the union cabinet approved the model tenancy act on 02/06/2021.The Act’s main aim is to create a balance of rights and interests of the landlords and the tenants. Also, its purpose is to establish a rent authority, separate rent courts and tribunals in every state to ensure speedy dispute resolution. The draft of the Act was first released in the year 2019.After its enforcement it will apply to all premises let out for residential, commercial or educational uses, but not for industrial use. Also, the act will not apply to hotels, lodging houses, inns etc.
The act will be applied prospectively, and it will not affect any existing tenancies.
The model act will be circulated to all the states/union territories for adaptation of the act by the way of fresh legislation or amending existing rental laws suitably. According to the Government the act aims to create a vibrant, sustainable and inclusive rental housing market in the country.
“It will enable creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness. Model Tenancy Act enable institutionalisation of rental housing by gradually shifting it towards the formal market. The Model Tenancy Act will facilitate unlocking of vacant houses for rental housing purposes. It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage.”, the press release issued by the Government reads.[i]
Need of the Act: –
According to the reports of Census 2011, more than 1 crore houses were lying vacant in the urban areas. This is reportedly because the owner of the property fears of losing possession. And by making these houses available for rent it will complement the vision of Housing forAll by 2022.
“The existing rent control laws are restricting the growth of rental housing and discourage owners from renting out their vacant houses due to fear of repossession. One of the potential measures to unlock the vacant house is to bringing transparency and accountability in the existing system of renting of premises and to balance the interests of both the property owner and tenant in a judicious manner,” says the new Act, piloted by the Ministry of Housing and Urban Affairs.
Key Features of the Act
- Written Agreement is mandatory
The act mandates that there should be a written agreement between the property owner and the tenant
- Establishment of Independent Authority
The act also mandates that there should be aestablishment ofan independent rent authorities rent courts and rent tribunals to dispose of the complaints in time bound manners it should be established in every state and union territory for the purpose of registration of tenancy agreement and tenancy related disputes
- Limit for security Deposits
Residential Purpose -The limit is to a maximum of two months’Rent
Non-ResidentialPurpose – It is a maximum of 6 months’ Rent.
- Obligation of Landlord: –
- The property owner will be responsible for activities like structural repairs except those necessitated by the damage caused by the tenant, whitewashing of walls and painting of doors and Windows etc.
- The act also proposes a three months’ notice to the tenant by the landlord before hiking up the rent amount to ensure that the landlords get the market price of their premises while at the same time the tenant gets the enough time to adequate arrangements to make up to the increased amount.
- There should be at least 24 hours prior notice before entering the rented premises to carry out repair or replacement in the premises.
- The act also mandates that if the property owner fails to make any refund, then they will be liable to pay a simple interest to the tenant at a rate that may be prescribed from time to time, the amount he admitted are fail to refund. as per the act no landlord can withhold/retain essential to the premises occupied by the tenant is the period of dispute or on any other pretext.
- Obligation of the Tenant: –
- The tenant will be responsible for repair of switches and sockets, drain cleaning, replacement of Glass panel in Windows, kitchen fixtures and maintenance of Garden and open Area.
- They will also not carry out any structural changes in the premises without the prior consent of the landlord that to in written.
- Mechanism for vacating the Premises: –
- If the property owner has fulfilled all the conditions stated in the rented agreement giving notice and still the tenant fails to vacate the premises on the expiration of the period of tenancy or termination of Tenancy the landlord will be entitled to receive double the monthly rent for 2 months and 4 times after that.
- In case of Dispute: –
- The act also mandates that in case any dispute arises between the tenant and landlord the parties will be required to first approach the rent authority, if they are not satisfied with the authority order then they can approach the Rent Court and lastly the Rent Tribunal.
- The Act also mandates if the landlord had proposed to make any improvement or construct any additional structures on/in the premises and the tenant refuses to allow it then the landlord can make an application in this behalf to the Rent Court.
Difference between Lease under Transfer of Property Act and Tenancy under Model Tenancy Act
|Basis||Lease under Transfer of Property Act, 1882||Tenancy under Model Tenancy Act, 2020|
|Definition of Transferor, transferee and rent||Section 105 of the Act states- the transferor is called Lessor, the transferee is called, the lessee, and the money, share, service or other things to be so rendered is called the rent.||The Section 2(a) defines Landlord as- “landlord”, whether called landowner or lessor or by any other name, means a person who receives or is entitled to receive, the rent of any premises, on his own account, if the premises were let to a tenant, and shall include –– (i) his successor-in-interest; and (ii) a trustee or guardian or receiver receiving rent for any premises or is entitled to so receive, on account of or on behalf of or for the benefit of, any other person such as minor or person of unsound mind who cannot enter into a contract Section 2(n) defines Tenant as – whether called lessee or by any other name, means a person by whom or on whose account or on behalf of whom, the rent of any premises is payable to the landlord under a tenancy agreement and includes any person occupying the premises as a sub-tenant and also, any person continuing in possession after the termination of his tenancy whether before or after the commencement of this Act; but shall not include any person against whom any order or decree for eviction has been made. Section 8 defines Rent Payable as – The rent payable in respect of a premises shall be the rent agreed to between the landlord and the tenant in accordance with the terms of the tenancy agreement.|
|Presence of Contract/Agreement||Not Mandatory||Mandatory|
|Rights of the Lessor||A lessor has a right to recover the rent from the lease which was mentioned in the lease agreement.Lessor has a right to take back the possession of his property from the lessee if the lessee commits any breach of condition.Lessor has a right to recover the amount of damages from the lessee if there is any damage done to the property.Lessor has a right to take back the possession of his property from the lessee on the termination of the lease term prescribed in the agreement.||Landlord has a right to receive the rent on stipulated time.To enter into premises for repair work with prior notice of 24 hours.Double payment of rent for two months and after that 4 time od rent in case the tenant refuses to vacate the premises.|
|Liabilities of the lessor||The lessor has to disclose any material defect relating to the property which the lessee does not know and cannot with ordinary supervision find out.Lessor is bound by the request of the lessee to give him the right of possession over his property.Lessor can enter into a contract with the lessee if he agrees to abide by all terms and conditions prescribed in the agreement, he can enjoy the property for the rest of the time period without any interference with an obligation to pay the rent later on||To do all the whitewashing of walls and painting of doors and Windowsrepair work.Give prior notice to tenant before entering the premises.No to withhold any essential supply or service in the premises occupied by the tenant.|
|Rights of the lessee||Lessee has a right to detach all things that he may have attached in the property or earth. His only obligation is that he has to leave the property in the same condition as he received it.When a lease is of unspecified duration in the lease agreement, lessee or his legal representative have a right to collect all the profits or benefits from the crops which were sown by the lessee at that property. They also have a right of free ingress and egress from such property even if the lease ends.Lessee has a right to transfer absolutely the property or any part of his interest in that property by sub-leasing or through mortgaging. Lessee is not independent of the terms and conditions mentioned in the lease agreement.||Right to receive 24 hours prior notice by the landlord before entrance.|
|Liabilities of the lessee||Lessee is under an obligation to disclose all related material facts which are likely to increase the value of the property for which the lessee has an interest in and the lessor is not aware of.Lessee is under an obligation to pay the rent or premium which is settled upon in the agreement to the lessor or his agent within the prescribed time.Lessee is under an obligation to maintain the property in the condition that he initially got the property on commencement of the lease and he has to return it in the same condition.If lessee gets to know about any proceedings relating to the property or any encroachment or any interference, then lessee is under an obligation to give notice to the lessor.Lessee has a right to use all the assets and goods which are on the property as an owner would use which is preserving it to the best of its nature. He is although under obligation to prevent any other person from using that asset or good for any other purpose from what was prescribed in the lease agreement.The lessee cannot attach any permanent structure without the consent of the lessor except for the purpose of agriculture.Lessee is under an obligation to give the possession of the property back to the lessor after the expiry of the prescribed term of the lease.||Not to damage the premisesInform in writing the landlord of any damageTake responsible care of the premises and its contents including fitting and fixtures.|
|Place for Dispute resolution||Civil Court||Rent Authority Rent Court, Rent Tribunal.|
Significance of the Act: –
- It will help the legal framework with respect to rental housing across the country.
- It will help in creating an adequate rental housing stock for the income groups addressing the issue of homelessness.
- The authorities created under this act will provide a speedy mechanism in resolving the disputes and other related matters.
- It will enable institutionalisation of rental housing by gradually shifting it towards the formal market.
- It will also create a formal relation between the landlord and the tenant.
Short comings of the Act: –
- As the act will be prospective basis it will not impact, he existing tenancies and by which the landlord of the property will not get the market price of their property.
- The act will cover only aspect of written agreement tenancy, the labour class will face a lot of problems as earlier they used to get rent premises only verbally.
- The act is not binding on the states as land and urban development still remains under state list.
- The act is also silent on license and leave arrangements.