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Know Your Renting Rights with the Model Tenancy Act
Updated : March 21, 2024
Author :
Table of Contents
2020 left us in a whirlwind, some of us made it through with so many ups and downs, but still made it, but what about everyone else? During COVID-19, jobs were lost, the economy came crashing down, and we basically made history every month. Because of this, many people who were tenants unable to pay their rent on time and in turn, the landlords weren’t earning, it was a vicious cycle. Luckily, the government implemented The Model Tenancy Act. But what exactly is this act? And how does it help the process?
What is the Model Tenancy Act?
According to the government, this act’s main goal is to make the process of renting profitable for both parties, the tenants and the landlords. To make sure there aren’t any issues that get out of hand, they have also implemented a Rent court and Rent tribunal to hear the problems or issues faced by both parties. However, the act will not be necessary in states that are allowed to modify the law given.
As per the Model Tenancy Act of 2020, the government has put for many plans for this act. The rent industry in India is in shambles and is very underdeveloped, with the surge in problems due to COVID-19, the pressure on the real estate industry and significantly increased. In the renting world, without the proper legalization, tenant and landlord problems continue to rise. With the Model Tenancy Act of 2020, we hope to see a bridge in trust between the landlords and the tenants. This way it becomes a better place for working professionals, students in different cities and especially the migrant population. Now you may ask yourself, well why do we need to rent legalization, it seems all fine to me?
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Well, let’s explore:
Did you know that even though people say it’s impossible to find a house! There are actually over 1.10 lakh houses sitting vacant in the urban areas of our country. This is because there isn’t a proper rental policy. Because of a lack of demand for flats or houses that are at the outskirts of the city, and the commute required to get into the city.
And another major reason we all know about, the migrant workers trudging back to their home towns because of absolutely no availability of accommodation in the city. This brings us to.
How The Model Tenancy Act 2021 Was Conceived
Even before the Pradhan Mantri Awas Yojana-Urban or the ‘Housing For All by 2022’ mission was launched in 2015, 20% of a couple of crores of houses were pre-decided to be put on rent exclusively. This was because of a report in 2014 by a rental housing task force, that found that affordable renting in India has the potential to address the problems faced by the underprivileged in attaining inclusive growth. This led to the finance committee to later design the new rent act as well as several other relevant tenancy laws in India.
Where It Applies
Once the new house rent rules in India under the Model Tenancy Act has applied, it is illegal for anyone to rent any premises in India without having it in writing. It covers both rural and urban areas.
What’s New
As per the new Model Tenancy Act in 2021, certain systems have been set up state-wise e.g. the grievance redressal mechanism through the Rent Authority, Rent Tribunal, and the Rent Court, with all resolutions to take place mandatorily within 60 days. Digital platforms are also being set up in local vernacular languages, with the Rent Authority keeping a track of these agreements.
Practices Protected In The Act
Some of the new practices that have been included in the act are:
- The tenant’s security deposit should not exceed 2 months’ rent amount and should be at least one month’s rent.
- The act has listed out all the repairs each party of the tenant will be responsible for, which can be deducted from the rent or security deposit under the provisions of the act.
- Allowing the repossession of the premises by the Rent Court if any illegal/immoral misuse of the premise is happening after a notice is served by the property owner, as well as the possibility to increase the rent 2-4 times.
Atmanirbhar Bharat - Rental Housing for Migrants
Because of the COVID-19 overtake and the lack of any income, the lack of any sort of affordable rental housing here led to a full-on diaspora of the migrant workers during the lockdown. Naturally, the government had to include affordable housing as part of their housing for all initiative.
With this initiative, the housing in the city that is funded by the government was made into ARHC, which stands for Affordable Renting Housing Complexes.
ARHC will be implemented through two models:
- By making use of existing Government funded vacant houses and converting them into ARHCs.
- Construction, Operation and Maintenance of ARHCs by Private/ Public Entities.
Key Features of the Model Tenancy Act 2020
- After the entry of the act, all property, residential and commercial will only be put out for rent after a written agreement by both parties on mutually agreed-upon terms.
- This Act promises quasi-judicial mechanisms for the issues that arise.
- For residential properties, the security deposit is 2 months' rent.
- For non-residential property, it will be as per the rental agreement, with a maximum of 6 months.
- The security deposit will be refunded by the landlord once the tenant has moved in.
- The landlord is entitled to get compensation if a tenant does not vacate the premises after tenancy has been terminated by order the compensation is double the monthly rent for two months and four times the monthly rent thereafter.
- If the locality in which the property is located undergoes some major distress that causes the tenant unable to leave, the landlord will allow the tenant to stay for another month extending the rental agreement.
- The tenant cannot sublet the property or have any structural changes done unless the landlord and the tenant agree upon it.
- The rent authority needs to be informed about the signing of the rental agreement within two months of its signing.
- An officer who has the rank of deputy collector or higher has the responsibility to act as a rent authority to mediate any issue that comes about out of a rental disagreement.
Key Issues And Analysis Of The Model Act
Below are some of the key issues that the Indian real estate sector should and is seeking to address, such as:
- The accessibility, availability as well as the need to formalize the real estate rental market in India.
- Specifying the smallest details of what must be included in the rent agreement including regular structural repairs, maintenance, as well as security deposit.
- Mandating Aadhaar number to be submitted, which can also lead to violation of privacy of either parties signing a rental contract.
- The exclusion of mentioning the resolution timeline off certain disputes by the adjudicatory bodies, give these are vital when disputes lead to holding back essential services and rent revisions.
Provisions Available for the Landlords Under the Model Tenancy Act 2019
Does not Allow the Overstay of Tenants
The landlord is entitled to get compensation if a tenant does not vacate the premises after tenancy has been terminated by order the compensation is double the monthly rent for two months and four times of the monthly rent thereafter.
Making the Eviction Process Easier
Under the Model Tenancy Act, the landlords have the freedom to approach the rent court if the tenant has not paid the rent for 2 months.
No Subletting Allowed
Without asking for permission and having the consent of the landlord, the tenant cannot sublet any part of the property in question.
Provisions Available for the Tenants Under the New Model Tenancy Act 2019
No Intrusion by the Landlord
One of the many complaints tenants have is the landlord coming and going as they please. In order to prevent this, the model policy clearly states that the landlord had to give 24 hours' notice before coming to the property and that the landlord can only come after 7 AM and before 8 PM.
Unnecessarily Huge Amount for the Safety Deposit
In some cities like Bangalore, Delhi and Mumbai, many landlords have taken up to a year’s rent as a security deposit. Luckily, in states where the Model Tenancy Act is accepted, the landlords cannot do this, they can only take up to two months' rent.
Increases in Rent
During the renting period, the landlord cannot suddenly hike up the price, unless they have a clause in the rent agreement, that lets them do so. Even if they do, the landlord will have to give a notice of 3 months before doing so.
Responsibility for the Structural Maintenance
The responsibility to tend to the structural maintenance is with the landlord, not the tenant
Changes Proposed in the Model Tenancy Act, 2019
With the draft model tenancy act 2019, we get-
Rent Authority: Currently, rent agreements are registered at the sub-registrar's office. In order to make things clearer, hold people responsible and maintain peace in the rental housing process, the policy proposes setting up a rent authority.
The founder and chairman of Praron Consultancy, Pranay Vakil, elaborated on this topic, saying, “For the last many decades, rental housing has been ignored and there is an imperative need that this should be brought under a regulator to bring in some sanity. The rental housing market has been a very fragmented, unorganised, underdeveloped market and there has long been a dire need to bring it to the same level as the Western countries.”
“Did you know that 35% of people staying in any city are floating population i.e. (They don’t belong to the city) and have no intentions of buying a property? They only want to stay in the city for work and rent out a property. This is one-third of housing demand for any city and imagines this entire market being neglected,” he says.
He also states that “This segment is often subjected to the local brokers whose information and database is so bad that they don’t even know the real owner sometimes. Often brokers don’t check the titles of the apartments on offer for rent. Many times, large deposits are collected at the time of renting a property purportedly by the owner. This
deposit is at stake later and a lot of tenants have run into problems getting back their deposit at the end of the rental term. The person who takes the deposit might not be the actual owner or even if he is the actual owner, he might not return the deposit. There is a tendency to offset the deposit
against so-called damage to the property at the end of the term leading to avoidable disputes which drag on over lengthy litigations.”
How Will the Model Tenancy Act 2019 Impact the Rental Housing Market?
Continuing from what we said earlier, there are almost 1.10 lakh fit-for-renting properties that are lying vacant across urban India due to the lack of transparency and slow dispute system. This leads to the limited supply of houses to rent, which leads to a surge in skyrocketing rent prices. By facing these issues, and trying to find a solution, the Model Tenancy Act would help the rental housing segment reach its full potential.
With the new Model Tenancy Act 2020, for the first time in decades, the government has given rental housing (for all) the importance it’s needed from day one. If all things go as planned, this may help it fulfil its vision of housing for all.
If you’re still looking for a house, or have found a house but need a good Rental Agreement to protect your interest, then let the experts at NoBroker help. With NoBroker Rental Agreements you can rest assured that your needs are covered and you will not face a monetary loss. You also get the added benefit of having the rental agreement delivered to your home! No more going to a government office or worrying about the correctness of your agreement, we take care of it all! Click the link below to learn more.
FAQ's
Ans. No intrusion by the landlord, 2 months' rent as a safety deposit, being given 3 months' notice before rent price increases, the responsibility for the structural management is on the landlord, not the tenant.
Ans. According to the government, this act’s main goal is to make the process of renting profitable for both parties, the tenants and the landlords. To make sure there aren’t any issues that get out of hand, they have also implemented a Rent court and Rent tribunal to hear the problems or issues faced by both parties.
Ans. The rent court does not bother about small squabbles, in the end, the tenant's behaviour is the landlord's responsibility.
Ans. A tenant who does not have a written contract or agreement is still entitled to all the rights of a regular tenant, including water, heating, etc. The tenant is still obligated to pay rent on time and take good care of the premises.
Ans. In some cities like Bangalore, Delhi and Mumbai, many landlords have taken up to a year’s rent as a security deposit. Luckily, in states where the Model Tenancy Act is accepted, the landlords cannot do this, they can only take up to two months' rent.
Ans. No subletting is allowed, the eviction process is easier and there is no overstay of the tenants allowed
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