Model Tenancy Act

Context: The Union Cabinet chaired by the Prime Minister has approved the Model Tenancy Act for circulation to all States / Union Territories. States can either enact fresh tenancy legislation or amend existing rental laws.

• Note: Model acts are not binding on states. They merely suggest provisions that either can be accepted as it is by states or with modification. States may also completely ignore these acts. Furthermore, Land is a state subject and only states can legislate to regulate the housing market.

About Model Tenancy Act
Aim of the Act

• To create a vibrant, sustainable, and inclusive rental housing market in the country.
• It will address the issue of homelessness by creating adequate rental housing stock for all the income groups. It aims towards the goal of housing for all by 2022.
• Lastly, it will institutionalize rental housing by gradually shifting it towards the formal market.

Coverage

• The Act will apply to premises rented for residential, commercial, or educational use but not for industrial use. It also won’t cover hotels, lodging, etc.
• This model law will be applied prospectively and will not affect existing tenancies.

Key Features of the Model Tenancy Act
Rent Authority

• The Act requires establishing rent authorities in every district to regulate renting of premises. Authority will protect the interests of landlords and tenants.
• The proposed authority will also provide a speedy adjudication mechanism for the resolution of disputes.

Security Deposit

• The act puts a cap on the amount of security deposit. It will be a maximum of two months of rent in case of residential premises and six months in case of non-residential premises.
• Currently, this amount differs from one city to another. For instance, in Delhi, the deposit is usually two-three times the monthly rent, but in Mumbai and Bengaluru, it can be over six times the monthly rent.

Increase in Rent

• The rent can be revised according to the terms and conditions mentioned in the agreement.
• If there is no such agreement, the landowner will have to give a notice in writing to the tenant, three months before the due date of revised rent.

Vacating Rental Premises

• The act has provided a mechanism for vacating the premises. It says that if a landlord has fulfilled all the conditions stated in the rent agreement – giving notice, etc., then the tenant has to vacate the premises.
• If the tenant fails to vacate the premises on the expiration of the period of tenancy or termination of tenancy, then the landlord is entitled to double the monthly rent for two months and four times after that.

Entering of Rental Premises

• Every landlord or the property manager may enter the rented premises in certain conditions. Like he/she needs to serve a notice, in writing or through electronic mode, to the tenant at least twenty-four hours before the time of entry.