Its provisions, once implemented by states and Union Territories, could reduce reluctance to rent and enhance the supply of rental homes making productive use of vacant houses
The Narendra Modi government has come out with the much-awaited draft model tenancy law that proposes to establish an independent authority in every state and Union Territory for registration of tenancy agreements and even a separate court to take up all tenancy-related disputes.
The draft model tenancy law has proposed limiting the advance security deposits to two months’ rent and has also suggested heavy penalties for tenants who decide to overstay. Those who do may have to shell out double the rent for two months and even four times.
It must be noted that this is only a model act because since land is a state subject, states have the right to either adopt it or reject it. Also, the laws to be notified by the states will not have a retrospective effect.
The Housing and Urban Affairs Ministry has put the draft law in public domain for stakeholder consultation and will seek Cabinet approval on it later.
These provisions, once implemented by states, could reduce reluctance to rent and enhance the supply of rental homes, making productive use of vacant houses.Why was a need felt to bring this on
The document notes that the need to introduce the model tenancy law was felt because the existing rent control laws are restricting the growth of rental housing segment and discouraging the landowners from renting out their vacant premises.
Its aim is to balance the interests of landowner and tenant and to create an accountable and transparent environment for renting the premises in disciplined and efficient manner to promote inclusive and sustainable ecosystem to various segments of society including migrants, formal and informal sector workers, professionals, students and urban poor, says the document.
Its intention is also to notify the rules for residential and non-residential premises and further to develop the policies to promote balanced rental housing by developing different options of rental housing like individual units, dormitories, hostels, co-living, co-housing, paying guest and employee housing and outline the roles of various stakeholders in order to ensure housing for all.
It excludes premises owned or promoted by the Centre, state, Union Territory, local authority, government undertaking, enterprise, statutory body or cantonment board. It also excludes premises owned by a company, university or organisation given on rent to its employees as part of service contract or those owned by religious or charitable institutions, any trust registered under the Public Trust Act of the state and those owned by Wakfs registered under the Wakf Act, 1995.
The rent authority after receiving information about tenancy agreement will provide a unique identification number to the parties and upload the details of tenancy agreement on its website compulsorily in local vernacular or state language in the format that has been prescribed in the model law within seven days from date of receipt of tenancy agreement along with the documents.
The rent payable for the unit to be let out will be the amount agreed between the landowner and the tenant as per the terms of the tenancy agreement.
Appointment of the rent authority: The district collector with the approval of the State/UT government can appoint an officer, not below the rank of Deputy Collector, to be the rent authority for the area within his jurisdiction to which this Act applies. The state/UT government may, by notification, constitute such number of Rent Tribunals at such places as may be deemed necessary by it and notify a Rent Tribunal as Principal Rent Tribunal, where more than one Tribunal is constituted.
Only the rent court and no civil court will have the jurisdiction to hear and decide the applications relating to disputes between landowner and tenant and matters connected with it.
The rent court or the rent tribunal will have to try and dispose of the case within 60 days from the date of receipt of the application or appeal. If there is a delay, then the rent court will have to record its reasons in writing for not disposing of the application or appeal within that period.Rights and duties of landlords and tenants
In case the landowner decides to revise the rent, he would have to give a notice in writing three months before the revised rent becomes due.
Even the security deposit to be paid by the tenant in advance shall be as determined by the agreement and as agreed mutually between ‘the landowner and the tenant’ subject to a maximum of two months’ rent in case of residential property and, minimum of one month’s rent in case of non-residential property. The security deposit shall be refunded to the tenant at the time of taking over vacant possession of the premises, after making due deduction of any liability of the tenant.
The draft rules also state that if the landowner does not accept the rent and other charges payable or refuses to give a receipt, the rent and other charges shall be sent to the landowner by postal money order or any other method as prescribed under the rules consecutively for two months. If the landowner does not accept the rent and other charges within this period, then the tenant may deposit the same with the rent authority. Once the rent has been deposited with the Authority, it can investigate the case and pass an order.
Even in case where the landowner refuses to carry out repairs, the tenant can get the work done and deduct the same from the rent provided that the deduction by tenant from the monthly rent on account of repair of the premises exceeds fifty percent of agreed monthly rent.
Also, if the premises become uninhabitable in the absence of repairs and the landowner refuses to carry out the repairs even after being called upon to do so in writing by the tenant, the tenant can have the right to vacate the premises and handover the possession to landowner after sending him a 15 days’ notice in writing or with the permission of the rent authority.
A landowner or the property manager may enter a premise in accordance with written notice or notice through electronic medium.
No landowner or property manager or tenant either by himself or through any person shall cut-off or withhold any essential supply or service in the premises occupied by the tenant or the landowner. Essential services include supply of water, electricity, piped cooking gas supply, lights in passages, lifts and on staircase, conservancy, parking, communication links and sanitary services etc.
If this is done then on the application from the tenant or the landowner, the rent authority after examining the matter may pass an interim order directing the restoration of supply of essential services immediately pending the inquiry.
This inquiry would have to be completed within one month of filing such an application.
The rent authority may even direct that a penalty be paid to the landowner or tenant if it finds that the application was made frivolously or vexatiously, says the draft.Repossession of the premises by the landownerThe rent court may, on an application made to it, order for the recovery of possession of the premises on the grounds that the landowner and tenant have failed to agree to the rent payable, that the tenant has not paid the arrears in full of rent payable and other charges for two months, including interest for delayed payment as decided in the tenancy agreement.
No order for eviction of the tenant on account of default of payment of rent shall be passed, if the tenant makes payment to the landowner or deposits with the rent court all arrears of rent including interest within one month of notice being served on him: But this relief will not be available again to the tenant if he defaults in payments of rent consecutively for two months in any one year subsequent to getting relief.
Finance Minister Nirmala Sitharaman on July 5 while presenting Budget 2019 had proposed that several reforms will be taken up for rental housing. A modern tenancy reform will be floated among the states. The FM called out the old rental laws archaic and stated that the government will soon formalise a modern tenancy policy and share it with all states.
Real estate experts say that clear-cut incentives to boost rental housing via a sound policy will positively help the government to further strengthen its Housing for All initiative. “Steps like revising tenancy laws would add more confidence in the housing sector. As per Census 2011, there were 11 million vacant houses that were found locked up. They too can be explored on this front,” said Pankaj Kapoor of Liases Foras.
"The new model tenancy is expected to balance the rights and responsibilities of both landlords and tenants that will make the rental market more efficient and streamlined across the country,” says Megha Maan, Senior Associate Director, Research at Colliers International India.
A national urban rental housing policy had been in the pipeline ever since the Modi government assumed charge in 2014. The first draft was put out in public domain in October 2015 and sought to promote various types of public-private partnerships for promotion of rental housing in the country and making good the growing housing shortage as a result of increasing urbanisation.The aim of the policy was to bring 11 million vacant unsold houses onto the rental market, to further encourage demand and reduce housing shortage. According to a KPMG report, the rental market in India is currently dominated by two major segments – increased demand from the migrated working class and rising demand-supply gaps in student housing.