Explained: What the Model Tenancy Act 2021 could mean for landlords and tenants

GUIDELINES FOR CHANGING STATE RENTAL LAWS

Many flats in Mumbai remain vacant' Will new Model Tenancy Act change that?
In Mumbai, even as home prices keep skyrocketing, plenty of flats within the city limits continue to remain vacant. Pic: Vidur Malhotra/Flickr (CC BY-SA 2.0)

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.

The 2011 census had recorded a total of 246.69 million households, of which 68% were rural and 32% urban, leaving 63.67 million urban and rural families without adequate housing. In India, rental homes have mainly been an urban phenomenon. But, approximately 12% of urban houses are vacant, with the share of persons living in urban rental accommodation decreasing from 58% to 27% between 1961 and 2011.

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. 

Important provisions under the Act

  1. The law is applicable prospectively and will not affect existing tenancies.
  2. It is not applicable on hotel, lodging house, dharamshala, inn, premises for industrial use; premises owned or promoted by the central and state governments, UT, local authority or statutory bodies, premises owned by a company, university or places given on rent to its employees as part of service contract; premises owned by religious or charitable institutions.
  3. Rent Authority is to be established to regulate renting of premises and to protect the interests of landlords and tenants
  4. Written agreement is a must for all new tenancies. The agreement will have to be submitted to the concerned District Rent Authority.
  5. Amount to be paid as security deposit by the tenant should not exceed two months’ rent for residential premises and six months for non-residential premises.
  6. Sub-letting of property may be made only with permission of landlord
  7. The law also spells out roles and responsibilities of landlord and tenants.
  8. The tenant shall not make any structural changes in the rental premises without the landlord’s consent.
  9. No landlord or property manager can withhold any essential supply to the premises occupied by the tenant.
  10. If tenancy has not been renewed, the tenancy shall be deemed to be renewed on a month-to-month basis on the same terms and conditions as in the expired tenancy agreement, for a maximum period of six months.
  11. Compensation in case of non-vacancy: On the expiry of extended period of six months of agreed tenancy period or the termination of tenancy by order or notice, the tenant shall be in default and liable to pay compensation of double the monthly rent for two months and four times of the monthly rent thereafter.
  12. The revision of rent between the landlord and the tenant shall be in accordance with the terms of the tenancy agreement.
  13. A landowner or property manager may enter a premise in accordance with written notice or notice through electronic medium served to the tenant at least 24 hours before the time of entry.
  14. Rent Courts and Rent Tribunals to be set up at district level to deal with landlord-tenant grievances on a time-bound basis though no specific timeline.
  15. In the case of force majeure conditions such as earthquake, cyclone, war, flood etc., certain advantages and concession shall be provided to the tenant and if the tenant is in the termination period, then leniency of an extra month shall be given for him to have enough time to vacate the premises. In case the premises has been affected so badly due to force majeure condition that it is impossible to reside in it, then the rent shall not be charged till the time the premises has been restored and made inhabitable.

Read more: Scant hope for ‘housing for all’ within Mumbai city


Controversial provisions

The Model Tenancy Act focuses on minute details of the rental agreement such as structural repairs and whitewashing. These must be carried out by the landlord, whereas tenants are responsible for drain cleaning, geyser repairs and repairing kitchen fixtures. Being a central framework, it may not be necessary to specify such details.

The New Model Tenancy Act aims to facilitate achievement of the target of constructing 20 million houses for the urban poor by 2022
The New Model Tenancy Act aims to facilitate the achievement of the target of constructing 20 million houses for the urban poor by 2022. View of a slum in Delhi. Pic: Wikimedia Commons/CC BY-SA 2.0

Further, the Act mandates the submission of Aadhaar Card of both tenant and landlord while filing rental agreement. This provision could be seen as violating the right to privacy as noted by the Supreme Court in K.S. Puttuswamy vs Union of India. The Court had ruled that mandatory requirement of Aadhaar numbers may only be made for expenditure on a subsidy, benefit or service incurred from the Consolidated Fund of India. Since registering a tenancy agreement carries no benefits or services from the state, making Aadhaar mandatory for registering a tenancy may violate the judgment. 

The other instance of violation of right to privacy under MTA arises from the uploading of details of tenancy agreements. The Act says that on registration with the Rent Authority and issuing of unique identification number, details of the agreement with documents will be uploaded on the authority’s website, though it is unclear whether personal details such as Aadhaar number, PAN, phone numbers etc will also be made public.


Read more: New rule mandates flats for poor in all apartments. But will it really happen?


What people say

Anirudh, a student living in Mumbai, said that low security deposit amount will give relief to tenants as landlords in big cities like Mumbai and Bengaluru ask for 12 months’ deposit and often do not refund the full amount when the tenant moves out. Ayushi, who works in a law firm, said implementation of Act will give tenants relief in terms of privacy too, as it curbs visits by landowners.

A landowner in Delhi, however, mentioned that the security deposit is too low as houses given out on rent often have expensive furniture and fittings. On the other hand, landlords feel that since the requirements of the Civil Procedure Code have been done away with, which worked largely in favour of tenants in case of eviction-related disputes in courts, they can now have some faith in the judiciary on the issue of eviction. 

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.

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About Utkarsha Srivastava 4 Articles
Utkarsha Srivastava is an advocate by profession, based in Delhi.

12 Comments

  1. The law is silent about the premises on pagadi basis. Majority of the space in Mumbai is occupied by pagadi system chawls. The residents eventhough are residing on rental basis since 70 odd years are paying rent. The landlords and chawl owners are different in many cases. Now when they purchased this premises, they paid sizeable amount, approx. almost whole construction cost that time. But now raising the issue of nominal rent, these chawl owners do not make repairs risking the life of residents. Do not allow it to sublet. If law permits then these vacant premises can be used as intended. After so many years, these residents must be declared as owners and allowed to let it because the chawl owner asks 50% of rent to allow to sublet which is hefty.

    • Indeed, it is silent about Pagdhi system. Since, this Act is only a framework, it is totally dependent on States on whether to implement and what all should be incorporated. Now, it is in the Maharashtra state’s hand.

  2. It has to talk about percentage increase in rent and at what interval. Yearly and a high rate will leave a hole in tenants pocket.

    It has to state who will pay maintenance and water charges. If tenant pays then it is in addition to the rent which again becomes difficult. For instance in Maharashtra owner pays but in Hyderabad tenant pays. I landed paying maintenance both places because I owned house in Maharashtra and rented in hyderabad when I had to shift in hyderabad.

    • Indeed. Let us see what States’ adopt to and what changes they seek. Hope, both Maharashtra and Telangana think in this direction, while implementing the Act and the new law give benfits alike.

  3. Tenancy Act but what about pagdhi system nothing is spoken or any concrete law on it is not clear. The landlords cheat the tenants in many ways. Also years ago illegal contructions given on pAgdhi where tenants not aware cause all facilities like water electricity connection provided from the government authorities. So buyers felt it was legal if these facilities were not available most of the people would not have taken up such pagdhi houses especially in Thane and KDMC municipalities

    • Indeed, it is silent about Pagdhi system. Since, this Act is only a framework, it is totally dependent on States on whether to implement and what all should be incorporated. Now, it is in the Maharashtra state’s hand.

  4. It is very surprising and shocking that on my personal premises the govt will tell me what rent to fix,etc. It is murder of democracy and fundamental rights of a citizen

    • The Act is silent when speaking of amount of rent. It has only said that the security deposit should not exceed two month’s rent.

  5. This act is pro tenant. For two months deposit government must promise that the dispute will be legally resolved within that period. No sense in double rent or four times if tenant doesn’t pay. The law should empower landlord to immediately expel the tenant who does not pay rent with one month notice. The landlord must be able through law to demand possession of his property without need to give reasons. Ownership is of absolute nature.

  6. It should cover old tenancy also so that old properties are demolished and new spacious structures are made,to resolve housing problems in Urban area.For example a single floor can be converted into four floors.

  7. Of no help. It should assure posession of premises upon completion of agreement or upon breach of agreement.
    This should be done within a specific period. Security deposit is too less to cover for non payment of bills or any damage to premises by the tenent.

  8. What is meant by old tenancy?. Whether the rental agreements entered in November 2020 with all terms n conditions safeguarding d interest of both d parties on par with Model Tenancy Act will be covered under d Model Tenancy Act or not?.

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