Model Tenancy Act – UPSC GS2

Utility: Direct Question can be asked on the topic.
  • Land is a state subject and only states can legislate to regulate the housing market.
  • Model acts are not binding on states.
  • India is set to double its urban population between 2018 and 2030. 
  • By 2028, New Delhi would become the most populous city on the planet. Thus, large-scale migration to urban centers in India is bound to create pressure on housing markets.
  • In India, an average commercial civil suit was disposed of in 1,445 days in a district court, as per World Bank’s Doing Business Report in 2018.
Aim of the Act:
  • To create a vibrant, sustainable, and inclusive rental housing market in the country.
  • It will address the issue of homelessness by creating adequate rental housing stock for all the income groups. It aims towards the goal of housing for all by 2022.
  • Lastly, it will institutionalize rental housing by gradually shifting it towards the formal market.
  • The Act will apply to premises rented for residential, commercial, or educational use but not for industrial use. It also won’t cover hotels, lodging, etc.
  • This model law will be applied prospectively and will not affect existing tenancies.
Key Features of the Model Tenancy Act:
  • Rent Authority:
    • The Act requires establishing rent authorities in every district to regulate renting of premises. Authority will protect the interests of landlords and tenants.
    • The proposed authority will also provide a speedy adjudication mechanism for the resolution of disputes.
  • Security Deposit:
    • The act puts a cap on the amount of security deposit. It will be a maximum of two months of rent in case of residential premises and six months in case of non-residential premises.
    • Currently, this amount differs from one city to another. For instance, in Delhi, the deposit is usually two-three times the monthly rent, but in Mumbai and Bengaluru, it can be over six times the monthly rent.
  • Increase in Rent:
    • The rent can be revised according to the terms and conditions mentioned in the agreement.
    • If there is no such agreement, the landowner will have to give a notice in writing to the tenant, three months before the due date of revised rent.
  • Vacating Rental Premises:
    • The act has provided a mechanism for vacating the premises. It says that if a landlord has fulfilled all the conditions stated in the rent agreement – giving notice, etc., then the tenant has to vacate the premises.
    • If the tenant fails to vacate the premises on the expiration of the period of tenancy or termination of tenancy, then the landlord is entitled to double the monthly rent for two months and four times after that.
  • Entering of Rental Premises:
    • Every landlord or the property manager may enter the rented premises in certain conditions. Like he/she needs to serve a notice, in writing or through electronic mode, to the tenant at least twenty-four hours before the time of entry.
  • Written Agreement is Mandatory:
    • Mandatory for there to be a written agreement between the property owner and the tenant.
  • The authority will provide a speedy mechanism in resolving disputes and other related matters.
  • It will help overhaul the legal framework with respect to rental housing across the country.
  • It will enable creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness.
  • It will enable institutionalisation of rental housing by gradually shifting it towards the formal market.
  • It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage.
  • The Act is not binding on the states as land and urban development remain state subjects.
  • Like in the case with RERA (Real Estate (Regulation and Development Act), the fear is that states may choose not to follow guidelines, diluting the essence of the Model Act.

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