Model Tenancy Act, 2019

Model tenancy act, 2019

Author: Shrankhala Parwar, School of Law, DAVV, Indore and Anubhuti Agrawal, School of Law, JLU, Bhopal.

About Model Tenancy Act,2015

What is the Draft Model Tenancy Act, 2015?

The Model Tenancy Act governs the rentals and the rights of the landlords and the tenants. It establishes a framework that redresses the disputes that may arise between both the parties. The Law covers all residential and non-residential properties.

Objectives of the act

• Mutually fixing and revising rent between the landlord and tenant.
• Unlocking existing properties to rent out.
• Addressing repossession issues in rental housing markets.

There is an enormous urban housing shortage in our country, a phenomenon that is only expected to accelerate with the increasing migrant population shift to urban areas. Thus, the Ministry of Housing and Urban Poverty Alleviation (MoHUPA) has been looking for an affordable housing policy that involves a rental housing intervention program, along with a suitable policy structure. If applied correctly, rental housing can be yet another method of providing housing for India’s urban population. Although the larger focus has traditionally been on homeownership, the significance of rental housing cannot be emphasized enough.

Salient features of the Draft Model Tenancy Act, 2015

Refund of the security deposit

As per the draft, it would be illegal if the landlord charges a security deposit, which is three times the monthly rentals unless both the parties have established a contract. Besides, at the time of vacating the property, the landlord has to return the entire security amount within a month.

Rental increment after renovation

A landlord has the right to increase the rent in case any construction or renovation has been carried out on the property. However, the increment should be done only one month after the completion of the renovation work. Also, the landlord should consult the tenant before increasing the rent. Likewise, the tenant also has a right to seek a reduction in rent in case there has been any structural defect or deterioration in the building. Both parties have to take care of the property mutually. Nevertheless, in case of any dispute, parties can reach out to the proposed Rent Authority.

Restrictions on the entry of the owner

The Act lays rules on the entrance of the landowner where lessor cannot step on to the rented premises unannounced. In case the owner needs to visit the property owing to repair or any other reason, he or she should write a notice to the tenant at least 24 hours in advance.

Rental disputes

In case of disputes, the landlord has no right to stop any facility such as water supply and electricity. If so, the matter should be taken to the proposed rent court instead of the civil courts, and the rent tribunals are urged to act on the principle of natural justice.

Notice period

In the case of the tenant wishes to vacate the property, he or she should provide one month notice in advance to the landlord.

Subletting

Tenant is not entitled to sub-let the property either partially or fully for any monetary gains unless written permission has been received from the landlord.

Exceptions to the law

The norms of the Act are not eligible for structure belonging to the government, education institutes, religious and charitable organizations.

Transfer of rent agreement

The tenancy contract terminates in case the tenant dies while the contract is still applicable. However, if the family members of the ceased tenant are willing to inhabit the property, the tenancy rights would pass on to this wife/husband and children.

Though, the government’s declaration to improve the lessor-lessee relationship hints towards favorable announcements in the near term. However, it remains to see what reforms are implemented and by when.

Why was a need felt to bring this on?

The document notes that the need to introduce the model tenancy law was felt because the existing rent control laws are restricting the growth of the rental housing segment and discouraging the landowners from renting out their vacant premises.

Its aim is to balance the interests of landowner and tenant and to create an accountable and transparent environment for renting the premises in a disciplined and efficient manner to promote inclusive and sustainable ecosystem to various segments of society including migrants, formal and informal sector workers, professionals, students and urban poor, says the document.

Its intention is also to notify the rules for residential and non-residential premises and further to develop the policies to promote balanced rental housing by developing different options of rental housing like individual units, dormitories, hostels, co-living, co-housing, paying guest and employee housing and outline the roles of various stakeholders in order to ensure housing for all.

It excludes premises owned or promoted by the Centre, state, Union Territory, local authority, a government undertaking, enterprise, statutory body or cantonment board. It also excludes premises owned by a company, university or organization given on rent to its employees as part of a service contract or those owned by religious or charitable institutions, any trust registered under the Public Trust Act of the state and those owned by Wakfs registered under the Wakf Act, 1995.

The work cut out for the rent authority?

The rent authority after receiving information about tenancy agreement will provide a unique identification number to the parties and upload the details of tenancy agreement on its website compulsorily in local vernacular or state language in the format that has been prescribed in the model law within seven days from date of receipt of tenancy agreement along with the documents.

The rent payable for the unit to be let out will be the amount agreed between the landowner and the tenant as per the terms of the tenancy agreement.

Appointment of the rent authority:

The district collector with the approval of the State/UT government can appoint an officer, not below the rank of Deputy Collector, to be the rent authority for the area within his jurisdiction to which this Act applies. The state/UT government may, by notification, constitute such a number of Rent Tribunals at such places as may be deemed necessary by it and notify a Rent Tribunal as Principal Rent Tribunal, where more than one Tribunal is constituted.

Only the rent court and no civil court will have the jurisdiction to hear and decide the applications relating to disputes between landowners and tenants and matters connected with it.

The rent court or the rent tribunal will have to try and dispose of the case within 60 days from the date of receipt of the application or appeal. If there is a delay, then the rent court will have to record its reasons in writing for not disposing of the application or appeal within that period.

Rights and duties of landlords and tenants

• In case the landowner decides to revise the rent, he would have to give a notice in writing three months before the revised rent becomes due.
• Even the security deposit to be paid by the tenant in advance shall be as determined by the agreement and as agreed mutually between ‘the landowner and the tenant’ subject to a maximum of two months’ rent in case of residential property and, minimum of one month’s rent in case of non-residential property. The security deposit shall be refunded to the tenant at the time of taking over vacant possession of the premises, after making a due deduction of any liability of the tenant.
• The draft rules also state that if the landowner does not accept the rent and other charges payable or refuses to give a receipt, the rent and other charges shall be sent to the landowner by postal money order or any other method as prescribed under the rules consecutively for two months. If the landowner does not accept the rent and other charges within this period, then the tenant may deposit the same with the rent authority. Once the rent has been deposited with the Authority, it can investigate the case and pass an order.
• Even in the case where the landowner refuses to carry out repairs, the tenant can get the work done and deduct the same from the rent provided that the deduction by a tenant from the monthly rent on account of repair of the premises exceeds fifty percent of the agreed monthly rent.
• Also, if the premises become uninhabitable in the absence of repairs and the landowner refuses to carry out the repairs even after being called upon to do so in writing by the tenant, the tenant can have the right to vacate the premises and hand over the possession to landowner after sending him a 15 days’ notice in writing or with the permission of the rent authority.
• A landowner or the property manager may enter a premise in accordance with written notice or notice through an electronic medium.
• No landowner or property manager or tenant either by himself or through any person shall cut-off or withhold any essential supply or service in the premises occupied by the tenant or the landowner. Essential services include the supply of water, electricity, piped cooking gas supply, lights in passages, lifts and on staircase, conservancy, parking, communication links, and sanitary services, etc.
• If this is done then on the application from the tenant or the landowner, the rent authority after examining the matter may pass an interim order directing the restoration of supply of essential services immediately pending the inquiry.
• This inquiry would have to be completed within one month of filing such an application.
• The rent authority may even direct that a penalty be paid to the landowner or tenant if it finds that the application was made frivolously or vexatiously, says the draft.

Repossession of the premises by the landowner

The rent court may, on an application made to it, order for the recovery of possession of the premises on the grounds that the landowner and tenant have failed to agree to the rent payable, that the tenant has not paid the arrears in full of rent payable and other charges for two months, including interest for delayed payment as decided in the tenancy agreement.

No order for eviction of the tenant on account of default of payment of rent shall be passed, if the tenant makes payment to the landowner or deposits with the rent court all arrears of rent including interest within one month of notice being served on him: But this relief will not be available again to the tenant if he defaults in payments of rent consecutively for two months in any one year subsequent to getting relief.

About Model Tenancy Act,2019

The government has drafted the Model Tenancy Act to establish the Rent Authority for regulating renting of premises in an efficient and transparent manner and to balance the interests of owner and tenant by establishing adjudicating mechanism for speedy dispute redressal and to establish Rent Court and Rent Tribunal to hear appeals and for matters connected therewith or incidental thereto.

Under section 4, the Act makes it mandatory for every tenancy to take place under a written agreement which will have to be registered with the Rent Authority within 2 months jointly by both the parties. The Rent Authority will then provide a unique identification number to the parties and upload the details of the tenancy agreement on its website compulsorily in local vernacular or State language within 7 days.

As per section 7, the tenant cannot sublet the premises without the prior consent of the landowner. The consent has to be obtained after giving the landowner all the information about such subletting.

Sections 8-11 deal with issues related to rent. The fixing and revision of rent will be governed by the tenancy agreement. If not stipulated in the said agreement, the notice of revision of rent has to be given to the tenant at least three months prior to the date on which it becomes due. The landowner can also increase the rent if he has incurred any expenditure on the improvement of the premises with the consent of the tenant. The security deposit to be paid by the tenant shall be determined by the agreement subject to a maximum of two months’ rent in case of residential property and, a minimum of one month’s rent in case of non-residential property.

Sections 12-20 have bestowed the following obligations on the tenant and the landowner :

1. The landowner has to give an original signed copy of the agreement to the tenant within 15 days after its execution.

2. Tenant is entitled to a receipt for every payment made by him under the agreement. If the landowner doesn’t accept the rent within two months, the same has to be deposited to the Rent Authority which will investigate the matter and pass an order

3. In the event of the tenant’s refusal to carry out scheduled or agreed repairs, the landowner shall get the repairs done and deduct the amount from the security deposit

4. In case the landowner refuses to carry out the scheduled or agreed repairs, the tenant can get the work done and deduct the same from the rent

5. In case the premises become uninhabitable and the landowner has refused to carry out the required repairs, after being called upon to get the repairs done in writing by the tenant, the tenant will have the right to vacate the premises, after giving landowner fifteen days’ notice in writing or with the permission of the Rent Authority.

6. If the Landowner has engaged a Property Manager to act on his behalf, he has to inform the tenant about the same.

7. No landowner or property manager or tenant either by himself or through any person shall cut-off or withhold any essential supply or service in the premises occupied by the tenant or the landowner. Rent Authority may pass an order for compensation against such a person after making a due inquiry.

A landowner can make an application before the Rent Court for repossession of the premises during the tenancy period on any of the grounds stipulated in section 21. Moreover, under section 22, a landowner is entitled to get compensation of double of the rent for two months and four times of the monthly rent thereafter, for the use and occupation of the premises by a tenant who does not vacate the premises after his tenancy has been terminated by order, notice or as per agreement.

Chapters VII and VII of the Act stipulate the constitution of Rent Authority, Rent Courts and Rent Tribunals. Rent Authority shall be appointed by the District Collector in consonance with the state government. Appeals from the orders of the Rent Authority can be preferred to the Rent Court within 30 days. The Rent Tribunal shall be headed by a Principal Appellate Member and comprise of two other Members appointed by the State Government in consultation with the High Court. The Act excludes the jurisdiction of the civil courts and confers such powers on the Rent Court and the Rent Tribunal. Moreover, the Rent Court give due regard to the provisions of the Transfer of Property Act, 1882, the Indian Contract Act, 1872 or any other substantive law applicable while deciding matters.  

How Will The Model Tenancy Act 2019 Impact The Rental Housing Market?

Government estimates from the past show there are over 1.1 crore fit-for-renting properties that are lying vacant across urban India due to the lack of transparency and slow dispute resolution system. Property owners shy away from letting out their premises fearing to squat. This leads to limited supply, resulting in sky-high rents. By addressing these issues, the Model Tenancy Policy would help the rental housing segment reach its true potential.

If landlords would have better confidence in the regulatory regime, they would unlock the rental housing inventory lying with them. When the supply increases, rents will rationalize in cities such as Mumbai, Bengaluru, and Delhi where finding good rental accommodation within budget, is often a problem.

Conclusion

 I would add that it is a very delicate balance that Indian Courts have tried to maintain. They have balanced the interest of the owners with that of the tenant. However, in real practice, this balance has been ineffective. Many parties have suffered an infringement of their rights however, due to lack of awareness and an inefficient judicial process they could not seek remedies. These shortcomings have resulted in harassment of tenants and owners by the other parties. Through this blog, I have tried to highlight a few major rights and obligations that one needs to be aware of to protect their interests.