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What is Model Tenancy Act?
The central government on June 3 approved the Model Tenancy Act for circulation among states and union territories, which will adopt the changes by amending their existing rental laws in the country. According to 2011 Census data, there is a demand for 18.8 million homes in urban areas. The proposed reforms are much-desired relief to tenants and homeowners alike.
In her Budget speech of 2019, Finance Minister Nirmala Sitharaman said the current rental laws are archaic, as they do not address the relationship between the lessor and the lessee fairly. The approved Model Tenancy Act seeks to address the distortions in the rental market and help modernise it.
In her Budget speech of 2019, Finance Minister Nirmala Sitharaman said the current rental laws are archaic, as they do not address the relationship between the lessor and the lessee fairly. The approved Model Tenancy Act seeks to address the distortions in the rental market and help modernise it.
The new rules will help people especially in urban areas where about 28 per cent of families live on rent.
Here are the following changes in the Model Tenancy Act:
1: The Act will be applicable for renting only residential, commercial, or educational use, but not for industrial use or the hospitality sector.
2: In a major breather for tenants, the Act caps security deposit to a maximum of two months of rent.
3. According to the new Act, the rent can either be hiked according to the terms in the rental agreement or the landowner shall be required to give a notice in writing three months before.
4. The Model Act imposes that the information filed with the Rent Authority shall be taken as evidence of facts related to the tenancy.
5. In case the tenant does not vacate the premises on time, the Act proposes to levy heavy charges. A landowner is entitled to get compensation equal to double the monthly rent for two months, and four times the monthly rent, thereafter.
6. The new Act makes a robust grievance redress system comprising Rent Authority, Rent Court, and Rent Tribunal, which will settle disputes within two months.
The earlier Rent Control Act was an attempt by the government to eliminate the exploitation of tenants but in the long run, these laws have gathered operational inefficiencies and have led to several adverse situations, including weakening investments in rental housing, deteriorating municipal property tax revenue, and so on. However, unless individual states implement the rules, the benefits may not reach the people.
Landlord and tenants: Key highlights of the rules of engagement
— Both landlords and tenants must insist on a rent agreement signed by both parties
— Without it, getting redress from the Rent Authority will not be possible
— Read the rent agreement before signing on the dotted line to avoid unpleasant surprises later
— Landlords should verify a tenant´s background
— This would include getting records of civilian and criminal courts, and address and identity proof checked (many agencies do this)
— Tenants should pay rent via digital mode to create a payment trail
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