Model Tenancy Act – Balancing Rights and Obligations – By Mamta Binani

By Adv. Dr. Mamta Binani,
Past President of the ICSI

Model Tenancy Act – Balancing Rights and Obligations

 

Introduction

The Hon’ble President of India, in his address to the Joint Session of Parliament on 9th June, 2014 had announced “By the time the Nation completes 75 years of its Independence, every family will have a pucca house with water connection, toilet facilities, 24×7 electricity supply and access.”

Hon’ble Prime Minister envisioned Housing for All by 2022 when the Nation completes 75 years of its Independence. In order to achieve this objective, Central Government has launched a comprehensive mission “Housing for All by 2022”.

Housing for All (HFA) mission is since launched in compliance with the above objective of the Government and with the approval of competent authority.

The mission seeks to address the housing requirement of urban poor including slum dwellers through following programme verticals:

  • Slum rehabilitation of Slum Dwellers with participation of private developers using land as a resource.
  • Promotion of Affordable Housing for weaker section through credit linked subsidy.
  • Affordable Housing in Partnership with Public & Private sectors.
  • Subsidy for beneficiary-led individual house construction.

Source: https://pmaymis.gov.in/PDF/HFA_Guidelines/hfa_Guidelines.pdf

Accordingly, in line with the vision of Hon’ble Prime Minister of ‘Housing for All’ by 2022, Model Tenancy Act (MTA) has been prepared with the objective of balancing the interests and rights of both the landlord and tenant; and to create an accountable and transparent ecosystem for renting the premises in a disciplined and efficient manner. It will enable creation of adequate rental housing stock for various income segments of society including migrants, formal and informal sector workers, professionals, students etc.; increase access to quality rented accommodation; and enable gradual formalisation of rental housing market. It will help overhaul the legal framework with respect to rental housing across the country. It is expected to give a fillip to private participation in rental housing sector thereby addressing the huge housing shortage.

Existing States rental laws have long drawn legal provisions which result in lengthy litigation to resolve disputes. A ceiling on rent has further reduced the quality and quantity of rental housing stock, resulting in low rental yields, which dissuade homeowners from renting premises. This has made rental housing financially unattractive resulting into informal sub-standard rental market lacking basic amenities. Further, the affordability to own a house is a challenge especially for low-income households. Therefore, it is imperative to promote rental housing to help in bridging this gap.

MTA will enable unlocking of vacant premises for rental purpose and create a  vibrant, sustainable and inclusive rental market. MTA will promote growth of  rental market thereby attracting investment and promote entrepreneurial  opportunities in the rental housing sector.

Recent Developments

Cabinet Approval for Affordable Rental Housing Complexes

On July 8, 2020 the Union Cabinet chaired by our Hon’ble Prime Minister, Shri Narendra Modi has given its approval for developing Affordable Rental Housing Complexes (ARHCs) for urban migrants/poor as a sub-scheme under Pradhan Mantri Awas Yojana – Urban (PMAY – U) whereby, the existing vacant government funded housing complexes, will be converted in ARHCs through Concession Agreements for 25 years.

Concessionaire will make the complexes livable by repair/retrofit and maintenance of rooms and filling up infrastructure gaps like water, sewer/ septage, sanitation, road etc. States/UTs will select concessionaire through transparent bidding. Complexes will revert to Urban Local Bodies ULB after 25 years to restart next cycle like earlier or run on their own.

Special incentives like use permission, 50% additional FAR/FSI, concessional loan at priority sector lending rate, tax reliefs at par with affordable housing etc. will be offered to private/public entities to develop ARHCs on their own available vacant land for 25 years.

This scheme seeks to fulfill the vision of ‘AtmaNirbhar Bharat.

Source: https://www.pib.gov.in/PressReleseDetail.aspx?PRID=1637215

Model Tenancy Act

To achieve the ‘Housing for All’ Mission the Government of India, Ministry of Housing and Urban Affairs had issued the Model Tenancy Act 2020 seeking public comments. The proposed Act consisted of 47 sections, eight chapters and two schedules.

http://mohua.gov.in/upload/uploadfiles/files/Draft%20Model%20Tenancy%20Act%2C%202019(1).pdf

The proposed legislation is a ‘model act’ because land is a state subject.

There is a Memorandum of Agreement signed by the States (including West Bengal) with the Ministry of Housing and Urban Affairs wherein the states would be pursued to enact the tenancy law or amend the existing one to align with the provisions of the model act, agreed to by them, under an MoU signed for PMAY-U.

Source:

Cabinet Approval of Model Tenancy Act

Now, the Union Cabinet headed by the Hon’ble Prime minister of India Shri Narendra Modi has approved the Model Tenancy Act on 02.06.2021 and the same has been circulated to the States and Union Territories for adaptation by way of enacting fresh legislation or amending existing rental laws suitably.

This Model Tenancy Act will help to overhaul the legal framework with respect to rental housing across the country, which would help spur its overall growth.

The Model Tenancy Act aims at creating a vibrant, sustainable and inclusive rental housing market in the country.  It will enable creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness.  Model Tenancy Act will enable institutionalisation of rental housing by gradually shifting it towards the formal market.

The Model Tenancy Act will facilitate unlocking of vacant houses for rental housing purposes.  It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage

Source:

https://pib.gov.in/PressReleseDetail.aspx?PRID=1723636

Model Tenancy Act Approved by Union Cabinet: https://ibclaw.in/model-tenancy-act-2021/

Based on the Model Tenancy Act Approved by the Ministry, some of the important issues has been dealt with in a question and answer format, for an easy understanding:

1. What is the preamble of this Act?

To establish Rent Authority to regulate renting of premises and to protect the interests of landlords and tenants and to provide speedy adjudication mechanism for resolution of disputes and matters connected therewith or incidental thereto.

2. To whom this Act shall apply?

The Act is proposed to be applied to all rental agreements entered into, with respect to property or premises, between the landlord (whether called landlord or lessor or by any other name) and tenant for the purpose of residence or commercial or educational use, except for industrial use.

3. To whom this Act will not apply?

a) Any premise(s) owned or promoted by the Central or State or Union Territory Government or Local Authority or a Government undertaking or enterprise or a statutory body or cantonment board;

(b) Premise(s) owned by a company, university or organization given on rent to its employees as part of service contract;

(c) Any premise(s) owned by religious or charitable institutions as may be specified by notification;

(d) Any premise(s) owned by any trust registered under the Public Trust Act of the State;

(e) Any premise(s) owned by Wakfs registered under the Wakf Act, 1995;

(f) Any other building and/or category of building(s) specifically exempted in public interest through notification.

It is interesting to note here that if the above exempted entities wishes to be governed by the Act, the owner may inform the Rent Authority to do so under section 4 of the Act.

4. Is it mandatory to register all rental agreements?

Yes, it is mandatory. Once this Act is approved by the Government and notified, then no person shall, after the commencement of this Act, let or take on rent any premises except by an agreement in writing, and it should be informed to the Rent Authority jointly by the landlord and tenant.

5. Is there any particular form towards giving this information of rental agreements and any laid down time frame?

Yes, there is a form laid out for the said purpose. The same is prescribed in the First schedule to this proposed Act. The agreement needs to be presented with a period of 2 months from the date of agreement. It goes on to mention that if the same is not presented within the said 2 months, then the landlord and the tenant has to separately file the particulars of the tenancy within 1 month from the date of expiry of the 2 months window.

6. Whether the existing agreement is required to be registered?

 As per the act the existing agreement is not required to be registered.

7. With whom this rental agreement has to be filed and what will be the medium to file the agreement?

 The agreement has to be filed with the officer of the Rental Authority who will be appointed by the District Collector with the previous approval of the State/UT Government, for the area within its jurisdiction to which this proposed Act will apply.

The Rent Authority shall put in place a digital platform in the local vernacular or state language for enabling submissions of document.

8. Whether any acknowledgement will be provided by the Rental authority receiving the rental agreement?

Yes, after receiving the agreement, the Rent Authority shall provide a unique identification number to the parties within seven working days from date of receipt of tenancy agreement and upload the details of tenancy agreement on its website, compulsorily, in local vernacular or state language.

9. What is the Tenancy period?

The Tenancy period is the period as agreed between the landlord and the tenant and as specified in the tenancy agreement.

10. What will be the consequence if the tenancy agreement is not renewed even after the period mentioned in the agreement?

If a tenancy for a fixed term ends and has not been renewed and the premises have not been vacated by the tenant at the end of such tenancy, then such tenant shall be liable to pay an enhanced rent to the landlord as governed by section 23 of the Model Tenancy Act.

11. Whether the terms and conditions executed between landlord and tenant, shall be binding upon their successors in the event of the death of the landlord or tenant?

Yes, in the event of death of the parties to the agreement, the successors shall have same rights and obligations as agreed in tenancy agreement for the remaining period of the tenancy. This also means that whether the point of successor is covered in the tenant agreement or not, the same will apply by virtue of a specific mention in the proposed Act.

12. Whether the tenant can sublet or assign or transfer his rights in the tenancy agreement and what is the formality?

Yes, the tenant can sublet/sublease or assign or transfer his rights if such a clause features in the tenancy agreement. Where the premises are sublet upon entering into a supplementary agreement to the existing tenancy agreement, the landlord and tenant shall jointly inform the Rent Authority about the sub-tenancy within a period of two months from the date of execution of such agreement in the specified Form.

13. Whether the landlord can revise the rent during the tenancy period?

Yes, the landlord can revise the rent as per the terms set out in the tenancy agreement.

14. How much amount can be collected as a security deposit by the landlord in case of residential property and non-residential property?

The security deposit to be paid by the tenant in advance shall be as determined by the Tenancy Agreement and as agreed mutually between the landlord and the tenant, subject to a maximum of 2 months’ rent in case of residential property and minimum of 6 month’s rent in case of non-residential property. The said security deposit shall have to be refunded to the tenant at the time of taking over the vacant possession of the premises, ofcourse, after making due deduction of any liability which remains due, from the side of the tenant.

15. Whether the original agreement is to be given to tenant by landlord?

Yes, according to the Act, one original signed copy of the agreement executed between the two parties has to be given to the tenant.

16. Whether rent receipt is to be given to the tenant for receipt of rent by the landlord?

Yes, the landlord or the property manager has to forthwith give rent receipt or acknowledgement for receipt of rent and for other charges, if any and also for advances made by the tenant.

17. Whether rental receipt or acknowledgement is to given to the tenant even in case of payment of rent through online mode like NEFT or RTGS or IMPS etc. directly to the landlord’s bank account?

No, if the rent is paid through online mode directly to the land owner account, then the bank acknowledgment is enough and there is no need for rent receipt or acknowledgment from landlord or its manager.

18. How to proceed in paying the rent if the landlord refuses to accept the rent and other charges payable or refuses to give a receipt?

In such a case, the rent can be sent to the landlord by postal money order or any other method as prescribed under the rules by the State Government, continuously for two months.

19. What the tenant should do in case the land owner has not been accepting the rent continuously for the two months period even after sending through the postal money order or any other method as prescribed by the State Government?

If the landlord does not accept the rent and other charges within this prescribed period, then the tenant may deposit the same with the Rent Authority.

20. What the Rent Authority will do after depositing the rent with them?

The Rent Authority shall investigate the matter and pass an order based on facts of the case. It will be pertinent to mention here that the withdrawal of rent and other charges payable, from the amount so deposited by the tenant, shall not operate the landlord or any other fact stated by the tenant, if the landlord withdraws it to the extent of the rent.

21. What the landlord should do in case the tenant refuse to carry out scheduled or agreed repairs as per the agreement?

The landlord shall get the repairs done and deduct the amount from the Security Deposit given by the tenant.

22. How to adjust the cost of the repairs done by the landlord if the cost exceeds the security deposit?

If the cost of the scheduled or agreed repairs exceed the security deposit, the tenant shall be liable to pay the same to the landlord within a period of one month from the issuance of notice to tenant by the landlord.

23. What the tenant should do in case the landlord refuse to carry out scheduled or agreed repairs as per the agreement?

In case the landlord refuses to carry out the scheduled or agreed repairs, the tenant can get the work done and deduct the same from periodic rent. However, the deduction of such rent should not exceed fifty percent of agreed monthly rent, payable by the tenant.

24. What the tenant must do in case the premises have become uninhabitable in absence of repair by landlord?

The tenant can abandon the premises and handover the possession to landlord, after giving the landlord fifteen days’ notice in writing. Alternatively, the tenant can vacate the premises with the permission of the Rent Authority.

25. Whether the landlord or property manager has the right to enter into the rented premises without giving any notice to the tenant?

No, the landlords ’s property manager cannot enter the rented premises without giving notice to the tenant.

26. What is the notice period to enter the rented premises by the land owner or property manager?

The notice period is 24 hours’ time before entering into premises.

27. What is the mode of serving the entry notice?

It may be a written notice or through electronic medium.

28. Whether the entry notice should contain reason for entry?

Yes, the notice must contain the reasons for entry as well as date and time of the entry. But no such notice is required by the landlord for entering into the premises let out on rent without prior notice to the tenant in case of emergent situations like war, flood, fire, cyclone, earthquake or any other natural calamity, which may affect that premises.

29. What is the time for entry into the premises by the land owner or property manager?

No person shall enter the premises before sun rise and after sun set.

30. If the landlord has engaged the property manager, is it mandatory to inform the details to the tenant?

 Yes, it is the duty of the landlord to inform the details about the name, authorisation, property and identity proof of the property manager appointed by him and in case the property manager is a legal entity, then the name of the entity and the contact person details has to be provided.

31. What are the functions envisaged for a property manager?

The functions of the property manager may include the following:

(a) collection of rent against receipt;

(b) getting essential repairs done on behalf of the landlord;

(c) inspection of the premises from time to time;

(d) giving notice to tenant for (i) proper maintenance of the premises; (ii) delay in payment of rent; (iii) revision of rent; (iv) take possession of premises upon vacation; (v) renewal of tenancy;

(e) help in resolution of disputes among tenants and between landlord and tenant;

(f) any other matters relating to tenancy.

32. Whether the property manager or landlord or tenant has the right to cut off or withhold the essential supplies or services of the rental premises?

No, the property manager or landlord or tenant has no right to cut off or withhold the essential supplies or services. In case the property manager or the landlord or the tenant does so, then on an application made in this regard, the essential services can be restored by the order of the Rent Authority even as an ad interim measure, pending disposal of the application. The Rent Authority shall conduct an inquiry against the application made by the landlord or the tenant, as the case may be, and complete the inquiry within one month of filing of such application.

33. Whether any compensation will be ordered against the person who has cut off or withhold the essential supplies or services of the rental premises?

The Rent Authority may direct for compensation on the person responsible for cutting off or withholding the essential supply.

34. Whether the tenant can be evicted from the premises during the tenancy agreement period?

Yes, the landlord of the premises can evict the tenant during the existence of tenancy agreement period by making application to the Rent Court on the any of the grounds mentioned in section 21 of the Act.

35. Whether the landlord is entitled to get compensated in case the tenant fails to vacate the premises after termination of rental agreement?

Yes, the landlord is entitled to get compensation of double of the monthly rent for two months and four times of the monthly rent after that, for the use and occupation of the premises by a tenant who does not vacate it even after the tenancy agreement is terminated.

36. Whether the tenant is liable to pay rent during the eviction proceedings?

Yes, during the eviction proceedings, Rent Court, on application by the landlord may order the tenant to make such payment and all other charges due from the tenant along with penalty, if any, to the land owner.

37. Who will function as a Rental Authority?

The District Collector or District Magistrate shall, with the previous approval of the State Government/Union territory Administration, appoint an officer, not below the rank of Deputy Collector, to be the Rent Authority within his jurisdiction.

38. Where to appeal against the orders passed by the Rent Authority?

The orders passed by the Rent Authority is appealable before the Rent Court having the territorial jurisdiction.

39. What is the time limit to prefer an appeal against the orders passed by the Rent Authority ?

The appeal should be preferred within 30 days from the date of the passing of the order by the Rent Authority.

40. Who will constitute the rent court in the state or union territory?

The District Collector or District Magistrate shall, with the previous approval of the State Government/Union Territory  Administration, appoint Additional Collector or Additional District  Magistrate or an officer of equivalent rank, to be the Rent Court for the purposes of this Act, within his jurisdiction.

41.Who will constitute the Rent Tribunal in the state or union territory?

The State Government or Union territory Government may, in consultation with the jurisdictional High Court, may by notification, appoint District Judge or Additional District Judge as Rent Tribunal in each District.

42. What is the procedure followed by the Rent Court or Rent Tribunal?

The Rent Court and the Rent Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 but shall be guided by the principles of natural justice and shall have power to regulate their own procedure.

43. What is the time frame within which the application filed before the Rent Court and Rent Tribunal is to be disposed off?

The Rent Court and the Rent Tribunal shall endeavor to dispose the case as expeditiously as possible which shall not be more than a period of sixty days from the date of receipt of the application or appeal.

44. Whether cross examining the witness at the time of proceedings in the Rent court or Rent Tribunal is possible?

Yes, where it appears to the Rent Court or Rent Tribunal during the proceedings that it is necessary in the interest of justice, it may allow for examination or cross-examination of the witness.

45. What is the powers of the Rent Court or Rent Tribunal?

The Rent Court and the Rent Tribunal for the purpose of discharging their functions under their Act, shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908.

Any proceedings before the Rent Court or Rent Tribunal shall be deemed to be a judicial proceeding.

46. Where to appeal against the orders passed by the Rent Court?

The Orders passed by the Rent Court is appealable before the Rent Tribunal within 30 days from the date of passing of the order by the Rent Court.

47. whether the Rent Court has the power to execute its order?

Yes, the Rent Court has the power to execute its order which includes the following:

  • delivery of possession of the premises to the person in whose favor the decision has been made;
  • attachment of any one or more bank accounts of the opposite party and satisfaction of the amount of order to be paid from such account;
  • Appointing any advocate or any other competent person including officers of the Rent Court or local administration or local body for the execution of the order.

48. What is the Jurisdiction of the Rent Court?

The jurisdiction of the Rent Court shall be limited to tenancy agreement submitted to it and shall not extend to the question of title or ownership of premises.

Conclusion:

The Model Tenancy Act proposes limiting the advance security deposits to two months’ rent and has also suggested heavy penalties for tenants who overstay. Those who do, may have to shell out double the rent for two months which could be increased to even four times. The act also proposes to make the owner responsible for repairs and it contains disputes redressal mechanism by constituting the Rent Court and Rent Tribunal. There is no doubt that, this model tenancy law will give a fillip for rental housing segment in our country. Moreover, this model tenancy law is a need of this hour because now-a-days there are many rental disputes arising between the tenant and the Land owner.

 These rental disputes are expected to be resolved in a time bound manner once this Model Tenancy Act is enacted/adopted and implemented effectively by all the states.

 

 

Disclaimer: The Opinions expressed in this article are that of the author(s). The facts and opinions expressed here do not reflect the views of IBC Laws (http://www.ibclaw.in). The entire contents of this document have been prepared on the basis of the information existing at the time of the preparation. The author(s) and IBC Laws (http://www.ibclaw.in) do not take responsibility of the same. Postings on this blog are for informational purposes only. Nothing herein shall be deemed or construed to constitute legal or investment advice. Discussions on, or arising out of this, blog between contributors and other persons shall not create any attorney-client relationship.

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