Personal Finance

Does the Model Tenancy Act make life easier for tenants and landlords?

Meera Siva | Updated on July 10, 2021

Take note of some caveats when the Act is implemented on the ground

Renting a home is a necessity for many. But the legal structure and practical strains in the relation makes it an ordeal to go through the tenancy process – for both tenants and landlords. The laws relating to the tenancy aspects were often outdated and dispute resolution in civil courts was slow and onerous. The Model Tenancy Act 2021, approved in June, tries to address these deficiencies.

The key aspect of the Act is that it makes it compulsory for the parties to have a written agreement that lays out important terms such as the rent, security deposit and maintenance responsibilities. This must be submitted digitally to the Rent Authority (which will be formed in each State) to receive a unique identification number for the agreement.

For tenants

One, on the payments front, there are points to cheer. Security deposit amount is capped at a maximum of two month’s rent in case of residential premises and a maximum six month’s rent in case of non-residential/commercial premises. You can also ask for a rent reduction if the building structure had deteriorated and the owner does not renovate. And if the premise becomes uninhabitable – say due to an event of force majeure - the landlord shall not charge rent until it is restored. There is also provision to receive interest from the owner if the rental deposit is not returned within the stipulated time, after vacating.

Two, the owner’s right to visit and evict are laid out. They are required to give a notice of at least one day in advance, so that they or appointed property manager, can enter the premises. The permissible purposes of the visit – for example routine inspection - are also laid out in the Act. The landlord can only evict a tenant if there are violations such as rent defaults for two consecutive months or misuse of property; as well as making renovations that cannot be completed without the tenant moving out.

Three, the Act has exceptions and is not applicable for certain types of properties. For instance, buildings owned by governments, educational institutes, companies and religious or charitable organisations and a few other categories are not under its preview.

For landlords

One, the Act gives leeway in fixing the rent amount and escalations. The permissible rent and terms on periodic increase are left to negotiation with the tenant. Also, if structural improvements, additions or alterations are done, the landlord can choose to charge higher rent. If this is disputed, the Rent Authority may determine the revised rent and also fix the date from which this becomes payable.

Two, there is compensation to landowners if the tenant does not leave the premises after the rent agreement term expires. You can charge double the monthly rent for the first two months and four times after that until the tenant vacates.

Three, the ill-understood sub-letting aspects are better laid out. The tenant cannot sub-let the premises without a written permission from the owner and it also requires a supplementary agreement. The landlord and tenant must jointly inform the Rent Authority about the sub-tenancy within two months from the date of execution of the agreement.

Practical aspects

That said, there are some caveats to consider when the Act translates to implementation on the ground. One, it is a model framework and is not binding on the States.

It is likely that many will implement their own version, as they see fit. And many progressive States, such as Tamil Nadu already have their own regulation (Tamil Nadu Regulations of Rights and Responsibilities of Landlords and Tenants Act 2017).

One example where States may want to take a different view may be in the prescriptive nature of the maintenance responsibility of tenants and owners - there are 14 items including replacement of glass panels in doors and windows is listed as part of periodic repair to be done by the tenant.

Two, even if they adopt most aspects - as we saw in the case of RERA - it could potentially take a long time before we start to see changes. For example, while the aim is to increase the speed of dispute resolution- by moving the cases from Civil Courts to a new authority –operationalising this would be time consuming.

There is support needed at local level to set up the Rent Authority (headed by an officer appointed by the District Collector or District Magistrate), Rent Court (headed by Additional Collector/ Additional District Magistrate rank officer) and the Rent Tribunal (which has the highest authority over the decisions of the other two).

The author is an independent financial consultant

Published on July 10, 2021

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