The Union Cabinet passed the new Model Tenancy Act on 2nd June in order to deal with the current issues faced by the landlords and tenants, to ensure smooth functioning, create a faster adjudication procedure for disputes relating to rental housing or agreements and to create a rent authority. The Act also aims to decrease vacant housing stock in order to promote rental housing. This article will be discussing some of the key features of the Act and will be mainly analyzing the drawbacks of it.
Rental Housing is directed by states as land, land improvement, and control of such falls under the State List of the Constitution. These laws indicated a roof on the rental sum, and put conditions for removal of the occupant, to keep landowners from charging extravagant leases and guarantee that individuals discovered protected and stable housing. The 2015 draft Rental Housing Policy noticed that these laws prompted low rental yields, and disincentivized landlords from putting resources into rental investment.[i] These additionally slanted game plans towards inhabitants, made it trouble to expel them, prompted more disputes, and therefore dissolved the trust of landowners in the administrative framework.[ii] On 2nd June, 2021, The Union Cabinet approved the Model Tenancy Act, 2021 for circulation to all States and Union Territories for adaptation in order to enact fresh legislation or suitably amend the existing rental laws. As per the Government’s press release, the Tenancy Act claims at “creating a vibrant, sustainable and inclusive rental housing market in the country” for promoting creation of adequate rental housing availability for all income groups.[iii]
The Tenancy Act aims to focus on three objectives which are:
- To establish a Rent Authority to regulate renting of premises
- To protect the interests of landlords and tenants and
- To provide a speedy adjudication mechanism for resolution of disputes and matters connected to it.[iv]
SOME SIGNIFICANT FEATURES OF THE ACT ARE:
I. Under chapter 2 section 4, the Act states that to rent any premises, a written agreement has to be formed between the tenant and the landlord. The tenancy agreement must include these elements which are:
a) The rent which the tenant has to give
b) The needed period for the tenancy,
c) The security deposit which is supposed to be paid in advance,
d) Landlord’s access into the premises because of sound causes, and lastly,
e) Responsibilities in order to maintain the premises.
The Policy mandates that the concerned party has to inform the Rent Authority about the agreement within two months from the date of its execution. This will only apply to all premises used for residential, commercial, and educational purposes and not to those owned by Auqaf registered under the Waqf Act, 1995 or by any trust registered under the public trust law of the State/Union Territory.
II. In section 5 under chapter 2 the Act mandates the tenants to request the landlord for renewal of the contract or extension of it. Further under section 23 the Act states that the tenant will be liable to pay enhanced rent provided:
- the period of tenancy has terminated and not been renewed,
- the tenant fails to vacate the premises at the end of such period. If this does happen then the tenant shall pay:
i) twice the monthly rent for the first two months
ii) four times the monthly rent subsequently till it occupies the premises.
III. Under chapter 6 and 7 the Act deals with the quasi-judicial functions where:
- The Rent Authority, headed by the Deputy Collector, has the duties of resolving disputes, passing interim orders and awarding compensations.,
- The Rent Court, headed by the Additional Collector or Additional District Magistrate, has the jurisdiction to adjudicate appeals against the Rent Authority’s orders and lastly,
- The Rent tribunal, headed by District Judge or Additional District Judge, has the jurisdiction to adjudicate appeals against the Rent Court’s orders.
IV. For eviction the Act has stated that in order to evict a tenant, the landlord must approach the Authority seeking for such Action. The Rent Authority may give an order for eviction on certain basis if the tenant:
- denies to pay the agreed rent
- fails to pay rent for more than two months
- misuses the premises even after receiving written notices to desist from such misuse and
- makes structural changes or permanent changes without written consent.
V. The Act also deals with security deposit under section 11 wherein it must not exceed two month’s rent for residential and six month’s rent for non-residential premises and shall be reimbursed once the premises is vacated.
THE LOOPHOLES OF THE MODEL TENANCY ACT OF 2021
I. The first and foremost analysis is that this particular Act is not mandatory in nature which means it is up to the states whether they want to adopt it or not. The Act fails to cover the policies for rental housing as the Act precisely focuses on having concrete tenancy agreements from chapter 2 to 4 and quasi-judicial bodies which is rent authorities, rent courts and tribunals from chapter 6 to 7.[vii]
II. The Model Act suggests laws like (i) the landlord has to do structural repairs & whitewashing of doors and walls etc, (ii) tenants is responsible for things like drain cleaning, geyser repairs, repairing kitchen fixtures & etc, and (iii) the maximum or minimum amount of security deposit, when the contracting parties are getting into an agreement. Due to such kind of minute details in the Act, these laws can possibly restrict modifications that contracting parties wish to make in a contract based on their specific circumstances.
III. The Tenancy Act of 2021 also mandates the parties to register their agreements to the rent authority with their Aadhar numbers, this provision can go against the Supreme Court’s 2018 Puttuswamy Judgement where it had stated that “requiring Aadhaar card or number may only be made mandatory for expenditure on a subsidy, benefit or service incurred from the Consolidated Fund of India” and due to this the court removed the policy of mandatory Aadhar card linking to bank accounts. Therefore, the current law under this Act may violate this judgement as tenancy agreements has no benefits or services from the consolidated funds of India.[viii]
IV. Furthermore, the Act has also stated that when the contracting parties will register their rental agreement with rent authority, they will be provided a unique id and the details of their rental agreement will be uploaded in the rent authority’s official website. The aforementioned law has not specified that what exact details will be uploaded on the website, if details of any individual’s personal documents are being uploaded then there will be a clear infringement of fundamental rights which is right to privacy.[ix]
V. In section 5 under chapter 3 of the Act, the law states about landlords allowing tenants to use the premises post tenancy period if the premises is affected by any disastrous event of force majeure with providing the explanation of force majeure being war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature and not including pandemic or lockdown which can create a major lacuna as this feature is needed since we are currently facing this crisis.[x]
VI. The Act is only focusing on tenancy agreements with a smooth functioning and there are no provisions for affordability of rental housing as mostly the low-income groups and economically weaker sections take up rental housing. Even if there are government initiatives, subsidies like The Affordable Rental Housing Complexes (ARHC) which have been directed towards making home-ownership affordable still the economically weaker sections and low-income groups will not benefit from it as their income is low or it is irregular in nature.
The Model Tenancy Act of 2021 indeed offers a smooth functioning and makes it easier to have a record on Information such as the number of properties on rent, and the rental yield from properties which can be useful for formulating policies and understanding the development of the real estate market and therefore eliminating informal contracts. Due to this there can be also a decrease in vacant housing stock as well. However, at the same time the minute details which are provided in the Act in order to formulate a tenancy agreement is not needed since these details are already specified in rent agreements in existing state legislations, including states like Maharashtra. The Act rather should have more focussed on rental housing policies for the tenants like addressing the issue of tenants being able to afford rental housing by providing tax exclusions to the low -income groups than mostly fulfilling the interests of landlords.
[i] National Urban Rental Housing Policy (Draft), 2015, Ministry of Housing and Urban Poverty Alleviation, Government of India,
[ii]India: Promoting Inclusive Urban Development in Indian Cities, Asian Development Bank, 2013, https://www.adb.org/sites/default/files/project-document/81213/41609-012-tacr-03.pdf.
[v] The Model Tenancy Act, 2021, PRS Legislative Research, https://prsindia.org/billtrack/the-model-tenancy-Act-2021#_edn18
[vi] The Model Tenancy Act, http://mohua.gov.in/upload/uploadfiles/files/3%20ENGLISH.pdf
[ix]Namita Vishwanath and Savithran Ramesh, The Supreme Court’s Aadhaar Judgement And The Right To Privacy, Mondaq (11 Oct, 2018), https://www.mondaq.com/india/privacy-protection/744522/the-supreme-court39s-aadhaar-judgement-and-the-right-to-privacy