Model Tenancy Act

In Context

• Recently, the government cleared the Model Tenancy Act (MTA) to regulate the rental market. 

In the news

• Only four States have revised their tenancy laws to be in line with the Model Tenancy Act (MTA).
  • As per information available with the Ministry of Housing and Urban Affairs (MoHUA), the States of Andhra Pradesh, Tamil Nadu, Uttar Pradesh and Assam have revised Tenancy Acts on the lines of MTA.
• Model Tenancy Act aims to regulate the rental market and unleash the potential in the real estate sector.

The Model Tenancy Act

• Agreement & Security deposits:
  • The Model Act requires the landlord and tenant to sign a written agreement which specifies the rent, period of tenancy and other related terms.  
  • Security deposit is capped at two months’ rent for residential premises, and six months’ rent for non-residential premises.
• Eviction of tenant:
  • Conditions for eviction of tenant under the Model Act include: 
    • Refusal to pay agreed-upon rent; 
    • Failure to pay rent for more than two months; 
    • Occupation of part or whole of premises without written consent; and 
    • Misuse of premises despite a written notice.
• Jurisdiction:
  • The Model Act establishes a three-tier quasi-judicial dispute adjudication mechanism consisting of: 
    • Rent Authority; 
    • Rent Court; and 
    • Rent Tribunal.  
  • No civil court will have jurisdiction over matters pertaining to provisions under the Model Act.
  • Establishment:
    • Rent Authorities and Rent Courts may be established by the District Collector with the approval of the state government.  
    • The state or union territory government may establish a Rent Tribunal after consulting with the jurisdictional High Court.  
• Model for urban & rural properties:
  • The Act provides a model for urban & rural properties & templates for residential & commercial properties. 
• Applicability: 
  • It will apply to future transactions & take people from informal to specific contract arrangements b/w landlord & tenant.
  • The Act will apply to premises let out for residential, commercial or educational use, but not for industrial use.
  • It also won’t cover hotels, lodging houses, inns, etc. 
  • This model law will be applied prospectively and will not affect existing tenancies.
• Increase in Rent:
  • The Act also tries to address how a renter can legitimately increase the rent. 
  • The Act states that rent can either be increased according to the terms and conditions mentioned in the agreement, or the landowner will have to give a notice in writing to the tenant, three months before the revised rent comes into effect.
• Supply of amenities & others:
  • A landowner cannot cut power and water supply in case of a dispute with the tenant.
  • A landowner cannot enter the rented premises without 24-hour prior notice to carry out repairs or replacements.

Significance:

• It aims at creating a vibrant, sustainable and inclusive rental housing market in the country.  
• It aims to bridge the trust deficit between tenants and landlords by clearly delineating their obligations.
• It will enable the creation of adequate rental housing stock for all income groups thereby addressing the issue of homelessness.  
• It will enable institutionalisation of rental housing by gradually shifting it towards the formal market.
• It 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.

Key issues

• Issues of availability and affordability:
  • The Model Act may not resolve key issues in the rental housing sector that it seeks to address.  
  • Experts have recommended various reforms that are required to address issues such as availability and affordability to formalise the rental housing market.
•  Too many specifications:
  • The Model Act specifies minute details of what should be included in a rent agreement such as assigning responsibility for structural repairs and routine maintenance and the maximum security deposit.  
  • It is unclear why central legislation must include such details which may be mutually agreed upon by contracting parties when signing an agreement.
• Privacy issues:
  • Registration of the rent agreements requires an Aadhaar number to be submitted.  
    • Mandating the submission of an Aadhaar number to register a rent agreement may violate a Supreme Court judgement.  
  • Further, the Authority must upload the details of the agreement (and supporting documents) on a public portal.  
    • This may violate the right to privacy of the contracting parties.  
• The time frame for Dispute resolution:
  • The timeline for the resolution of some disputes by adjudicatory bodies has not been specified in the Model Act.  

Way ahead

• The new Model Tenancy Act is a progressive law, keeping the interests of both parties in mind. 
• However, some experts have suggested that the Centre should have also looked into incentivizing tenants and landlords through subsidies and tax exemptions, encouraging public-private partnership in residential rental management and enhancing access to finance for low-income segments. 
  • Such measures will bring in investments.  
• Since it is a Model Act, its implementation will only come into effect when states make changes to existing rental laws.

Source: TH