Explained - Draft Model Tenancy Law 2019

Introduction :- Last week, the Ministry of Housing and Urban Affairs (MHUA) released the draft Model Tenancy Act, 2019, which aims to regulate rental housing by a market-oriented approach. The Model Tenancy Act attempts to smoothen hitches and regulate the renting of premises in the country. However, since land is a state subject, states have a choice on whether they wish to adopt it or not.

Why an Act ?
Pointing to the Census 2011 count of 1.1 crore houses lying vacant, an MHUA statement said the Model Act would bring these into the rental market, and would promote the growth of the rental housing segment.

The existing rent control laws are restricting the growth of rental housing and discourage owners from renting out their vacant houses due to fear of repossession.

One of the potential measures to unlock the vacant house is to bringing transparency and accountability in the existing system of renting of premises and to balance the interests of both the property owner and tenant in a judicious manner.

Two Notable Changes Proposed In The Model Tenancy Act, 2019 :-

• Rent Authority :
  = Currently, rent agreements are registered at the sub-registrar’s office. In order to bring transparency, fix accountability and promote fairness in the rental housing segment, the policy proposes setting up of a rent authority.
  = The authority will set up a website where it would update the details of all rent agreements it has registered.
  = This would be on the lines of the functioning of the real estate regulatory authorities.
• Speedy dispute resolution:
  = In case of a dispute, landlords and tenants will have to approach the rent authority for settlement.
  = In case they are not satisfied with the order of the authority, they can challenge it in the rent court/rent tribunal within 30 days from the date of the order.
  = In the areas to which this Act extends, only the rent court and no civil court shall have the jurisdiction to hear and decide the applications relating to disputes between landowner and tenant.
  = The court/tribunal should not take more than 60 days to dispose the case, adds the policy.

Key Provisions Proposed in the Draft Tenancy Law :-

• Security deposit :
  Landlords cannot seek an amount more than two month’s rent as security deposit. This deposit would be returned to the tenant.
• Rent revision :
  The policy states that if a rent agreement is made for a specific period, the landlord cannot increase the rent amount within this period, unless a provision to that effect has been expressly stated in the agreement.
  The landlord will have to give a written notice, three months in advance before revising the rent.
  Landlords can increase the rent in case they have incurred expenditure on account of improvement, addition, or structural alteration which does not include ‘repairs’.
• Entering the rented premises :
  The landlord must give the tenant a notice of 24 hours in advance (this could be sent using any electronic medium) to enter the premise. The visiting time has to fall between 7 am to 8 pm.
• Maintenance of the rented premises :
  The responsibility to maintain the premises lie with both the parties. The rent agreement will have to specifically mention who takes care of what, in case of damages.
  If the responsibility lies with the landlord and he refuses to do the needful, the tenant can deduct the money he spent on the same in the monthly rent.
   In a reverse situation, the landlord can deduct the amount from the security deposit. In case the amount is larger than the deposit, the tenant will be liable to pay the balance.
• Subletting :
  Tenants cannot sublet part of whole of the rented building without the prior permission from the landlord. If they have permission to do so, tenants cannot charge an amount more than the rent they pay themselves.
• Overstaying to attract hefty amount: Tenants who overstay in premises beyond their agreement would end up paying two times the rent for the first two months and four times afterwards.
• Eviction :The landlord could move the rent court in case the tenant does not pay rent for two months. If the tenant corrects the situation within one month of the matter reaching court, they will be allowed to stay, if this is their only default in the course of that year.
  In case the premises are not fit for habitation, the tenant would be within his right to leave it after serving a 15-day notice period.

Expected Outcomes :-

• If landlords would have better confidence in the regulatory regime, they would unlock the rental housing inventory lying with them. 
• The Model Act, if adopted and enforced by the states, will lead to a better regulated private rental housing market for the middle and higher income segments.