12 Apr 2021 Leasing
The rental housing market has always had strong demand, but the market has been a deterrent due to the absence of sound rental policies. The majority of the landlords in India refrain from renting out properties due to the fear of property damage or delay in rent payment or tenant overstay. To bridge the trust deficit between the landlords and tenants the union government has approved the Model Tenancy Act on June 2, 2021.
The Model Tenancy Act aims at opening the vacant housing stock in key rental housing markets in India and reduce litigation. “It is expected to give a flip to private participation in rental housing as a business model for addressing the huge housing shortage” as claimed by the government. The provisions in the new Model Tenancy Act are in line with the drafted tenancy bill in 2019. As per real estate experts, this act will help the government strengthen its ‘Housing for All’ initiative and can fuel the rental housing supply by attracting more investors.
“If this law is implemented well, it can transform the rental housing market to around Rs. 3 lakh crore by 2023.”
The enactment of the New Model Tenancy Law is left to the State and Union Territories, or they can amend their existing rental laws. This act applies to properties used for residential or commercial purposes. The act covers properties located in urban as well as rural areas.
The key highlights of the approved Model Tenancy Act are as follows:
A written agreement between the landlord and tenant is a must for new tenancies and should be submitted to the district Rent Authority
The law is not effective for existing tenancies
The roles and responsibilities of landlords and tenants are clearly stated in the act
Responsibilities of the landlord include painting the house, structural repairs (except the ones caused by tenants), plumbing and electrical wiring maintenance
Responsibilities of tenants include socket and kitchen fixtures repairs, cleaning drains, replacement of glass panels in doors and windows, maintenance of open space around, should avoid intentional damage, and notify the damage to the landowner
The tenants cannot sublet the property without seeking prior permission from the landlord
The tenants are allowed to do structural changes only if they have written consent from the landlord
The landlord cannot stop the tenant from using essential services such as water, electricity, etc.
The landlord must inform the tenant 24 hours in advance to inspect the premises occupied by the tenant
It promotes uniform security deposit. Up to two months’ rent can be collected as a security deposit for residential properties and six months’ rent for commercial properties
Based on the mutual consent of the landlord and tenant through a written document, the duration of tenancy and rent shall be fixed
The revision of rent will be as per the terms agreed by the landlord and tenant in the rental agreement. If the agreement has no terms included for rent revision then the landlord should give a written notice three months prior.
The tenant should provide a tenancy termination notice to the landlord if he or she is not pleased with the rental increase. The tenant should pay the increased rent proposed by the landlord if he or she forgets to do the latter.
During the tenancy period, the rent cannot be increased unless the terms are clearly stated in the rental agreement
Separate rent Authority, court, and tribunals shall be set up in every district to ensure faster redressal of disputes
Within 60 days window, the court or tribunal will address the complaint
The tenants cannot be evicted during the tenancy period unless it is agreed in writing by the tenant and landlord
The rent shall be paid by the tenant even during the pendency of a dispute
For example – A landlord can approach the court if the tenant does not agree to structural improvement or to construct an additional structure in the premises that have been rented out.
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