Tenancy can be defined as a contract or an agreement in which the owner of a property owner gives exclusive temporary possession of his/her property to another person in barter of fixed monthly fortune (rent). This another person who owns the temporary possession of a property from a landlord or the owner is known as a tenant.
Since decades, there have been various issues related to period of tenancy, high security deposit, untimely payment of rent, dispute over hike in rent amount, overstaying of tenants, structural damage to the property, sudden termination of contract by the tenant and so on. Each state had certain laws to safeguard the interests of both tenants and landlords. Current Finance Minister of India, Nirmala Sitharaman, addressing the Budget 2019 announced to take certain measures to promote the rental housing sector, new tenancy laws would be implemented, replacing the inefficient, archaic laws. The Model Tenancy Act, 2019 aims to address and rectify shortcomings in the rental sector in India.
But, how will these laws benefit tenants and homeowners, both? Let us take a look at it.
The draft Law is applicable to all the housing or residential properties, commercial properties excluding hotels, lodges and synonyms commercial plazas and properties for educational institutions. This law will not affect the already existing tenancies.
Security deposit is one of the major concerns related to tenancy and the Model Tenancy Act deals with the same. Earlier, some of the tier 1 cities like Pune, Mumbai and Bengaluru would ask for a security deposit equivalent to the rent amount of 6 to 12 months. The draft Act mandates the landlords to cap the security deposit of up to 2 months and not more than that for residential sector. In the case of non-residential spaces, the security deposit cap is set to an amount equivalent to the monthly rental. Tenants can now breathe a sigh of relief!
In case, any structural damages to the property, caused by the tenant are evident, the landlord has the right to cover the expenses for the same from the security deposit.
According to the draft Act, the terms and conditions of rent increment should be clearly mentioned in the agreement. If not, then the landlord needs to give a three month notice in writing before revising the rental amount. The draft also orders the tenant to duly respond to the notice and if he fails to do so, then it will be considered that the revised rental is accepted by the tenant.
The draft bill mentions hefty penalties for tenants who fail to vacate the space as per the period mentioned in the agreement. The tenant is obliged to pay a penalty which is equivalent to or twice the monthly rent for two months. Proceeding this two month period, if the tenant further fails to vacate the house, the landlord is entitled for compensation worth four times the monthly rental.
A form needs to be filled and submitted duly attaching ‘know your customer’ (KYC) documents of both the tenant and the land owner within two months of agreement to the Rent Authority as mentioned in the first schedule of the Law. The draft clearly states that the information provided will be considered as an evidence for grievance redressal or any other issues related to tenancy. Incomplete and insufficient information will not be rendered valid to be presented as evidence in any court of law.
Rent Authority, Rent Court and Tribunal have been assigned in the states across the country to ensure speedy grievance redressal. The drafted law orders the grievance redressal systems to resolve disputes within 60 days of registration. Earlier, this procedure took years to be resolved which required a lot of time and money investment from both the tenant and the landowner. As compared to the previous system, the 60 day dispute resolution system seems promising.
The second schedule of the Model Tenancy Act, 2019, has clearly mentioned the responsibilities of landowners and tenants. The responsibilities of landowners as per Part A are:
As per Part B of the second schedule, the tenants have a right to claim the following from the landowner:
The Model Tenancy Act, 2019, has been formulated and structured in order to safeguard the interests and rights of both tenants and landlords. With all of the mentioned provisions have already benefited a lot of consumers and set to revolutionise the rental sector in India.