Model Tenancy Act – Omozing

The government of India has recently approved the Model Tenancy Act, which aims to reduce disputes between landlords and tenants. The Act tries to provide housing for all by making the option of renting out more easy so that the unoccupied houses can be occupied on rent that is more affordable for the renters looking to find an accommodation.

Have you been bombarded with personal questions when house hunting on rent? Have you rented out your home, with the latest kind of wall paint, only to see your tenants use it as a scribble wall for their toddler? Untimely increase in rent because it is time for your landlord to customise their car interiors? Late rent by tenants accompanied with ten excuses and twenty days of vacation that was seemingly easy to afford? Every broken tubelight is the beginning of an argument about who is to pay for the repair?

Renting is a hassle for both the landlord as well as the homeowner. From overbearing landlords, noisy tenants to untimely increment of rent or refusal to vacate premises, the disagreements between a landlord and tenants are common.

This happens due the presence of several gaps in the existing rental agreement framework which allows matters to be unresolved indefinitely.

The new Model Tenancy Act, drafted in 2019, has now been passed by the administration at the centre. It aims to minimize or eliminate the reason for most of these issues between landlords and the tenants.

The new framework offers a renewed transparency and accountability with clear and standardized rules laid down in the written agreement between the owner and the renter.

The landlord may take a security deposit of upto two month’s rent
No rules beyond the ones laid down in the agreement can be imposed by the landlord on the tenant
Increment in rent is to be notified in writing at least three months prior to the date of updated rent
The scope and limit of nature and expense of repair work is pre-decided to be borne by either party.
The act is applicable in urban as well as rural areas
On failure to vacate the premises after the expiration of agreement, the rent of the following two months shall be two times the original rent, and four times thereafter.
All disagreements and disputes arising will be resolved at three levels, within a cap of 60 days at each level

Finance minister Nirmala Sitharaman raised an issue regarding the current issue with existing policy saying, “they do not address the relationship between the lessor and the lessee realistically and fairly”. On the recent acceptance of the proposed new act, the Housing Ministry released a statement in favour of the act, which said, “Model Tenancy Act will enable institutionalisation of rental housing by gradually shifting it towards the formal market. It is expected to give a fillip to private participation in rental housing as a business model, for addressing the huge housing shortage”.

The new act eliminates the possibility of unfair rent increment practices, imposing of moral rules on tenants, or unstandardised security deposit demands. People in favour have also been suggesting these changes have long been overdue, especially in the digital age where the rental market needed more standardization and clear terms and conditions for all parties involved. The current practices have not seen any reforms and are thus believed to be outdated. The real estate market in India is far behind structurally as compared to more developed nations, such as the USA, where the market also plays a big role in generating employment for real estate agents. Under this act, all agreements will be under the purview of the Rent Authority. A more definitive scope for rental market restructuring will bring the deals on paper and generate true data. The data created can be used in various ways by techforward startups.

However, housing and tenancy is a state matter and the new code is introduced by the central administration. Thus, it will be enforced by individual states within their jurisdiction as per individual discretion. It will be enforced similar to how Real Estate Regulation ACt (RERA) was introduced. The enforcement of the act is also anticipated to raise issues of a rent spike in rent-controlled buildings. It is to be noted that this Act will be applicable to new agreements and there are no changes in the existing agreements even after enforcement by the respective state.