It is believed that the Model Tenancy Act, 2019 will help overhaul the legal framework vis-à-vis rental housing across India and may also give a boost to private participation in this segment.
In a bid to balance the rights and interest of both landlords and tenants, and create adequate rental housing stock in the country, the Ministry of Housing and Urban Affairs has drafted the Model Tenancy Act, 2019. It may be noted that Finance Minister Nirmala Sitharaman had also talked about this Act in her maiden Budget 2019 speech, saying that to promote rental housing, the government will take up several reform measures, including the finalization of a Model Tenancy Law. That is because the “current Rental Laws are archaic as they do not address the relationship between the Lessor and the Lessee realistically and fairly.”
It is believed that the Draft MTA will help overhaul the legal framework vis-à-vis rental housing across India and may also give a boost to private participation in this segment. No need to say that industry experts and developers have welcomed the Act.
“The government finally doing something about the country’s archaic rental laws has been long overdue. In a country with such a huge housing affordability deficit, rental housing can significantly contribute to the Government of India’s Housing for All by 2022. The reasons why housing is lying vacant include opaque property rights and ineffective implementation of rental contract laws, which this Act seeks to address,” says Anuj Puri, Chairman, ANAROCK Property Consultants.
Here we are taking a look at 10 things about this Model Act which every landlord and tenant should know:
1. The new draft Model Tenancy Act, 2019 aims to cap security deposits at two months’ rent for housing and one month’s rent for other properties. However, “although well-intentioned, this cap may hurt landlords in cities where much larger security deposits have been the norm. A two-month security deposit will also not be enough to compensate the landlord if significant damage has been done to the property,” says Puri.
2. The Act seeks to penalize recalcitrant tenants for refusing to move out of their rental properties after the agreed-upon rental period expires. The landlord will be able to claim double of the monthly rent for two months and four times of the monthly rent after that as compensation. This will put to rest one of the biggest fears of property owners who do not want to risk letting out their properties in India.
3. The Act stipulates that a landlord cannot refuse to provide essential utilities and access to common facilities. This has been a fairly common grouse of tenants in the past.
4. The landlord will also not be able to increase the rent without giving at least three months’ notice to the tenant, and cannot increase rent in the middle of a rental term.
5. Once this Model Act comes into force, no person will be able to let or take on rent any premises except by an agreement in writing.
6. Within 2 months of executing the rental agreement, it will be mandatory for both landlords and tenants to intimate to the Rent Authority about this tenancy agreement. The Rent Authority, within 7 days, will issue a unique identification number to both the parties.
7. After the commencement of this Model Act, a tenant – without the
prior consent in writing of the landowner – won’t be able to sublet whole or part of the premises held by him, or transfer or assign his rights in the tenancy agreement or any part thereof.
8. The terms of agreement executed between a landlord and his tenant will be binding upon their successors in the event of the death of the landowner or tenant. In such a case, their successors will have the same rights and obligations, as agreed in the tenancy agreement, for the remaining period of tenancy.
9. It should be noted that the existing tenancies will not get impacted as the Draft Model Tenancy Act will be applicable prospectively.
10. The Central government has shared a copy of the Model Act with the States and Union Territories (UTs) for their views and comments. The Act, once finalized, will be shared with the States and UTs for adoption.
Industry experts, however, fear that much like in the case of RERA, the rental Act rules are prone to dilution at the state level, since land is essentially a state subject.
“The Model Tenancy Act, 2019 may turn out to be a toothless tiger if this happens, and the Centre must ensure that modification of the rules does not happen beyond a reasonable limit,” says Puri.