Impact of Model Tenancy Act, 2021 on landlords and tenants

Adv Rahul Totala

The union Cabinet, on June 2, 2021, approved the draft model tenancy law, in a move that is likely to revive India’s rental housing market by effectuating a multitude of reforms.

Key provisions of the Act are:

·Prospectively Applicable - The Model Tenancy Act will apply in case of premises which have been let out for educational, commercial and residential usage but not for industrial purposes. There will also be no coverage under the Act for lodging houses, hotels and inns among other hospitality businesses. The law will be prospectively applicable without impacting any current tenancies

·Security Deposit Cap: The new Act attempts at setting down a clear regulation for the security deposit. The Act has proposed a limit to the security deposit at 2 months with regard to residential units and 1 month in case of non-residential units.

·Rent increase regulations: The Act attempts at tackling the issue of rent increases. Section 9(2) of the Model Tenancy Act proposes that rent may be raised based on the agreement’s terms and conditions or the land-owner has to provide a written notice 3 months prior to the implementation of the revised rent. This may either be accepted by the tenant or a notice should be given for terminating the agreement. In case of failure of the tenant to reply to the notice for a rent increase, he/she will be deemed to have given acceptance to the rent increase as proposed by the property owner.

Key Highlights of Model Tenancy Act are:

·Enhanced rent shall be payable upon failure to vacate the premises on expiry or termination of the tenancy.

·Sub-letting/transfer/assignment of right under an agreement must be through a supplementary agreement, notice whereof shall be given to the Rent Authority.

·A tenant cannot be evicted during the continuance of the agreement unless otherwise agreed to by the landlord and tenant.

·Tenants are restricted from subletting the whole or a portion of rented property.

·The Act will create a fast-track quasi-judicial mechanism for adjudicating disputes by providing for Rent Authorities, Rent Court and Rent Tribunal.

·The jurisdiction of the Rent court shall not extend to the questions of title ownership and shall have the power to regulate their own procedure.

·The Act bars the jurisdiction of civil courts in respect of any suit or proceeding that relates to the provisions of the Act

·It will facilitate unlocking of vacant houses for rental housing purposes

The above act tries to balance the interests of both landlords and tenants. The Act discourages overstay of tenants, makes eviction of tenants easy and also restricts illegal sub-letting by tenants. The Act further restricts intrusion of the landlord and makes the landlord responsible for structural maintenance of rented premises.

It is indeed a step in the right direction by union and it is upto respective State Governments to adopt and enact the said law.