'Security Deposit Limited To 2 Months For Residence; Enhanced Rent After Tenancy Period' : Key Features Of Draft Model Tenancy Act

The Union Cabinet, on Wednesday, approved the Model Tenancy Act.

Now, this Model Act will be circulated to all States / Union Territories for adaptation by way of enacting fresh legislation or amending existing rental laws suitably. According to the Government, Model Tenancy Act aims at creating a vibrant, sustainable and inclusive rental housing market in the country.

"It will enable creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness. Model Tenancy Act will enable institutionalisation of rental housing by gradually shifting it towards the formal market. The Model Tenancy Act will facilitate 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 press release issued by the Government reads.

The stated objective of the Model Act are

1. To establish Rent Authority to regulate renting of premises
2. To protect the interests of landlords and tenants
3. To provide speedy adjudication mechanism for resolution of disputes

The key takeaways are:

1. Enhanced rent  to be paid by tenant if he refuses to vacate after tenancy period expires
2. Security deposit limited to two months rent in case of residential tenancy
3. Information about tenancy agreement to be given to Rent Authority, which will be conclusive proof of the facts

4. Rent Courts/Tribunal to dispose cases/appeals within a period of sixty days

Landlord and Tenant Definitions

"Landlord" 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. It includes (i) his successor-in-interest; and (ii) a trustee or guardian or receiver receiving rent for any premises or is entitled to so receive, on account of or on behalf of or for the benefit of, any other person such as minor or person of unsound mind who cannot enter into a contract.

"Tenant", 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. This includes any person occupying the premises as a sub-tenant and also, any person continuing in possession after the termination of his tenancy..

No person shall let or take on rent any premises except by an agreement in writing

No person shall, after the commencement of this Act, let or take on rent any premises except by an agreement in writing, which shall be informed 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 shall be informed to the Rent Authority by the landlord and tenant jointly within a period of two months from the date of tenancy agreement (Form given in schedule 1 of the Act). This information provided shall be conclusive proof of the facts relating to tenancy and matters connected therewith. In the absence of any statement of information, the landlord and the tenant shall not be entitled to any relief under the provisions of this Act.

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

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

The tenant may request the landlord for renewal or extension of the tenancy, within the period agreed to in the tenancy agreement, and if agreeable to the landlord, may enter into a new tenancy agreement with the landlord on mutually agreed terms and conditions.

Where a tenancy for a fixed term ends and has not been renewed or the tenant fails to vacate the premises at the end of such tenancy, then such tenant shall be liable to pay an enhanced rent to the landlord as provided in section 23. Section 23 provides 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.

Grounds for eviction

A landlord can file an application for eviction of tenant before Rent Court invoking the following grounds: 

(a) Non Payment of Rent: The tenant does not agree to pay the rent payable under section 8;

(b) Non Payment of Rent Arrears: The tenant has not paid the arrears of rent and other charges payable in full as specified in sub-section (1) of section 13 for two consecutive months, including interest for delayed payment as may be specified in the tenancy agreement within a period of one month from the date of service of notice of demand for payment of such arrears of rent and other charges payable to the landlord in the manner provided in sub-section (4) of section 106 of the Transfer of Property Act, 1882;

(c) Parted with possession: The tenant has, after the commencement of this Act, parted with the possession of whole or any part of the premises without obtaining the written consent of the landlord;

(d) Misuse of Premises: The tenant has continued to misuse the premises even after receipt of notice from the landlord to desist from such misuse.

(e) Repair, Reconstruction etc: 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.

(f) Consequence of change of land use by the competent authority: Also, the premises or any part thereof is required by the landlord for carrying out any repairs, construction, rebuilding, additions, alterations or demolition, for change of its use as a consequence of change of land use by the competent authority.

(g) Tenant Not Vacating After Giving Written Notice To Vacate: 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. 

(h) Structural alterations: 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.

Functions of Rent Authorities

The Rent Authority has to, within three months from the date of its appointment, put in place a digital platform in the local vernacular language or the language of the State/Union territory for enabling submissions of document by landlord and tenant

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

In case of any dispute between landlord and 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 also fix the date from which such revised rent becomes payable.

Where the tenant is unable to decide to whom the rent is payable during the period of tenancy agreement, the tenant may, in such case, deposit the rent with the Rent Authority in such manner as may be prescribed.

No landlord or property manager shall, either by himself or through any other person, withhold any essential supply or service in the premises occupied by the tenant. In case of contravention of these provisions, the the Rent Authority after examining the matter, may pass an interim order directing the restoration of supply of essential services immediately on service of such order upon the landlord or property manager.

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

Rent Courts and Tribunals 

Other provisions deal with constitution of Rent Authorities, Rent Courts and Tribunals and procedure that should be followed by them. The Rent Court or, as the case may be, the Rent Tribunal, according to the Model Law provisions, shall endeavor 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. 

Exemptions

The Act does not apply to the following:

(a) 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;

(b) premises owned by a company, University or organisation given on rent to its employees as part of service contract;

(c) premises owned by religious or charitable institutions as may be specified, by notification by the State Government/Union territory Administration;

(d) 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;

(e) other building or category of buildings specifically exempted in public interest by notification by the State Government/Union territory Administration.

However, if the owner and tenant of the premises referred above agrees that the tenancy agreement entered into between such landlord and tenant be regulated under the provisions of this Act, such landlord may inform the Rent Authority of the agreement to do so.

Click here to Read/Download Model Tenancy Act