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Rent, security, maintenance — what could change for tenant & landlord under Model Tenancy Act

With a total of 47 sections and two schedules, the Model Tenancy Act proposes completely overhauling the legal framework of rental housing across the country. 

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New Delhi: Compulsory tenancy agreement, payment of rent, rights and obligations of landlord and tenant and conditions for eviction — the Model Tenancy Act 2021, approved by the Union Cabinet, proposes an overhaul of the legal framework of rental housing across the country.

With a total of 47 sections and two schedules, the Model Act is the same as the draft Model Tenancy Act 2020 released by the Ministry of Housing and Urban Affairs in October last year.

In a note attached to the draft Act, the ministry had introduced the Bill as a step towards fulfilling Prime Minister Narendra Modi’s ‘Housing for All’ by 2022 vision.

The note had said that the model law “has been prepared with the objective of balancing the interests and rights of both the landlord and tenant; and to create an accountable and transparent ecosystem for renting the premises in a disciplined and efficient manner”.

How does this model Act propose to change things for landlords and tenants? ThePrint explains.

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What is a ‘model’ law?

This Act, which is applicable to residential and commercial tenancies, is just a “model” law. This means that it provides a prototype of a law that states and Union Territories can adopt completely or with changes or not adopt it at all.

The reason for issuing just a model Act and not passing a binding law is that the Parliament cannot pass a binding law in this case. Land falls under the State List of the Seventh Schedule, and according to Article 246 of the Constitution, the state governments have exclusive power to make laws on subjects in the State List.

Therefore, nearly every state has its own law governing matters of rental housing in the form of Rent Control Acts. For instance, Maharashtra has the Maharashtra Rent Control Act 1999 and Haryana has the Haryana Urban (Control of Rent and Eviction) Act 1973.

In fact, the note attached to the 2020 draft Act had blamed the existing rental laws of the states and Union Territories for the non-availability of a large number of houses for rental purpose. It had noted that according to the 2011 census, around 110 lakh houses were lying vacant.

Uttar Pradesh has taken a lead in this regard. It replaced its UP Urban Buildings (Regulation of Letting, Rent and Eviction) Act 1972, with Uttar Pradesh Regulation of Urban Premises Tenancy Ordinance 2021 in January this year. The Ordinance is based on the central government’s model law with a few changes.

Compulsory rent agreement

The model law calls for the setting up of a rent authority, rent court and rent tribunal, while making it clear that civil courts will no longer hear such cases.

It, therefore, sets up a quasi-judicial mechanism for disputes with fixed fast-track timelines for adjudication.

The law also makes it compulsory to have a written agreement in place for all tenancy agreements entered into after the law is notified. This agreement is required to be communicated to the rent authority by the landlord and the tenant jointly within two months.

The rent authority is supposed to establish a digital platform in a local vernacular language or the language of the state or UT to enable submission of the agreement.

While the authority can be led by an officer not below the rank of Deputy Collector, rent court can be an Additional Collector or Additional District Magistrate. Both are to be appointed by the District Collector or the District Magistrate with previous approval of the state government.

The state government is further empowered to notify — in consultation with the respective high court — a district judge or an additional district judge as the rent tribunal in each district.

The rent authority’s orders can be challenged before the rent court, and the rent court’s orders may be challenged before the rent tribunal. The court and the tribunals are required to dispose of the cases within 60 days and record reasons in writing for any delay beyond this period.

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Rent and security deposit

The model law does not contain any monetary ceiling for rent, allowing the parties to negotiate and execute the agreement on mutually agreed terms.

After payment of rent each time, the landlord or his property manager needs to provide a signed rent receipt to the tenant. But if the payment has been made electronically, the bank acknowledgement would be conclusive proof of payment.

For the security deposit, the law states that the amount cannot be more than two months’ rent in case of a residential premises and six months’ rent in case of non-residential premises.

If the tenant fails to vacate the premises once the period of tenancy ends or on termination of tenancy by the landlord, the tenant would have to pay twice the monthly rent for the first two months and four times the monthly rent after that,

However, if the tenant is unable to vacate the premises because of any disastrous, unforeseen natural event like flood, war, drought, cyclone, fire and earthquake, then they can continue to be in possession of the premises till a month after such a “disastrous event” ends, on the same rent.

When can a tenant be evicted

According to the model Act, the rent court can direct eviction of a tenant on an application made to it by the landlord on certain grounds listed in Chapter 5 of the law.

For instance, this can be done if the tenant does not agree to pay the rent, the tenant has not paid the arrears of rent for two consecutive months within a month of a demand notice being issued, the tenant continues to misuse the premises despite notice to not do so by the landlord or if the tenant has carried out any structural change or erected any permanent structure in the premises without the landlord’s consent.

More importantly, the model law says that no landlord or property manager should withhold any essential supply or service in the premises occupied by the tenant. Essential services include supply of water, electricity, piped cooking gas supply, lights in passages, lifts and on staircase, conservancy, parking, communication links and sanitary services.

If a landlord does this, the tenant can approach the rent authority, which can then pass an interim order directing restoration of the essential services and conduct an enquiry into this. The authority can then award a compensation of a maximum of two months rent, to be paid by the person responsible for withholding the essential supply. However, if it finds that the tenant’s application was frivolous, it can also levy a penalty of amounting to a maximum of two months’ rent on the tenant.

Who maintains the property?

Section 15 of the model law says that the landlord and tenant shall keep the premises “in as good a condition as at the commencement of the tenancy, except for normal wear and tear”.

It further states that they would be responsible for repair and maintenance, according to the Second Schedule of the law or as agreed to in the tenancy agreement.

The Second Schedule of the law lists down the division of responsibilities for maintenance of the premises, between the landlord and the tenants.

For instance, whitewashing of walls, painting of doors and windows, and electrical wiring are all landlord’s responsibilities. Meanwhile, the tenant is expected to take care of drain cleaning, wash basin repairs, geyser repairs, switches and socket repairs, kitchen fixture repairs and maintenance of gardens or other open spaces used by the tenant.

If a tenant fails to or refuses to carry out repairs, the landlord may carry them out and deduct the amount from the security deposit. If the landlord refuses to carry out repairs, the tenant may facilitate the repairs and deduct the amount from the rent to be paid for the succeeding months.

(Edited by Rachel John)

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