What is Model Tenancy Act, 2020?

Real estate has been the focal point of the law makers for quite some time and there has been attempts to bring legislation to solve the prolonged ambiguity and flaws in the real estate laws. First revolutionary legislation enacted by the Parliament was Real Estate (Regulation and Development) Act, 2016 to promote and protect the interest of the home buyers as well as to help boost the investments in real estate sector.

This particular act also established a Real Estate Regulatory Authority (RERA) in every state to regulate real estate sector and to adjudicate over the cases relating to it. After this, much deliberations have been underway to come up with a uniform law for regulating the rental properties. Finally on 2nd June the central government has provided its approval to the Model Tenancy Law (MTA), 2020. We will know and understand about this tenancy law in this article.

What does a model law mean?

The Central Government has sanctioned the Model Tenancy Act, 2020 which by its name is a model law, this means that central government has passed a suggested law for state governments so that they can either adopt this law as it is or may come up with a legislation which is based on model law and because rent control is a state list subject the state government are free to formulate a law on this subject.

Provisions under MTA, 2020

The Model Tenancy Act, 2020 in its preamble states, “An Act to establish Rent Authority to regulate renting of premises and to protect the interests of landlords and tenants and to provide speedy adjudication mechanism for resolution of disputes and matters connected therewith or incidental thereto.”

Through this legislation the government’s aim is to bring rent housing of both commercial and housing property under the purview formal market. Through institutionalization of the rent authority, it would minimize petty disputes.

Under this act there are 47 sections divided under eight chapters and there are two schedules. Where 1st schedule contains form for information of tenancy and schedule II contains obligations of the Landlords and Tenants.

Further, provisions state:

• This act puts mandate, that there shall be written agreement for every new tenancy. This implies a fixed rent and duration of tenancy which will be based on mutual agreement by written agreement.

• There is also a provision for adequate notice period for making hike in rentals as this will ensure that landlord extract market price their properties at the same instance enough time is there with the tenant to make arrangements.

• The Act provides for a cap on the security deposit, which for a residential property will be maximum two months’ rent as advance security deposit and for commercial property it can be maximum six months’ rent.

• As per the act, if tenant fails to vacate the rental premises in accordance with the rent agreement, then he will be liable to pay twice monthly rental for first two months and then four times the subsequent months till he continues.

• There is a specific provision that states, if there is any lapse on the part of landlord to provide the refund on time then he will be liable to pay simple interest as may be applicable.

• Rent Authority will be the first adjudicating authority to hear about the dispute between the landlord and tenant. If any party is dissatisfied with the order of the Rent Authority, then they may approach ‘Rent Court’ and then after the ‘Rent Tribunal’.

• There is a provision which says that if there is any repair works to be undertaken because of which supply of any essential utility can be disrupted then 24-hour prior notice shall be issued for the same.

• Act also states that landlord or the property manager cannot disrupt the essential supplies to the premises in case of any dispute between the parties.

• The landlord will be liable to undertake activities like structural repairs, except for such which are result of damage caused by the tenant, painting of doors and whitewashing the wall, plumbing repairs, internal and external electrical wiring and any other related maintenance.

This act will apply prospectively and the existing agreements will not get the benefits of the provision under the new law.

Prior Arrangements

This is not the first time that a legislation on rent control has been brought about, there are Rent Control Acts existing in almost all the state in India for example: Maharashtra has Rent Control Act, 1999, Karnataka has Karnataka Rent Control Act, 1999, Delhi has Rent Control Act, 1958 and Chhattisgarh Rent Control Act, 2011 is in Chhattisgarh. The problem with most of the legislations are that they have not been amended for a very long time so under this new model law the states can either make a new legislation on rent control or can make necessary amendments to the existing law.

Conclusion

By passing of this model act the government has made a much-needed progression towards formalizing one of those sectors that is till date followed keeping in mind the custom and practice in the market. Although there were laws for this but it lacked well defined rights and duties as well as responsibilities of the landlords and the tenants. The experts say this law will ensure better regulation of the Rent Control regime and would encourage better engagement of the parties with the law.