Institutionalization of Rental Housing – Enactment of Model Tenancy Law

In the meeting of Union Cabinet dated 02^nd June.2021, The Model Tenancy Act, 2021 (MTA) got approved under which separate Rent Authorities, Courts and Tribunals would be set up in districts to protect the interest of both the owner and the tenant; enabling to streamline the process of renting property in India and aid the rent economy in the estate sector

After being on the drawing board since 2019, India now has a way to a legislation to establish Rent Authority to regulate renting of premises and to provide speedy adjudication mechanism for resolution of disputes and matters connected therewith or incidental thereto. The act shall be known as (Name of State/Union territory) Tenancy Act, 2020

The model law will now be circulated to states and union territories, for adaptation through way of enacting fresh law or amending present rental legal guidelines suitably. States can adopt the Act as it is with fresh legislation, considering the fact that it is a state subject, or they can amend their present rent acts to component in the new MTA. The onus will be on states and union territories to accept or reject the law as model act are not binding. The States and Union Territories have MoUs with the Centre underneath the Pradhan Mantri Awas Yojana – Urban providing as under:

Key takeaways –

• No building or premises can be rented except a written agreement on mutually agreed terms; Rent has to be constant by means of mutual agreement between landlord and the tenant.
• The Act shall apply to each residential and commercial tenancy; therefore, it applies all over India.
• The act will be observed solely prospectively, and the current tenancies shall proceed to be ruled with the aid of existing rental laws of the States/UTs.
• If the tenancy time period ends at the time when the area whereby the rented premises is located experiences any pressure majeure event, the landlord shall permit the tenant to continue occupancy for one month from the date of the cessation of such event on the identical terms as that of the prevailing tenancy agreement.
• Recovery of possession by means of the landlord on certain conditions and in case if the tenant fails to vacate the property after the rent ends, the landlord is entitled to double the lease for the first two months and then four times the monthly lease thereafter.
• Security deposits for residential structures need to no longer exceed two months’ rent, and in the case of non-residential establishments, it shall be as per the terms of tenancy settlement subject to a most cap of six-month rent. The security deposit shall be lower back at the time of taking over vacant possession of the premises by the Landlord after adjusting for any dues.
• This will ensure that a landlord does no longer arbitrarily amplify the rent in variance with what has been agreed to in the agreement. It will also make certain that the tenant is no longer evicted at the whim of the landlord.
• There is no financial ceiling. It shall observe to all tenancies with no financial threshold. At present, in many ancient properties let out under archaic rent-control Acts, such ceilings have left landlords stuck with old-fashioned lease amounts.
• A digital platform will be set up in the local vernacular language or the language of the State/Union Territory for submitting tenancy settlement and other documents. Rent Authority will keep a tab on these agreements.
• Verbal agreements will be out of the picture, as the MTA mandates written settlement for all new tenancies which is to be submitted to Rent Authority. Tenant will continue to pay the lease even throughout the pendency of a dispute with a landlord.
• Subletting of premises can solely be carried out with the prior consent of the landlord, and no structural alternate can be performed with the aid of the tenant without the written consent of the landlord.

The model law proposes putting up a rent authority to be headed by means of an officer of the rank of deputy collector and will be set up by means of the district collector, with the approval of the respective state government. States will set up a grievance redressal mechanism to ensure speedy redressal of dispute comprising of Rent Authority, Rent Court and Rent Tribunal to furnish fast-track resolution of disputes. Disposal of a complaint/appeal by way of the Rent Court and the Rent Tribunal will be mandatory within 60 days.

Historical Overview

In India, like the United States of America, the commencing of the call for rent controls can be traced to the First World War as inflation used to be surging, and tenants had been in distress. The Rent Control Act, 1918 was once passed in the Bombay Presidency in order to maintain rents within sensible limits, and a similar Act was additionally enacted in Kolkata in 1920. The Delhi Act was once born in 1938 beneath the Defence of India Rules at the onset of the Second World War and used to be supposed as a transient measure given the extenuating circumstances.

In absence of a model law, there are casual agreements with arbitrary clauses and regularly litigation arising out of disputes.Which lead to emergence of the Rent Control Act in Independent India. However, what started out as a temporary remedy measure continued, and a Central Rent Control Act was passed in 1948 with the aid of Independent India and was once carved out as an exception to the Transfer of Property Act, 1882.

There used to be a shortage of rental housing due to the First and Second World Wars, and the governments at that time, as a temporary measure, instituted Rent Control Statutes to ensure the stability of energy between tenants and landlords, matters are no longer the same and the time has come to overhaul the archaic provisions of Rent Control completely, and the Model Tenancy Act is a step in the right direction.

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