A peek on the Model Tenancy Act
(Neeraj Dubey and Shubham Aggarwal)
The Model Tenancy Act, 2021 (“Model Act”) was recently approved by the Cabinet and circulated to all the States and Union Territories for their adoption. The Model Act aims to establish a Rent Authority to regulate renting of premises and to protect the interests of landlords and tenants and to provide speedy adjudication mechanisms for resolution of disputes and connected matters. On the political front, the Model Act seeks to fulfil its objective of housing for all under the Pradhan Mantri Awas Yojana. This piece analyses the scheme of the Model Act which is as follows:
Applicability: The Model Act applies to any building, which is let on rent for the purpose of residential or commercial use except hotel, lodging house, dharamshala, inn and for industrial use but includes garden, garage or closed parking area, vacant land, grounds and out houses, if any, appertaining to such building or part of the building and fitting to such building or part of the building for the more beneficial enjoyment thereof. The Model Act does not apply to Government owned premises, or premises owned by religious or charitable institutions, or to premises owned by organizations given on rent to its employees as part of service contract. The Model Act will apply prospectively and will have no effect on the existing tenancies.
Tenancy Agreement: The Model Act prescribes that any letting out or taking on rent of a property shall only be done through a written agreement, which must be informed to the Rent Authority within a period of two months from the date of the tenancy agreement. The Rent Authority will provide a unique identification number to the parties and upload details of the tenancy agreement on its website in local language. The tenancy agreement shall govern the duration of tenancy and rent payable and any revisions thereof, among other aspects. Any dispute relating to the revision of rent shall be resolved by the Rent Authority. In cases where the landlord refuses to accept rent or refuses to give a receipt for rent for two months, the tenant may deposit the rent with the Rent Authority. The Model Act limits the security deposit to be paid by the tenant to a maximum of two months’ rent in case of residential premises and a maximum of six months’ rent in case of non-residential premises. The Model Act prohibits the tenants from subletting or transferring its rights in the tenancy agreement. In cases where the subletting or the transfer is done by way of a supplementary agreement, the same must be informed to the Rent Authority within a period of two months. The Rent Authority is also tasked with developing a digital platform where the parties can submit the documents required under the Model Act easily.
Rights and Obligations of Landlord and Tenant: The Model Act prescribes that the structural repairs, whitewashing of walls and painting of doors and windows, changing and plumbing pipes, internal and external electrical wiring, and related maintenance shall be the obligation of the landlord. The tenant, on the other hand, shall be responsible for periodic repairs, maintenance of gardens and open spaces let out to or used by the tenant, take reasonable care of the premises during the subsistence of the tenancy and shall not intentionally damage the premises. If either the tenant or the landlord fails to carry out the necessary repairs, the costs incurred can be deducted from the security deposit or the rent, respectively. The landlord however is prohibited from withholding any essential supply or service in the premises occupied by the tenant.
The landlord has been permitted under the Model Act to engage a property manager, whose duties can include collection of rent, inspecting the premises, carrying out repair, among others. The landlord must provide all relevant details about such manager to the tenant including name and purpose for which the property manager is authorised. In case the property manager acts against the instructions given by the landlord, it can be removed, and the tenant can be compensated for any loss incurred. Under the Model Act, both the landlord and the property manager have the right to enter the premises on the condition that a 24-hour notice before the entry would be given to the tenant.
Eviction and Recovery: Under the Model Act, a landlord cannot evict a tenant during the continuance of the tenancy agreement except under the following circumstances: (i) where the tenant refuses to pay rent; (ii) tenant has not paid arrears of rent and other charges payable; (iii) the tenant has misused the premises or carried out any structural change without the consent of the landlord; (iv) where the landlord requires to carry out repair of the premises or part of it which cannot be completed without evicting the tenant; (v) where the tenant has given a notice to the landlord to vacate the premises and in consequence of that notice the landlord contracted to sell the said premises. The legal heirs of the landlord can also move the Rent Court for eviction and recovery of possession of the premises after the death of the landlord where there is a bonafide requirement of the premises let out on rent by the legal heirs.
Adjudication of Disputes: The Model Act prescribes a separate adjudicatory mechanism for disputes between the landlord and the tenant. The dispute resolution process is spread across three bodies – Rent Authority, Rent Court, and Rent Tribunal. The District Collector or the District Magistrate will appoint an officer not below the rank of Deputy Collector to be the Rent Authority within his jurisdiction. He shall also appoint an officer not below the rank of Additional Collector or Additional District Magistrate to be the Rent Court. Rent Tribunal will be appointed by the State Government or the Union Territory in each district where the person appointed will not be below the rank of a District Judge or Additional District Judge. Rent Authority shall have all the powers that are vested in a Rent Court in respect of any proceedings initiated for tenancy agreement, revision of rent, deposit of rent, repair and maintenance of property, duties of property manager and consequences of violation, and withholding essential supply or service. Any appeal from the Rent Authority will be preferred by the Rent Court and any further appeal shall be before the Rent Tribunal. The Rent Court and the Rent Tribunals are free to regulate their own procedure in terms of filing of application, issuing of notice, filing of reply and rejoinder, etc. Civil Procedure Code 1908 shall only apply with respect to service of notice and for according the power of a civil court to these bodies.
Authors – Neeraj Dubey, Partner – Corporate Law and Shubham Aggarwal, Associate