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Security Deposit Limited to 2 Months for Residence; Enhanced Rent After Tenancy Period’: Key Features of Draft Model Tenancy Act

Security Deposit Limited to 2 Months for Residence; Enhanced Rent After Tenancy Period’: Key Features of Draft Model Tenancy Act

The Centre on Wednesday (June 2, 2021) gave acceptance to the Model Tenancy Act, a move that is likely to overhaul the legal framework concerning rental housing across the country.

The official statement given by the state government reads as follows “

“It will enable the creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness. Model Tenancy Act will empower the institutionalization of rental housing by gradually shifting it towards the formal market. The Model Tenancy Act will facilitate the unlocking of vacant houses for rental housing purposes. It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage."

The objective of the model tenancy act-

  • To set up Rent Authority to direct renting of premises
  • To ensure the interests of landlords and tenants.
  • To give rapid adjudication mechanism for resolution of disputes

The key takeaways are:

  • Enhanced rent to be paid by the tenant if he refuses to vacate after the tenancy period expires.
  • Security deposit restricted to two months’ rent in case of residential tenancy.
  • Data about tenancy agreement to be given to Rent Authority, which will be definitive evidence of facts. 
  • Rent Courts/Tribunal to dispose of cases/appeals within sixty days.

Definition of landlord and tenants

Landlord" signifies an individual who gets or is qualified to receive, the rent of any premises, on his own, if the premises were let to a tenant. It incorporates

 (I)  his successor-in-interest; and

 (ii) a trustee or guardian or receiver getting rent for any premises or is qualified to so receive, because of or in the interest of or for the benefit of, some other individual, for example, minor or individual of unsound mind who can't agree.

“Tenant", implies an individual 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. This comprises any individual involving the premises as a sub-tenant and any individual continuing in possession after the end of his tenure.

No individual will let or take on rent any premises except by an agreement in writing.

No individual will, after the initiation of this Act, let or take on rent any premises except by an agreement in writing, which will be notified to the Rent Authority by the landlord and tenant jointly, in the form specified in the First Schedule within a period of two months from the date of tenancy agreement.

This will be notified to the Rent Authority by the landlord and tenant jointly within a time of two months from the date of the tenancy agreement (Form given in schedule 1 of the Act). This data provided will be conclusive proof of the facts regards to tenancy and matters associated therewith. Without any statement of data, the landlord and the tenant will not be qualified for any relief under the provisions of this act.

Enhancement Rent to be paid by Tenant if he fails to vacate the premises at the end of tenancy

Every tenancy agreement entered into after the commencement of this Act shall be valid for a period agreed upon between the landlord and the tenant and as specified in the tenancy agreement.

The tenant can request to owner or landlord for renewal of the aforementioned agreement, only if the landlord wants or may enter into a new tenancy agreement with mutual terms and conditions.

If the tenancy agreement is for a fixed period and it ends and has not to be renewed or the tenant fails to vacate the premises then in such case the tenant shall be liable to pay enhanced rent provided in section 23.

Section 23 states that“such tenant shall be liable to pay the landlord (a) twice the monthly rent for the first two months; and (b) four times the monthly rent thereafter till the tenant continues to occupy the said premises.

Limits on Security Deposits:

The security deposit to be paid by the tenant in advance shall (a) not exceed two months’ rent, in case of residential premises; and (b) not exceed six months’ rent, in case of non – residential premises.

Ground for eviction:

The landlord has a right to file an application in the Rent court for eviction of tenants if he invoking the following grounds:

1. Non-Payment of Rent: If the tenant does not agree to pay the rent as per section 8.

2. Non-Payment of Rent Arrears: If the tenant has not paid the arrears of the rent and other charges which are mentioned in Section 13 (1) that for two consecutive months, including interest for delayed payment as may be specified in the agreement within a month from the date of service of notice of demand for payment of such arrears of rent and other charges provided in section 106(4) of the Transfer of Property Act, 1882.

3. Parted with possession: After commencement of this act if the tenant possesses the property of the landlord either wholly or partly without the written consent of the owner.

4. Misuse of Premise: If the tenant misuses the property after several notices from the landlord regarding the same. 

5. Repair, Reconstruction, etc. Where the landlord must carry out any repair or construction, rebuilding requires which cannot be possible to be carried out without the premises being vacated.

6. Consequence of change of land use by the competent authority: Also, the premises or any part thereof is needed by the landlord for completing any repairs, construction, reconstructing, augmentations, adjustments, or destruction, for change of its use as a consequence of change of land use by the competent authority.

7. Tenant Not Vacating After Giving Written Notice to Vacate: The tenant has given written notice to vacate the premises let out on rent and as in the outcome of that notification the landowner has contracted to sell the said premises or has made some other steps, because of which his interest would seriously suffer if he is not given possession of that premises.

8. Structural alteration: if the tenant has carried out any structural change without the written consent of the landlord.

Functions of Rent Authorities:

The Rent authority within 3 months from the date of its appointment, file digital platforms in local vernacular language or language of the State/Union territory for enabling submissions of the document by landlord and tenant.

The Rent Authority then has to (a) provide a unique identification number to the parties; and (b) upload details to the tenancy agreement on its website in the local vernacular language or the language of state/union territory, within seven working days. 

In case of dispute between landlord and tenant regarding rent, then the Rent Authority may on an application made landlord or tenant, determine the revised rent and other charges payable by the tenant and also decide the date from which the revised charges become payable. 

If the tenant is unable to know to whom the rent is payable during the period of the tenancy agreement, in that case, the tenant can pay rent to the Rent Authority.

No landlord or property manager will withhold any essential supply or services in the premises of the tenant. If the contravention of these provisions, the Rent authority after analyzing the matter can pass an interim order asking for restoration of essential supply or service.   

If any person not satisfied with the order of a Rent Authority can do appeal in Rent Court having territorial jurisdiction.

Rent Court and Tribunals:

According to the Model Law provision, the Rent court and Tribunals shall try to dispose of the case as expeditiously as possible, not exceeding sixty days from the date of receipt of the application or the appeal.

Exemptions

The Act does not apply to the following:

  • premises claimed or promoted by the Central Government or State Government or Union domain Administration or local authority or a Government undertaking or enterprise or a legal body or Cantonment Board.
  • premises owned by a company, University, or association given on rent to its workers as a part of the service contract;
  • premises owned by religious or charitable institutions as might be specified, by notice by the State Government/Union region Administration;
  • premises owned by auqaf enrolled under the Waqf Act, 1995 or by any trust enlisted under the public trust law of the State/Union territory for the time being in force;
  • other building or categories of buildings particularly exempted in the public interest by notice by the State Government/Union Territory Administration.

Notwithstanding, if the owner and tenant of the premises referred above agree that the tenancy agreement entered into between such landlord and tenant be managed under the provisions of this Act, such landlord may notify the Rent Authority regarding the agreement to do as such. To set up Rent Authority to direct renting of premises.

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