INTRODUCTION
After years of planning and drafting, the Union Government has finally approved the Model Tenancy Act (MTA) 2021, which aims to make rent laws more equitable for landlords and tenants, as well as to streamline the process of renting a home. Such legislation had become necessary in order to meet the target of constructing 20 million houses for the urban poor by 2022 under Pradhan Mantri Aawas Yojana. The primary goal of the Act is to regulate the rental housing market, which includes both residential and commercial properties, by establishing tenancy guidelines, rights and obligations for landlords and tenants, and an adjudication mechanism for tenancy disputes.
This article aims at understanding and exploring the basics of the Model Tenancy Act 2021. Read On!
NEED FOR THE MODEL TENANCY ACT, 2021
Over the last decade, India has seen a tremendous increase in urbanization, causing people to migrate from rural to urban areas in search of better life opportunities, resulting in overcrowding in cities that were not yet prepared to meet the housing needs of such a large population, leading to the development of roadside housing and slums. Previously, the Rent Control acts of individual states governed rental laws in India. These acts, however, contained numerous loopholes that discouraged people from investing in the rental real estate business. The Act also made it more difficult for landlords to evict their tenants, which hampered the resale of a tenanted property. The rental laws also discouraged tenants from moving into a rented house because they did not set a maximum amount for the security deposit that landlords required. Furthermore, there was no provision requiring landlords to provide tenants with a receipt for rent payment, leaving tenants vulnerable to eviction on the false charge of non-payment of rent. These were some of the major factors that deter both landlords and tenants from investing in the rental housing industry. As a result, the Model Tenancy Act, 2021 was enacted to address these concerns[1].
FEATURES OF THE ACT :
Model Tenancy Act of 2021 is divided into 8 Chapters and 47 Sections. The Chapters of this Act list provisions to regulate the renting of premises, to protect the interests of landlords and tenants, and to provide a quick adjudication mechanism for the resolution of disputes and matters related to or incidental to the renting of premises. Furthermore, we will be discussing all the chapters in brief :
Chapter I – PRELIMINARY
Chapter I is a preliminary chapter that provides the title, commencement, and extent of the Act. This chapter also clarifies the definitions used in this Act. For the purposes of this Act, a “landlord” is defined as a person who receives or is entitled to receive the rent of any premises on his own account, if the premises were let to a tenant, and includes his successor-in-interest, as well as a trustee or guardian. The term “tenant” refers to any person who pays the rent of any premises to the landlord under a tenancy agreement, including any person who occupies the premises as a sub-tenant. This Act does not apply to hotels, lodging houses, dharamshalas, inns, industrial premises, premises owned or promoted by the central and state governments, UTs, local authorities, or statutory bodies, premises owned by a company, university, or places rented to its employees as part of a service contract, or premises owned by religious or charitable institutions.
Chapter II- TENANCY
The most significant change brought about by the MTA is the requirement for tenants and landlords to enter into a Tenancy Agreement. Both parties must notify the Rent Authority jointly by submitting the form provided in Schedule 1 of the MTA, along with the prescribed documents, to the digital platform of Rent Authority. The Act also limits the amount of security deposit to (i) two months’ rent for residential properties and (ii) six months’ rent for commercial properties, but it does not regulate rent fixation or revision. The landlord and tenant are free to agree on the tenancy term, rent amount, and rent revision. The rented premises can only be sub-let by executing a supplementary agreement to the existing rent agreement, and the landlord and tenant must jointly notify the Rent Authority of the said sub-tenancy within the specified timeline. These detailed terms and conditions provided by the Act will aid in the regulation of all types of leases, which were previously only captured by more sophisticated commercial leases[2].
Chapter III- RENT
This whole chapter deals with Rent. The tenant is responsible for paying the rent as agreed upon in the agreement. The landlord cannot raise the rent without the tenant’s consent. The Security Deposit must be paid in advance and cannot exceed two months’ rent for residential properties and six months’ rent for non-residential properties. After making the necessary deductions, the Security Deposit will be refunded to the tenant on the date of taking over vacant possession of the premises[3].
Chapter IV- RIGHTS AND OBLIGATIONS OF LANDLORD AND TENANT
The IV chapter talks about the rights and obligations of landlord and tenant[4].
Rights of Tenant :
- To obtain a receipt/bank acknowledgment for rent payment.
- To pay the rent to the landlord via postal money order or to the Rent Authority if the landlord refuses to take rent.
- To vacate the uninhabitable premises after giving the landlord 15 days’ notice.
Duties of Tenant :
- Maintenance of the premises, such as drain cleaning, changing tap washers and taps, washbasin repairs, switch and socket repairs, and so on (Schedule 2)
- Take reasonable care of the premises and notify the landlord of any damage.
Rights of Landlord :
- To collect rent and other charges as specified in the tenancy agreement.
- After giving 24 hours notice, enter the premises for inspection, maintenance, or reasonable cause, but not before sunrise or after sunset.
- If the tenant fails to maintain the premises, charges will be deducted from the security deposit.
Duties of Landlord :
- Structural repairs, wall whitewashing, plumbing pipe replacement, and electrical wiring maintenance (Schedule 2)
- Not to hold a sufficient supply of essential services.
Chapter V- EVICTION AND RECOVERY OF POSSESSION OF PREMISES BY THE LANDLORD
This chapter discusses eviction and recovery of possession of premises by landlord. The Act states that a tenant cannot be evicted unfairly during the term of the tenancy unless otherwise agreed to in writing. However, the Rent Court may make an order for eviction and recovery of possession of the premises on certain grounds, including but not limited to misuse of premises, failure to pay rent, parting with possession by the tenant, and carrying out structural changes without prior permission of the landlord, among others, on an application made to it by the landlord. If the tenant does not vacate the premises by the end of the term of the lease, they must pay twice the monthly rent for the first two months and four times the monthly rent after that. While sophisticated commercial leases include terms that address the aforementioned issues, the Act’s provisions will go a long way toward regulating leases that do not include these terms in detail and protecting the interests of both the tenant and the landlord.
Chapter VI – RENT AUTHORITIES, THEIR POWERS AND APPEALS
Rent Authorities, their powers, and appeals is covered in Chapter VI. The Rent Authority will become the registering authority for all residential and commercial tenancy and sub-tenancy agreements under the MTA. Within 7 days of the agreement’s registration, the Rent Authority must issue a unique identification number to the transacting parties and upload the details of the tenancy agreement to a dedicated web portal. In the event of a disagreement between the parties regarding the determination of the rent payable, the Rent Authority has the authority to revise and decide on a new rent. If a tenant violates the terms of the tenancy agreement, the Rent Authority may evict him. The aggrieved party can appeal to Rent Tribunal within 30 days of order passed by Rent authority.
Chapter VII- RENT COURTS AND RENT TRIBUNALS
Rent Court and Rent Tribunal are discussed in this chapter. Rent Courts and Rent Tribunals will be established at the district level to deal with landlord-tenant disputes on a time-bound basis, though no specific timeline has been established. The presiding judge in Rent Court will be an Additional Collector or an Additional District Magistrate. The role is to adjudicate against Rent Authority orders and orders for eviction and possession of premises. The presiding officer in Rent Tribunal would be a District Judge or an Additional District Judge. Its primary function is to adjudicate from Rent Court orders. The MTA imposes a 60-day deadline for adjudication of tenant eviction and non-payment of rent appeals[5].
Chapter VIII- MISCELLANEOUS
This is a miscellaneous chapter. According to this chapter, the officers and other employees of the Rent Authority, Rent Court, and Rent Tribunal are to be appointed by the state/union government in consultation with Rent Authority, Rent Court, and Rent Tribunal. The Rent Court’s jurisdiction shall be limited to the tenancy agreement submitted to it as specified in the First Schedule and shall not extend to the question of title or ownership of premises. The provisions of the Court Fees Act of 1870 apply to applications or appeals presented before the Rent Authority, Rent Court, or Rent Tribunal[6]. The State Government/Union Territory Administration may make rules to carry out the provisions of this Act.
CONCLUSION
The Act clearly intends to regulate the renting of premises, to protect the interests of landlords and tenants, and to provide a quick adjudication mechanism for dispute resolution. The Act’s provisions seek to balance the interests and rights of both the landlord and the tenant, as well as to create an accountable and transparent ecosystem for renting out premises in a disciplined and efficient manner. The Model Tenancy Act has a bright future and will go a long way in the history of the Indian real estate market.
[1] Gulatee, A. (2021, October 7). The Model Tenancy Act, 2021: A Step Forward. SCC Online Blog. https://www.scconline.com/blog/post/2021/10/07/the-model-tenancy-act-2021-a-step-forward/
[2] Gupta, S. (2021, June 10). Examining the Model Tenancy Act, 2021 and regulation of rental property in India.The PRS Blog.
[3] Mahajan, A. (2021, July 18). The Model Tenancy Act, 2021 – Envisioning ‘Affordable Housing for All.’ NLUJ Law Review. http://www.nlujlawreview.in/the-model-tenancy-act-2021-envisioning-affordable-housing-for-all/
[4] MOHUA. Background Note on Model Tenancy Act (MTA). Ministry of Housing and Urban Affairs, Government of India.https://mohua.gov.in/upload/uploadfiles/files/1%20Background%20Note%20on%20MTA%20(English).pdf
[5] Khaitan & Co. & Knight Frank LLP. (2021). 2021: A New Era for Rental Estate in India. Knight Frank. https://content.knightfrank.com/research/2264/documents/en/a-new-era-for-rental-real-estate-in-india-indian-real-estate-residential-office-8206.pdf
[6] Modi, P. (2020, October 7). The Court Fees Act, 1870: A Critical Study. JudicateMe. https://judicateme.com/the-court-fees-act-1870-a-critical-study/
YLCC would like to thank Dipti Tharwani for her valuable insights in this article.
