What is Model Tenancy Act, 2020

 

The Ministry of Housing and Urban Affairs has prepared a draft to the Model Tenancy Act for the benefit of safeguarding renting regulations and the rights of those involved in the business of Real-estate services. It establishes that the supreme Rent Authority gets to take charge upon any activity which in turn involves the lending of premises. This agreement between the landlord and the tenant needs to be sanctioned by such an authority. It protects the right of the tenants as well as the landholder. The model also ensures the creation of a favorable and more transparent system for renting premises, barring the premises owned by the government or those for industrial use.

By definition of the Ministry of Housing and Urban Affairs, the Model Tenancy Act (MTA) is “an 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 and incidental thereto.”

The Government, by means of this Act, wishes to promote the growth of rental markets in the country while provisioning an inclusive and hassle-free procedure. Presently, there doesn’t exist legislation governing these rental matters, while state laws and regulations exist in the tenancy criterion.

 

BACKGROUND OF THE DRAFT

As per the census conducted by the Ministry, around 100 lakh houses were lying vacant due to the provisions of the state/UT laws which discouraged renting. Thus, if one were to buy a property for renting purposes, it was no less a hassle to enter the contract. The migrant labor force would rather stay in rented accommodation, this had to be envisioned in order to promote the Prime Minister’s ‘Housing for All’ mission.

Rental accommodations have ease in entry and exit and are available at affordable prices. The population in the urban areas, according to the Ministry, has grown by more than 31% owing to the share of migrating. This migration can be rooted to finding better job opportunities, access to education, business, and healthcare. Thus, with the projected increase of 50% by 2050, MTA is prepared with the objective of balancing the interests and rights of both landlords and tenants.
It will enable the state to create rental housing stock for the facilitating different income groups of the society including migrants, formal and informal sector workers, professionals, and students.

Private participation will also be included in order to curb the huge housing shortage faced by migrants. This is also a way to help bridge the gaps between different segments of income classes by providing houses, which are otherwise not affordable to low-income groups. The legislation seeks responses from various stakeholders including Real-estate service providers to improve the draft.

 

OVERVIEW OF THE SOME FEATURES

1. After commencement of MTA, no premises to be rented except by an agreement in writing on mutually agreed terms
2. MTA to be applicable to residential and commercial tenancies
3. MTA to be applicable to who State/UT urban and rural areas
4. Rent to be fixed by the mutual agreement between landlord and tenant
5. MTA to be applied prospectively and the existing tenancies shall continue to be governed by the respective extant rental laws of the State/UT
6. MTA to provide for a fast-track quasi-judicial mechanism for adjudication of disputes
7. MTA to be applicable to all tenancies without any monetary threshold
8. The terms of the agreement shall be binding upon successors of the landlord as well as a tenant for the remaining period of tenancy agreement
9. Sub-letting is not permitted without execution of supplementary agreement between landlord and tenant.
10. Security deposit for residential premises shall not exceed two months’ rent and in case of non-residential premises it shall be as per the terms of tenancy agreement subject to a maximum of six month’s rent.
11. Recovery of possession of premises by the landlord on certain grounds
12. The landlord is entitled to double the monthly rent for the first two months and thereafter, four times the monthly rent in case of default by the tenant to vacate the premises after termination of tenancy.

 

KEY HIGHLIGHTS OF MTA

A.     Tenancy Agreement – 

      The Model Tenancy The act states that no person shall let or take on rent any premises except by an agreement in writing which shall be informed to the rent authority jointly by the landlord and the tenant in the form specified under MTA within a period of two months from the date of the tenancy agreement. After receiving information about the execution of the agreement, the authority shall provide a unique identification number to the parties and upload the details on its website in vernacular language.

B.     Security Deposit –

       The MTA caps the security deposit payable by the tenant to a maximum of 2 months in the case of residential premises and to 6 months in the case of non-residential premises.

C.     Withholding essential supply or service – 

      No landlord or property manager shall either by himself/herself or by any other person, withhold any essential supply or services in the premises occupied by the tenant. In case of any contravention and by receiving an application from the tenant in this regard, the rent authority after examining the matter might pass an interim order directing the restoration of supply of essential service.

D.     Rights and obligations of a successor – 

      The MTA proposes that the terms of the agreement executed between the landlord and the tenant shall be binding upon their successors in the case of death of the landlord or tenant. In such a case, the successors of the deceased landlord or the tenant, as the case may be, shall have the same rights and obligations as agreed to in the tenancy agreement for the remaining period of the tenancy.

E.      Restriction on sub-letting –   

      The MTA proposes that no tenant shall sub-let in whole or parts of the premises held by him/her as  a tenant or transferor assign his/her rights in the tenancy agreement without executing a supplementary agreement to the tenancy agreement.

F.      Rent Court and Rent Tribunal – 

      The district collector or district magistrate shall with the previous approval of the State Government/Union territory administration, appoint an additional district collector or additional district magistrate or an officer of equivalent rank to be the rent court for the purposes of MTA, within the jurisdiction.

G.     Procedure to be followed – 

      The speedy redressal of disputes is the responsibility of the rent courts. They shall have the powers to regulate the procedure in the following ways:

●       The landlord and the tenant file an application with the tribunal along with necessary documents.

●       The tribunal shall then issue a notice to the opposite party

●       The opposite party shall reply with accompanied affidavits

●       The applicant may file a rejoinder after serving the copy.

●       The  tribunal shall fix a date of hearing and may hold summary inquiries

●       The dispute shall be resolved within 60 days by the ren court.

 

The act contains provisions in the favor of both, the landlord as well as the tenant. Thus, when in today’s times, we think of dwelling into Real estate services or to buy a property for rent, it can create more opportunities for migrants and other lower segments to facilitate urban development in harmony.