Model Tenancy Act, 2021
Why in News?
After years of preparation and drafting, the union government has finally given the green light to a Model Tenancy Act (MTA) 2021, which aims to make rent laws more equitable for landlord and tenant, and smoothen the processing of renting a home. Such an act had become necessary to achieve the target of constructing 20 million houses for the urban poor by 2022 under the Pradhan Mantri Aawas Yojana.
Need for Such legislation
The Model Tenancy Act, 2021 was approved by the Union Cabinet on June 2, 2021 for adoption by states and union territories. It seeks to:
(i) establish a speedy adjudication mechanism for dispute resolution,
(ii) regulate renting of premises, and
(iii) protect interests of landlords and tenants.
The main reasons are conflicts in landlord-tenant relationships, fear of repossession, non-payment and late payment of rent, damage to property, delay in court procedures and old local rental laws of states which had not been amended for decades. The new law aims to balance the interests of landowners and tenants with speedy and transparent disposal of disputes. It aims to promote an inclusive and sustainable ecosystem for various segments of society including migrants, formal and informal sector workers, professionals, students and urban poor. It also outlines the roles of various stakeholders.
Model Acts are guidelines which states may adopt to best address unique circumstances. The Model Tenancy Act 2021 is one such. Land and land related rights, duties and rules are one of the 66 state subjects mentioned in the constitution, under which states have exclusive rights to make or repeal laws. Hence, states can repeal or amend existing rental laws or pass new laws to regulate rental housing, with MTA as a reference.
Conditions for tenancy, eviction, and sub-letting
- Tenancy agreement: The Model Act states that to rent any premises, a written agreement must be signed between the landlord and the tenant.
The agreement must specify:
(i) the rent payable,
(ii) the time period for the tenancy,
(iii) terms and period for revision of rent,
(iv) the security deposit to be paid in advance,
(v) reasonable causes for entry of landlord into the premises, and
(vi) responsibilities to maintain premises.
The Rent Authority must be intimated about the agreement within two months from the date of agreement. This will apply to all premises used for residential, commercial, and educational purposes.
- Security deposit: The security deposit may not exceed:
(i) two months’ rent for residential premises, and
(ii) six-months’ rent for non-residential premises.
The security deposit will be refunded by the landlord to the tenant at the time of taking over vacant possession of the premises, after making due deductions.
- Tenancy period: The tenant may request the landlord for renewal or extension of the tenancy period.
The tenant will be liable to pay enhanced rent if:
(i) a tenancy period has ended and not been renewed, or
(ii) the tenant fails to vacate the premises at the end of such tenancy.
If the tenant fails to vacate the premises at the end of tenancy, or on termination of tenancy by an order, he will be liable to pay:
(i) twice the monthly rent for the first two months and,
(ii) four times the monthly rent subsequently till he occupies the premises.
- Eviction: To evict a tenant, the landlord must apply to the Rent Authority seeking such eviction.
The Authority may make an order for eviction on certain grounds including :
(i) refusal to pay the agreed rent;
(ii) failure to pay rent for more than two months;
(iii) parting of possession of part or whole of premises without written consent of landlord;
(iv) misuse of premises even after receiving written notices to desist from such misuse; and
(v) structural change by tenant without written consent.
- Sub-letting: Under the Model Act, sub-letting is prohibited unless allowed through a supplementary agreement. The landlord and tenant must jointly inform the Rent Authority about the sub-tenancy within two months from the date of execution of such agreement.
Dispute Resolving Mechanisms
- The Model Act proposes to establish a three-tier quasi-judicial mechanism for adjudication of disputes. Rent Authorities and Rent Courts will be appointed by the District Collector with the approval of the state government. The state government may establish a Rent Tribunal in each district after consulting with the jurisdictional High Court. No civil court will have jurisdiction over matters pertaining to provisions under the Model Act.
- The Model Act specifies the procedure for examination of cases and judicial conduct by Rent Courts and Rent Tribunals. It also specifies timelines for adjudication of certain cases by all three authorities.
A Progressive Step
The new Model Tenancy Act is a progressive law, keeping the interests of both parties in mind. Since it is a Model Act, its implementation will only come into effect when states make changes in existing rental laws. Maharashtra, for instance, has decided to partially enforce the provisions of the new Act while the UP cabinet has passed an ordinance accepting the new Act as it is. Other states are yet to respond.
However, some experts have suggested that the Centre should have also looked into incentivizing tenants and landlords through subsidies and tax exemptions, encouraging public-private partnership in residential rental management and enhancing access to finance for low-income segments. Such measures will bring in investments. While arguments over whether the model Act is anti or pro-tenant remain equally divided, most agree that it is a step towards transforming the housing sector in the country.
Questions expected in the examination:
Question 1. What is Model Tenancy Act? Give advantages of this act in resolving dispute among tenant and landlord.
Question 2. Mention in detail reasons responsible behind Model Tenancy Act.
Question 3. Discuss the key features and dispute resolving mechanisms given in the new Tenancy Act passed by Government of India.