Everything you need to know about ‘The Model Tenancy Act, 2021’

Introduction

The Model Tenancy Act, 2021 has established Rent authority towards fulfilling the interests and rights of both the landlord and tenant. With the increase of freelancing culture, remote-work, globalisation and relocating for work, living in rented premises is more affordable and expanding. The Model Tenancy Act, 2021 is the need of time but is it really pragmatic?

Background

The relationship between landlords and tenants has historically been governed by the Rent Control Act which was passed in 1948 by the Centre. This was eventually implemented by states and in the past several decades, state governments have altered their laws thus keeping with the principle that land is a state subject. Tenancy laws are the need of time but will this law achieve its objectives or result in fraud?

Scope and Application of the Act

The Act will be applicable in the future when the states and union territories adopt this act and will not affect existing tenancies. The Model Tenancy Act, 2021 is subject matter in Concurrent List and applies to every rural and urban area of that particular state.
It will apply to premises let out for residential, commercial, educational use. It also won’t cover hotels, lodging houses, inns or industrial use premises.
This Act does not cover any property owned or promoted by the Central Government, State Government or Union Territories.
Anything owned by any religious institution or registered under Wakf Act, 1995 is also beyond the scope of this Act.

Rent Authority, Tribunals and Courts

A Rent Tribunal will be set up and an Additional Collector or Additional District Magistrate shall be appointed district-wise in the state. The procedure of this court will be guided by the principle of natural justice and shall regulate by making their own rules. The Civil Procedure Code, 1908 shall not apply.
The Civil Procedure Code, 1908 shall apply in every application or appeal made and service of summons by the Rent Court. Every application made under clauses (a), (b), (e), (f) and (g) of subsection (2) of section 21 or 22 shall be decided by the Rent Tribunal within 90 days and under clause (c) and (d) of the subsection 2 of section 21 within 30 days.
The Rent Tribunal has the same powers as vested in Civil Courts under the Civil Procedure Code, 1908 for summoning, enforcing attendance, requiring the discovery or production of documents, issuing examination-in-chief of witnesses or any other matter which may be prescribed.
Verbal Tenant Agreements have become illegal and only agreements in writing shall be informed to the Rent Authority according to the form and documents specified in the First Schedule of the Model Tenancy Act, 2021. An extra one month is also provided after the expiry of this time given by the Rent Authority. The Rent Authority provides a unique identification number and cross checks with all the information provided by the parties, after which they will be entitled to every relief under this Act.
A digital platform will be set up in the local vernacular language or the language of the State/Union Territory for submitting tenancy agreement and other documents. The Rent Authority will be governing these agreements.

Regarding any dispute relating to the revision of rent, Rent Authority can be approached either by the tenant or owner for the determination of rent.

Jurisdiction

The Civil Court will not entertain any suit or proceedings relating to the provision of this Act.
The jurisdiction of the Rent Court shall be limited to the tenancy agreement and no questions related to ownership etc. shall fall under its ambit.
The state or union territory government in consultation with the Rent Tribunal shall appoint employees or offices and they shall be deemed to be a public servant under the meaning of Section 21 of the Indian Penal Code.

Rights of Tenant

In any ‘force majeure’ conditions a period of one months shall be given to the tenant from the date of such disastrous event with the same terms and conditions or the landlord may choose not to charge the tenant.
The tenant can leave the premises if it is inhabitable and the landlord has refused to provide help by giving a fifteen days notice to the owner.
Tenants can file an application in the Rent Authority and an enquiry shall be conducted to find whether the landlord had withheld the essential services within one month of filing this. Compensation can be levied and awarded by the Rent Authority not exceeding two months of monthly rent.
Paying just two months of deposit in case of residential and six months in commercial properties will lower the expenditure significantly.

Liabilities of Tenant

If the Tenant fails to vacate the premises and the agreement has not been renewed, then the monthly rent would amount to double of the actual rent for the first two months and four times till the tenant continues to live in that premises.
The Act says that the tenant must pay the security amount as well as the extra amount needed for repairs within one month of the issue of notice by the landlord, if the repair amount supersedes the deposited amount.
There have been restrictions on subletting the whole part or any part or transfer or assign rights in tenancy agreement, except entering into a supplementary agreement and the landlord as well as the tenant shall jointly inform the Rent Authority about it.
The obligations of the Tenant include payment of rent and other charges which were agreed in the tenancy agreement. Tenants can deposit the rent with the Rent Authority when he is unable to decide to whom the rent is payable or the landlord refuses to accept the rent or refuses to give receipt or to repair and maintain any and every facility specified in tenant agreement.
It is the duty of the tenant to not damage the premise intentionally or negligently and inform the Landlord in case of any damage.
The tenants will be held responsible for drain cleaning, switches and socket repairs, kitchen fixtures repairs, replacement of glass panels in windows, doors and maintenance of gardens and open spaces, etc.
If the money is deducted from the security amount, the tenant must pay back that amount within one month.
No tenant can make any structural changes in the premises without a written permission from the Landlord.

Rights of Landlord

The Rent and period of tenancy shall be according to the tenancy agreement which will be mutually agreed between landlord and tenant.
For any extension, the tenant may request the landlord and enter into another tenancy agreement.
The Landlord can deduct the amount from the security deposit if the tenant has failed to repair and maintain the premise but he has to give a 24 hour prior notice before entering the place for any management work or inspection or any reasonable cause specified in the tenant agreement. The above mentioned reasons would not apply in cases of natural calamity.
The Rent Court may allow repossession by the landlord if the tenant misuses the premises, after being served a notice by the landowner. Misuse of the premises, as defined, includes public nuisance, damage, or its use for “immoral or illegal purposes”.

Liabilities of Landlord

The disposition of the case shall be made within sixty days. However, for cities like Mumbai or Delhi, this seems too ambitious because producing or completing a simple judicial formality at times can take more than a year’s time.
The Act also fails to cover the prospects of TDS under Section 194 of the Income Tax Act, 1961 for cities like Mumbai or Delhi where rent for a larger premises is going to be more than fifteen thousand rupees. This will create a liability on the Landlord and end up compromising his monetary advantage.
The Owner cannot revise rent in between the rental period and three months’ notice has to be given before the revision to the tenant.
The rent amount can be increased only with the mutual consent of Tenant and Owner, when it does not fall under the ‘Repair and Maintenance of property’ and will be effective from one month of the completion of work. This again raises a question that if the tenant does not comply with the genuine demands of the owner, then the relief can be sought only through long judicial proceedings. Even if it promises to dispose of the case in 30 days, this has not been actually implemented or executed in India since independence. Will the Landlord be ready to invest more money into getting the relief? How will this be taken care of under this act? The act has not taken any stand on it and will result in fraud and misrepresentation.
The security deposit for the residential premises shall not exceed two months rent and in non-residential properties for six months. This is a significant loophole as the recovery process is an ordeal. The Jurisdiction and civil procedures is a thing that appears threatening but is ineffectual. For example, if a tenant from Mirzapur is living in Mumbai and after 6 months of living in that premise, leaves and disappears without paying the due amount for more than 2 months, the recovery process for the owner will be impractical and unworkable. How will the owner recover his money when the jurisdiction of the tenant will be different as well as the investigation procedure? Frequently, the people renting are not from the same place that they are seeking to rent into. The deposit has also been reduced to just 2 months and if the damages are more than the amount of deposited rent, then the owner will be at grave loss provided the tenant has left the city and is unreachable.
The Act in an All India Act as mentioned above and in cities like Patiala, Jaipur or Lucknow, the rent for smaller housing societies is lower and deposit will eventually be less. In such cases, how will the owner recover, if some tenant has unintentionally damaged the premise and the money needed to fix it is more than the deposited amount and the tenant has left or the tenancy agreement has expired? This will not work in favour of the landlord if the tenant has disappeared. Owners need at least 6 months rent as deposit amount for their stability and protection of interests.
The landlord will be held responsible for structural repairs except those necessitated by damage caused by the tenant, whitewashing of walls and painting of doors and windows, etc.

Conclusion

The Significance of the act is that it aims to provide a speedy mechanism in resolving disputes and any other matters related to the parties of a tenancy agreement. It will help remodel and refurbish the legal framework with respect to rental housing across the country. It will fuel the creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness and institutionalisation of rental housing by gradually shifting it towards the formal market.

The Challenges and loopholes of this act may take away the credibility of all its objectives. In a country like India, making centralised laws for each and every premise having different demands and conflicts is very impractical. This law, if adopted by the state and union territories, is going to give rise to new problems and may not even improve the current situation. The aperture of the above Act is a foremost issue for the Union Ministry of Housing and Urban Affairs to think about. The accountability and transparency that this act provides is commendable.

The Model Tenancy Act looks good on paper with certain gaps but the big question is whether the states will implement it as it is or not. The implementation of these regulations is ultimately a political decision. RERA took years for proper implementation as it was left to the states to modify and implement it. Will the Model Tenancy Act, 2021 meet the same nemesis?

References:

Article by Ms. Shephali Jha in June, 2021 while interning at the Chambers of Advocate Shankarlal Raheja.

Disclaimer: The views herein are personal and while careful attention has been given to ensure that the information is accurate the author assumes no liability or responsibility for any reliance thereon. This article is merely an information-sharing activity and is not a substitute for legal advice. It must be noted that we shall not be liable for any loss or damage caused due to any reliance thereof.

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