Model Tenancy Act: A mixed bag

IN PERSPECTIVE

The Union Cabinet, on June 2, last year, approved the Model Tenancy Act 2021, which can now be adopted by all the states individually, as ‘rent’ is a state subject under the Constitution. The Act governs the rights and duties of both the tenant and the landlord.

Many of the previous rent control Acts have somehow failed to be satisfactory, especially for tenants, as they did not protect the recovery of security deposits made by the tenants, or in many cases, a large amount of money was deducted from the security deposit in the name of expenses and damages. In addition, the Acts levied several charges on tenants apart from the standard rent paid to the owner. In many states, the charges included 15% of the rent for amenities, 10% of the rent as maintenance of the property, the prorata property tax relating to premises levied by the local authority, and other expenses for electricity, water etc.

Unfortunately, the legal regime to address the above issues was undefined, which led to uncertainty. After a long wait, the new Tenancy Act 2021 proves to be more sensitive to the needs of tenants.

The new Act’s primary objective is regulating residential and commercial properties that are let out for rent. It owes to lay clear guidelines on tenants’ tenancy rights and obligations.

The Act also works on seamless and transparent adjudication of disputes between landlords and tenants. It works on balancing the mutual responsibilities of landlords and tenants, thereby making the process of renting a property easy and safe. These features are believed to reduce the burden on courts and existing tenancy-related disputes.

One of the critical features of the Act is executing a written agreement between the landlord and the tenant, which is mandatory.

To reduce further ambiguities in understanding the agreement, the Act additionally mandates to include the amount of the rent fixed, tenure of rent, payment of security deposit, revision of rent amount etc.

Unlike the previous Act, the new one fixes only two months’ rent as security deposit in case of a residential property and rent of six months in case of a commercial property.

It makes it the landlord and tenant’s obligation to notify the rent agreement to the rent authority within two months of the agreement’s execution. If the tenant fails to cooperate, the same responsibility must be fulfilled by the landlord within a month of the expiration of the previous two months.

The Act further emphasises the importance of renewing the rent agreement in case the tenancy period expires, failing which the tenant has to pay the enhanced rent to the landlord. If the landlord refuses to give a valid receipt for the rent received, the Act prescribes to pay the rent through postal money order, and for whatever reason, if the landlord declines to accept the rent, the Act mandates to pay it with the rent authority.

Further, the Act makes it clear that the landlord cannot enter the property premises before or after sunset and has to inform the tenant at least 24 hours before entering, to avoid inconvenience to the tenant.

The Act specifies that the tenant cannot make any alterations to the property without the consent of the landlord. If done, the landlord can retain the security deposit and demand the excess amount spent on repairs. Unlike in the earlier Act, the landlord cannot withhold or stop basic amenities like water, electricity and right to passage from the tenant.

Now, briefly focusing on dispute resolution and adjudication, the Act establishes a three-tier mechanism for seamless and speedy outcomes.

The three adjudication authorities that draw power under the Act are the rent authority headed by the district collector, the rent court headed by the additional collector or additional district magistrate, and the tent tribunal headed by the district judge or additional district judge. The rent tribunals are to be established in each state under the Act with the consultation of their respective high courts.

In spite of all the above merits, landlords opine that the Act does not let the property owners enjoy the benefits of having an immovable property as the returns are low.

This discourages many not to invest in rental housing markets and this may also lead to deterioration of existing housing stock; apart from which implementation of any law requires a permanent setup and incurs substantial administrative costs, and this will be an additional burden to the state.

Apart from the predictions, the nature and impact of a law can only be determined based on its functioning in reality. Therefore, the only option is to wait and watch the Act make its impact.

(The writer is Faculty of Law, PES University, Bengaluru)