INTRODUCTION
An announcement was made in Union Budget 2019-2020 by the Finance Minister, Ms.
Nirmala Sitharaman proposed few changes to be bought under the housing sector
the laws governing the transactions between landlords and tenants for renting
of property in India. Almost two years after announcing it, the union cabinet
approved the Model Tenancy Act, 2020’[1]
(“MTA”) that aims to boost rental
housing in the country and reduce litigation, which was first released in the year
2019 by the Ministry of Housing and Urban Affairs ("Ministry") for seeking public comments. The MTA will provide
the legal framework for the rental housing including commercial premises across
the country. It is expected to give a boost to private sector participation in
the rental housing sector thereby creating a lucrative market and addressing
the huge housing shortage especially faced by the urban population. States can
adopt the Act as either in the form of fresh legislation, since it is a state
subject or they can amend their existing rent acts in line up with the MTA.
The existing state rental
laws such as Maharashtra Rent Control Act, 1999 and Delhi Rent Act, 1995 have
lengthy legal frameworks tilted heavily in favour of tenants which results in
unsettled litigation. Ceiling the rent further deteriorated the quality and
quantity of rental house stock resulting in lower rental yields. On the other
hand, affording a house is a challenge especially for a low-income household
and it becomes difficult to promote rental housing to such households. In
addition to the rental housing, the draft law also emphasis on growth of
investment in the sector and give a boost to entrepreneurial opportunities and
innovative mechanisms of sharing of space. It will be applicable prospectively
without affecting the existing tenancies, meaning that owners who have not been
able to evict tenants due to the provisions of the previous laws will get no
relief unless the state in which they own a property specifically provisions
for it.
[1] http://mohua.gov.in/cms/modeltenancyact.php
1. Tenancy Agreement[1]
- All the new tenancies of the premises are bound to execute a rent agreement in writing. As per the requirement under section 4 of the MTA, the details of the executed rent agreement shall be duly submitted to the concerned Rent Authority in the prescribed form as specified under the MTA, jointly by the landlord and the tenant within 2 months from the execution date of the Agreement.
- In the event if both the landlord and the tenant, fails to jointly submit the details with the Rent Authority within 2 months from the execution date of the Agreement, then they can separately inform to the Rent Authority within a period of one month from the date of expiry of the 2 months period specified above.
- A digital platform will be put in place which may be in the local vernacular language or the language of the State/Union Territory for submitting tenancy agreement and other documents. Rent Authority will keep a charge/control/tab on these agreements.
- The Rent Authority will provide a UIN (Unique Identification Number) to the parties and within seven working days of the receipt of the information from the parties, the Rent Authority will upload the tenancy details on the above-said digital platform.
- The term ‘premises’ includes residential and commercial premises but excludes industrial premises.[2]
2. Security Deposit
A cap on the number of the months security
deposit (“SD”) has been put in place by the provisions of the MTA. The
SD to be paid by the tenant shall not exceed two months rent in case of the
residential properties and in the case of non-residential properties the SD shall
not exceed more than the six (6) months' rent.[3]
3. Restricting the sub-letting rights
The sub-letting or assigning or
transferring of premises held by a tenant is allowed subject to entering into a
supplementary agreement and informing jointly to the Rent Authority within two
months in the prescribed form, from the date of execution of such supplementary
agreement.[4]
4. Eviction and Recovery of possession of premises by the landlord
During the continuance of tenancy the tenant shall not be evicted from the premises for the defaults unless otherwise agreed to something in writing by both the parties and if nothing agreed in a tenancy the agreement, then the landlord shall approach the Rent Authority for obtaining an order of eviction and recovery by relying on the grounds such as tenant failed to pay agreed rent or arrears for consecutive two months, sub-let without obtaining written consent, misuse the land after receiving cease and desist order from a landlord, failed to vacate let out premises after receiving vacate notice, necessary to carry out changes or repair of let out premises on the direction of competent authority.[5.
However, in case of the death of landlord, the legal heirs shall move the application to Rent Authority, showing a bonafide requirement for seeking the eviction and recovery of possession of premises let out. [6]
5. Rent Authority, their powers, and appeals [7]
The MTA has introduced the mechanism of
addressing the disputes and grievances through a specific Rent Authority (“RA”) to providing an expeditious
conclusion of such disputes. The district collector or district magistrate is vested
with the power to appoint jurisdictional RA an officer not below the rank of deputy
collector in consultation with respective state governments. The MTA has
provided more teeth to the RA by vesting the powers of Rent Court relating to revision
of rent, determination of revised rent in case of dispute, the deposit of a rent
with rent authority, repair and maintenance of the property, duties of a property
manager and consequences of violation of duties and withholding essential
service or supply.
6. Dispute Resolution Mechanism- Rent Courts and Rent Tribunals[8]
The MTA paved the way for establishing the jurisdictional Rent Courts (“RC”) and Rent Tribunals (“RT”) for achieving the speedy redressal of disputes and have powers to regulate their own procedure. The RC / RT shall decide the dispute within a period of sixty (60) days. The jurisdiction of the RC & RT is limited to the tenancy agreement and does not extend to disputes on title and ownership of the premises in dispute.
The district collector or district magistrate shall, with the previous approval of the State Government/Union territory administration, appoint an additional collector or additional district magistrate or an officer of equivalent rank, to be the rent court for the purposes of the MTA, within his jurisdiction. The State Government/Union territory administration in consultation with the jurisdictional High Court, may by notification, appoint a district Judge or additional district Judge as rent tribunal in each district.
Conclusion
Upon successful implementation of the
MTA by the respective state governments across the nation, it will lead to a
massive relief to the real estate sector and eventually stabilise the rental
and housing market in India. The restriction by the existing rental laws on the
growth of rental housing and discourage owners from renting out their vacant
houses due to fear of repossession, will come to an end now and transparency
and accountability in the existing system of renting of premises will come into
effect. Furthermore, as the land is the State’s subject, therefore the State
would be free to adopt the law, also, States and Union territories can adopt
the MTA by enacting fresh legislation or they can amend their existing rental
laws suitably. Besides this, huge investment would be required to constitute three-tier
grievance redressal system as provided under the MTA.
Download the complete Model Tenancy Act, 2020 at: [1] http://mohua.gov.in/cms/modeltenancyact.php
This Article has been Compiled by Himanshu Mohinani (Associate) and edited by Deepika Sharma (Senior Associate) You can direct your queries or comments to the author at himanshu@factumlegal.com or deepika@facumlegal.com
Disclaimer:
The contents of this article should not be construed as a legal opinion. This article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. We expressly disclaim any financial or other responsibility arising due to any action taken by any person on the basis of this article.
[1] Section 4 of The Model Tenancy Act, 2020
[2] Section 2(d) of
The Model Tenancy Act, 2020
[3] Section 11 of The Model Tenancy Act, 2020
[4] Section 7 of The Model Tenancy Act, 2020
[5] Section 21 of The Model Tenancy Act, 2020
[6] Section 22 of The Model Tenancy Act, 2020
[7] Chapter VI of The Model Tenancy Act, 2020
[8] Chapter VII of The Model Tenancy Act, 2020
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