Analysing the Model Tenancy Act 2020

 

A brief overview of the latest legislation passed by Central Govt in simple language with no legal jargons. Hope it helps you or your known in case you need to take a property on rent or in the alternative, wish to rent out a property.

 

1.     Need for the new law:

As on date more than one crore houses are standing vacant for many reasons :

 

·         Old Archaic Law i.e. Rent Control Act of 1948 has not been amended since decades (land being a state subject, each state has its own Rent Control Act for example, Maharashtra Rent Control Act,

Delhi Rent Control Act, etc)

·         Lack of trust between the tenants and the landlords and the earlier law was more pro tenants, fear of landlords of losing the premises .

·         Lack of a  sound mechanism to resolve tenant-landlord conflicts apart from a really expensive and cumbersome lengthy route of filing a civil lawsuit.

·         Property owners generally in many cases also found it nearly impossible to evict tenants or sometimes tenants unlawfully occupy the premises which further created a negative view towards renting.

 

 

2.     The Model Tenancy Act 2021

 

Approved on 2.6.2021 by the Central Government it has been now circulated to all States and Union Territories for adoption since Land, Land improvement and control of rent fall within State Govt purview.

 

Aim: To balance the interests of both landlords and tenants, provide a speedy and effective mechanism for resolution of disputes, formalize rent agreements, etc.

 

·         The act, which is just a “model” law, is applicable to both commercial and residential  tenancies.

 

Salient Features:

 

·         Written Agreement mandatory: Act makes it compulsory for the tenant and landlord to have a written agreement which has to be informed to the rent authority jointly                                                                                by the tenant and landlord  within a period of two months from entering into a rent/lease agreement. The agreement shall be agreed on mutual terms as there are no restrictions or rent ceilings.

 

·         With every payment of rent, a receipt has to be provided by the landlord or the tenant and if the payment is done via electronic mode, the bank acknowledgement would be considered as payment proof.

 

• Security Deposits

Security deposits which were earlier set arbitrarily by the landlords specially in cities like Mumbai/Bangalore (5-12 months rent) are now fixed and accordingly, 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.

 

·         Hike in Rent: It also provides three months' notice to tenants for a hike in rentals to ensure landowners are enabled to extract the market price for their properties while also ensuring that tenants get enough notice to make adequate arrangements in their best interests.

 

 

• Repair and maintenance of property: Obligations of Tenant vis a vis Landlord

 

In cases where premises becomes unhabitable due to force majeure conditions, , the landlord shall not charge rent from the tenant until the said premises is restored by the landlord.

 

It is the duty of both, the landlord and the tenant to keep the premises in as good condition as possible.

(IMP) The Act says that no landlord or property manager can withhold any essential supply to the premises occupied by the tenant in the event of a dispute or on any other pretext                                  for eg cutting off power/water supply. . They have to provide a 24-hour notice to tenants before undertaking any repair work that may disrupt utilities' supply.

 

Under the 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.

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

 

• Eviction and recovery of possession of premises by landlord

A tenant can be evicted if the tenant fails to pay the rent which was agreed by the landlord and the tenant or if the tenant has not paid the arrears of rent and other charges payable in full, for consecutive two months, or the tenant has continued to misuse the premises (using for illegal purpose, etc).

Also, if the tenant fails to vacate the premises after the tenancy agreement ends or the landlord terminates the agreement, the tenant would have to pay twice the monthly rent for the first two months and four times the monthly rent after that. whereas the current norm in metro cities ranges from five to up to 12 months.

 

·         Dispute Resolution: If a dispute emerges between the owner and tenant, they will have to first approach 'Rent Authority'. If any party is not satisfied with the Rent Authority's order, 'Rent Court' can be approached, followed by a final and then 'Rent Tribunal' unlike earlier where the only remedy was to file a civil suit before the courts.

 

 

 

Despite the challenges, this new piece of legislation is expected to give a boost to private participation in rental housing as a business model for addressing the huge housing shortage currently in the country.

The law seeks to balance out the renter's interests with tenants, who have enjoyed protection against eviction and rent hikes under laws that were drafted decades ago and mostly with the intent of preventing exploitation of tenants by landlords.