Why in the news?

After releasing the draft in 2019, the Union Cabinet has approved the Model Tenancy Act (MTA) and to be sent to the states and union territories to enact legislation or amend laws on rental properties.

What is Model Tenancy Act (MTA)?

The Ministry of Housing and Urban Affairs drafted a ‘Model Tenancy Act’ in 2019 which envisages to balance the interest and rights of both the owner and tenant and to create an accountable and transparent ecosystem for renting the premises in a disciplined and efficient manner. It will enable creation of adequate rental housing stock for various income segments of society including migrants, formal and informal sector workers, professionals, students etc. It will increase access to quality rented accommodation, enabling gradual formalization of the rental housing market. It is also expected to give a fillip to private participation in rental housing for addressing the huge housing shortage across the country. It will help overhaul the legal framework vis-à-vis rental housing across the country.

In a nutshell, the purpose to bring such an act is:

• Balance the interest of owner as well as the tenant
• Creation of adequate rental housing stock
• Access to quality rented accommodation
• Formalize the rental housing market
• Give a fillip to private participation

What is the need of the Model Tenancy Act?

As per 2011 census, nearly 1.1 crore houses are lying vacant in the country and making these houses available will complement the vision of “Housing for All by 2022”.

Key Provisions of Model Tenancy Act

• This Model Tenancy Act provides description of rights and obligations of both landlord and tenant.
  • The landlord will be responsible for any structural repairs except those necessitated by damage caused by the tenant.
  • The tenant will be responsible for activities like drain cleaning, kitchen fixture repairs, maintenance of gardens and open spaces etc.
• Verbal rent agreements are illegal under this act. It is mandatory to sign a written agreement with the owner by the tenant.
• The security deposit to be paid by the tenant should not exceed two months’ rent for residential property and six months’ rent in case of non-residential property.
• The act provides for the establishment of an independent authority in every state and UT for registration of tenancy agreements and a separate court to take up tenancy related disputes.
• The landlord will have to give 24 hours prior notice before entering the rented premise to start any repairs and replacement.
• Conditions for eviction of tenant under the Model Act include: (i) refusal to pay agreed upon rent; (ii) failure to pay rent for more than two months; (iii) occupation of part or whole of premises without written consent; and (iv) misuse of premises despite a written notice.
• The Model Act establishes a three-tier quasi-judicial dispute adjudication mechanism consisting of: (i) Rent Authority; (ii) Rent Court; and (iii) Rent Tribunal. No civil court will have jurisdiction over matters pertaining to provisions under the Model Act.
• The tenant cannot be evicted during his tenancy period. However, misuse of the premises, as defined, includes public nuisance, damage or its use for immoral or illegal purposes will allow the landlord to take repossession of the premise by the rent court.
• Disposal of a complaint/appeal by the Rent Court and the Rent Tribunal will be mandatory within 60 days.

What type of properties are covered under the Model Tenancy Act?

• The act will be applicable for those premises let out for commercial or residential, educational use. However, it will not apply to any premise let out for industrial use.
• It will not cover lodging houses, hotels and inns.
• The act will not affect existing tenancies.

Merits of the Model Tenancy Act

• The act will formalize the shadow market of rental housing.
• The act seeks to protect the interests of both owner and tenant.
• As the act has a provision of establishing rent courts and resolving any disputes within 60 days, it will lead to faster resolution of disputes.
• It will increase rental yields from the property and will bring an end to exploitative practices.
• It will attract private investment.
• It will reduce procedural barriers as the registration will be done on a digital platform.
• The act will increase transparency and discipline in the rental housing market.

Challenges to implement this Model Tenancy Act

Land and urban development being a state subject, the act is not binding on the states. When Real Estate (Regulation and Development Act) or RERA was passed, states did not follow the guidelines of the act resulting in dilution of the provision of the act. The fear is that the same may happen with Model Tenancy Act also.