One of the extremely bold and positive initiatives by the Union
Government -the Model Tenancy Act, 2021 has potential to bring about a change
in the real estate scenario. The step among other things seeks to regulate the
vast but scattered rental market in the country. It also encourages the
landlords to rent out vacant premises thereby increasing the supply of
residential units.
The explicit purpose of the model law is to regulate business of
renting of premises, protect the interests of landlords as well as tenants and
provide a credible mechanism for speedy resolution of disputes between the two
parties. The objective is to be achieved by mandatory signing of rent agreement
between landlords and tenants, and setting up of Rent Authorities, Rent Courts
and Rent Tribunals for expeditious resolution of disputes. In addition, the
model law also clearly spells out the rights and obligations of landlords and
tenants.
Salient features of model law
After the passage of the law by the state or the UT, it would be
mandatory for landlords and tenants to sign a Tenancy Agreement.
It would be obligatory on the part of the landlord and tenant to
jointly deposit this agreement with the
Rent Authority within two months of the signing from both parties involved. In case they fail
to jointly inform the Rent Authority about the execution of the tenancy with
the stipulated time, both parties will be required to do it separately within a
month after expiry of the two-month period.
The mandatory signing of the Tenancy Agreement will make the
relationship between landlord and tenant more structured, enforceable by the
law and thus helpful for both the parties. Besides other things, the agreement
will have to specify rent, period of tenancy and details about renewal and
extension of tenancy as well as rent. The agreement itself is introduced to
reduce the scope of unnecessary disputes between landlord and tenant.
Disputes, however, can still arise over the terms of the
agreement and its implementation. The model law provides quite an elaborate
mechanism for speedy resolution of the disputes.
Security deposit
The model law also seeks to do away with the arbitrary practice
of asking exorbitant security deposits by landlords from tenants, especially in
large cities. Under the model law, the security deposit being sought by the
landlord cannot exceed two month’s rent in case of residential premises and six
months in case of non-residential property.
As the security deposit will be mentioned in the Tenancy
Agreement, there is no way that landlords will be able to extract large
security deposits from tenants who are often desperately looking for a place to
live outside their hometown.
The security deposit, it has been specified, will have to be
refunded to the tenant on the date of taking over vacant possession of the
premises from the tenant, after making due deduction of any liability of the
tenant.
It is to be noted here that Act will not apply to premises owned
or promoted by the Central or State government, local authority, government
undertaking, enterprise, a statutory body or Cantonment Board.
Premises owned by a company, University or organisation given on
rent to its employees, premises owned by religious or charitable institutions
or auqaf registered, too does not fall under the purview of the Act.
Conclusion
The Model Tenancy Act is a well thought out legislation which
will encourage landlords to rent out vacant premises without any fear of losing
control of them and on the other hand increase the stock of residential
premises. It will also help the tenants to find suitable premises at reasonable
rent.
However, everything would depend on how soon the state
governments/UTs enact their own laws to implement the Model Tenancy Act,
benefitting the landlords as well as prospective tenants. It is, in fact, going
to be a win-win situation for landlords as well as tenants.
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