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Model Tenancy Act, 2021

Introduction of the Model Tenancy Act, 2021:

The Union Cabinet, on June 2, 2021, approved the Model Tenancy Act, 2021 (“Tenancy Act”) for circulation to all States and Union Territories for adaptation by way of enacting fresh legislation or by suitably amending the existing rental laws. According to the Government’s press release, the Tenancy Act aims at “creating a vibrant, sustainable and inclusive rental housing market in the country” to promote creation of adequate rental housing availability for all income groups. More so, the Tenancy Act is intended to overhaul the Indian legal framework in relation to rental housing and institutionalise rental housing by creating a Rent Authority (i.e., an officer appointed under the Tenancy Act) for reporting renting arrangement.

Primary Objectives of the Tenancy Act:

The Tenancy Act stipulates that its objective is three-fold:

1.   To establish a Rent Authority to regulate renting of premises;

2.   To protect the interests of landlords and tenants; and

3.   To provide a speedy adjudication mechanism for resolution of disputes and matters connected therewith.

Key Features of the Tenancy Act:

·         No person shall let or take on rent any premises except by an agreement in writing, which shall be informed to the Rent Authority by the landlordand tenantjointly, in the specified form within a period of two months from the date of tenancy agreement.

·         The Rent Authority will, within seven working days from the date of receipt of the information about the execution of tenancy agreement, along with the specified documents:

o    provide a unique identification number to the parties; and

o    upload details of the tenancy agreement on its website in local vernacular language or the language of the State/Union Territory.

·         The security deposit to be paid by the tenant in advance shall:

o    not exceed two months’ rent, in case of residential premises; and

o    not exceed six months’ rent, in case of non-residential premises.

·         The security deposit will need to be refunded to the tenant by the landlord on the date of taking over vacant possession of the premises from the tenant, after making the due deductions of any liability of the tenant.

·         The tenancy will be valid for a period as agreed upon between the landlord and the tenant and as specified in the tenancy agreement.

·         Where a tenancy for a fixed term ends and has not been renewed or if the tenant fails to vacate the premises at the end of such tenancy, then except in a case the locality where the premises let out on rent is situated is affected by any disastrous event of force majeure, the tenant will be liable to pay an enhanced rent to the landlord as under:

o     twice the monthly rent for the first two months; and

o    four times the monthly rent thereafter till the tenant continues to occupy the said premises.

·         Interestingly, ‘force majeure’ does not expressly include ‘pandemic’ and means a situation of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the habitation of the tenant in the premises let out on rent.

·         No sub-letting of the premises or transfer or assignment of rights in the tenancy agreement will be allowed by the tenant except by entering into a supplementary agreement to the existing tenancy agreement, which will also need to be reported to the Rent Authority.

·         Rights and obligations of the landlord and the tenant including related to repairs and maintenance, payment rent, withholding of essential services and supply to the premises, vacation etc. have been detailed in the Tenancy Act.

·         A tenant will not be evicted during the continuance of tenancy agreement unless otherwise agreed to in writing. However, the Rent Court may, on an application made to it by the landlord, make an order for eviction and recovery of possession of the premises on inter alia the following grounds, namely:

o    that the tenant does not agree to pay the rent payable;

o    that the tenant has, after the commencement of the Tenancy Act, parted with the possession of whole or any part of the premises without obtaining the written consent of the landlord;

o    that the tenant has continued to misuse3 the premises even after receipt of notice from the landlord to desist from such misuse;

o    where it is necessary for the landlord to carry out any repair or construction or rebuilding or addition or alteration or demolition in respect of the premises or any part thereof, which is not possible to be carried out without the premises being vacated;

o    that the tenant has given written notice to vacate the premises let out on rent and in consequence of that notice the landlord has contracted to sell the said premises or has taken any other step, as a result of which his interests would seriously suffer if he is not put in possession of that premises;

o    that the tenant has carried out any structural change or erected any permanent structure in the premises let out on rent without the written consent of the landlord.

·         A tenant can also vacate and handover the possession of the premises by giving such written notice as is required under the tenancy agreement and in the absence of any provision thereto, the tenant will need to give notice to the landlord of at least one month before giving up possession of the premises.

·         The District Collector or District Magistrate shall, with the previous approval of the State Government/Union Territory administration, appoint an Additional Collector or Additional District Magistrate or an officer of equivalent rank, to be the Rent Court, within his jurisdiction.

·         The State Government/Union Territory administration may, in consultation with the jurisdictional High Court, may, appoint a District Judge or Additional District Judge as Rent Tribunal in each district.

·         In case of any dispute between the landlord and the tenant regarding revision of rent, the Rent Authority may, on an application made by the landlord or tenant, determine the revised rent and other charges payable by the tenant, and fix the date from which such revised rent becomes payable.

·         Any person aggrieved by the order of the Rent Authority can prefer an appeal to the Rent Court having territorial jurisdiction.

·         The Rent Court (or Rent Tribunal) shall endeavour to dispose the case as expeditiously as possible, not exceeding a period of sixty days from the date of receipt of the application or appeal. Delay in disposal within the stipulated period of sixty days will require the Rent Court or the Rent Tribunal to record its reasons in writing for not disposing of the application or appeal within that period.

·         Other than the provisions specifically provided, nothing contained in the Code of Civil Procedure, 1908 shall apply to the Rent Courts and Rent Tribunals, which shall be guided by the principles of natural justice and shall have power to regulate their own procedure.

·         The provisions of the Tenancy Act shall not apply to:

o    premises owned or promoted by the Central Government or State Government or Union Territory administration or local authority or a government undertaking or enterprise or a statutory body or cantonment board;

o    premises owned by a company, university or organisation given on rent to its employees as part of service contract;

o    premises owned by religious or charitable institutions as may be specified, by notification by the State Government/Union Territory administration;

o    premises owned by auqaf registered under the Waqf Act, 1995 or by any trust registered under the public trust law of the State/Union Territory for the time being in force;

o    other building or category of buildings specifically exempted in public interest by notification by the State Government/Union Territory administration.

Conclusion        

The Tenancy Act is evidently trying to bring coherence to the landlord tenant issues which generally languish in courts for years and in many cases, for decades. The stipulation of time period of sixty days for adjudication of applications and appeals by rent court and tribunal is intended to bring an urgency to resolution of cases in a timely manner. Further, the mandatory requirement of reporting of all tenancy arrangements and management of such relationship is intended to create discipline to the otherwise fractured rental housing market in the country. The creation of rent authority, rent court and rent tribunal to deal with operational and day to day management issues including non-payment of rent, delay in undertaking repair and maintenance and eviction of tenants are steps in the right direction. The proposal to impose punitive rent on tenants on non-vacation of property post expiry of the tenure or termination of the agreement, limit on chargeability of security deposit by the landlords, accountability on undertaking repairs by the landlords in a timely manner are intended to boost the rental housing sector. The Government is hoping that once this legislation is adopted by the States and Union Territories, it will enhance private participation in rental housing, address the huge housing shortage across different income groups and reduces homelessness.

Endnotes:

1 “Landlord”, whether called landowner or lessor or by any other name, means a person who receives or is entitled to receive, the rent of any premises, on his own account, if the premises were let to a tenant, and will include his successor-in-interest; and a trustee or guardian or receiver receiving rent for any premises or is entitled to so receive, on behalf of, any other person such as minor or person of unsound mind who cannot enter into a contract.

Tenant”, whether called lessee or by any other name, means a person by whom or on whose account or on behalf of whom, the rent of any premises is payable to the landlord under a tenancy agreement and includes any person occupying the premises as a sub-tenant and also, any person continuing in possession after the termination of his tenancy whether before or after the commencement of the Tenancy Act; but shall not include any person against whom any order or decree for eviction has been made.

For the purposes of this clause, “misuse of premises” means encroachment of additional space by the tenant or use of premises which causes public nuisance or causes damage to the property or is detrimental to the interest of the landlord or for immoral or illegal purposes.