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
- The law is applicable prospectively and will not affect existing tenancies.
- 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.
- Rent Authority is to be established to regulate renting of premises and to protect the interests of landlords and tenants
- Written agreement is a must for all new tenancies. The agreement will have to be submitted to the concerned District Rent Authority.
- 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.
- Sub-letting of property may be made only with permission of landlord
- The law also spells out roles and responsibilities of landlord and tenants.
- The tenant shall not make any structural changes in the rental premises without the landlord’s consent.
- No landlord or property manager can withhold any essential supply to the premises occupied by the tenant.
- 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.
- 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.
- The revision of rent between the landlord and the tenant shall be in accordance with the terms of the tenancy agreement.
- 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.
- 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.
- 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.
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.
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.
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.