The draft Model Tenancy Act 2019 plans to pick up where the Rent Control Act left off. The Rent Control Act, in the long run, had created more problems than it solved. Often referred to as a Draconian law, the Rent Control Act was deemed as one-sided, one that failed to protect the interests of landlords, thereby, not allowing rental housing to thrive in India.

Today, on the back of burgeoning segments like student housing, co-living, etc., the focus is back on rental housing and its various offshoots. The need of the hour thus, is a legal framework that will regulate these segments. Which is why all eyes are now on the draft Model Tenancy Act, 2019, which the central government has come up with. Although the draft legislation is likely to undergo some changes after receiving comments from stakeholders, it has more or less laid down the essential ground rules for landlords as well as tenants. What is noteworthy in the Model Tenancy Act is the clear objective to balance the rights and responsibilities of both, the landlords as well as the tenants. The Model Act, as per the draft, proposes ‘to establish a Rent Authority for regulating the renting of premises in an efficient and transparent manner and to balance the interests of the owner and tenant by establishing adjudicating mechanism for speedy dispute redressal and to establish Rent Court and Rent Tribunal to hear appeals and for matters connected therewith or incidental thereto.’ Here are some of the noteworthy provisions in the Act.

Mandatory Tenancy Agreement

The Act makes tenancy agreement between landlord and tenant mandatory. Also, within two months of the signing of the agreement, the landowner and tenant will have to jointly inform the Rent Authority about the agreement in a specified form. Besides other things, the tenancy agreement will include provisions for the renewal of tenancy. In case of non-renewal of tenancy, the tenant can continue to occupy the premises for a maximum period of six months after which he/she will be declared as ‘tenant in default’ and consequences shall follow.

Revision of Rent

The tenant will be required to pay rent to the landowner as per the terms mentioned in the tenancy agreement. The rent revision too will take place as per the terms of the agreement. In case nothing about rent revision is mentioned in the agreement, the landowner will be required to give three months notice to the tenant before increasing the rent. If a tenant fails to respond to it by giving a notice for termination of tenancy to the landowner, it will be assumed that he/she has accepted the rent increase proposed by the landowner.

Security Deposit

This has been one of the biggest pain points for tenants, especially in cities like Mumbai where the security deposits are extremely high and often unaffordable. The Act proposes to cap the security deposit to a maximum of two month’s rent in the case of residential property and one month’s rent in the case of non-residential property. The landowner will be required to refund the security deposit to the tenant at the time of taking over vacant possession of the premises. The landowner, however, has been allowed to deduct the liability of the tenant, if any.

Obligations of the Landowner and Tenant

The Act has outlined several obligations for the landowner as well as tenant. The landowner and the tenant shall be bound to keep the premises in a good condition as it was at the time of commencement of the tenancy, except for normal wear and tear, and shall be responsible for the respective repairs and maintenance as specified in the Act itself or as has been mentioned in the tenancy agreement.

In case the premises becomes uninhabitable in the absence of repairs and the landowner has refused to carry out the required repairs, after being called upon to get the repairs done in writing by the tenant, the tenant will have the right to vacate the premises and handover the possession to landowner, after giving the landowner fifteen days’ notice in writing or with the permission of the Rent Authority. During the tenancy, the tenant must not intentionally or negligently damage the premises or permit such damage; notify the landowner of any damage, as soon as possible; take care of the premises and its contents including fitting and fixtures; and keep it reasonably habitable having regard to its condition at the commencement of tenancy and the normal incidence of living. No landowner or property manager or tenant either by himself or through any person shall cut-off or withhold any essential supply or service in the premises occupied by the tenant or the landowner. The tenant cannot sublet a part of or the whole property, to someone else.

Eviction of the tenant

The draft Act has laid down a detailed procedure for eviction of tenant and thus, effectively putting a check on arbitrariness on the part of landowner.

During the period of tenancy agreement, the landowner will have to approach the Rent Court for the eviction of the tenant. The main grounds on which the landowner can seek eviction of a tenant include failure to reach an agreement on rent; non-payment of rent, arrears or other charges; misuse of premises; using it for illegal or immoral purposes; causing public nuisance; damaging the property; repair, alteration or demolition of property.

Compensation

A landowner is entitled to get compensation of double of the monthly rent for two months and four times of the monthly rent thereafter, for the use and occupation of a premise by a tenant who does not vacate the premises after his tenancy has been terminated by order, notice or as per the agreement. What is evident from all such provisions is that the draft Model Tenancy Act 2019, if implemented in its right spirit by all the states, has the power to become a strong piece of regulation that can truly regulate the rental housing market in India. The current dynamics of the real estate market, including the millennial mindset which is to rent rather than own, will ensure that the rental housing segment, fueled by segments like co-living, student housing, etc., will boom.

The author is Group CEO, Elara Technologies, the country’s only full stack real estate technology platform that owns PropTiger.com, Housing.com and Makaan.com

Dhruv Agarwala