Presumably the Model Tenancy Act, 2019 vis-à-vis rental housing will aid in the transformation of the legal perspective in its entirety throughout India and may also encourage private participation in this sector.
The newest draft Model Tenancy Act, 2019 is empowered in limiting security deposits for housing at two months’ rental and for other properties one months' rent.
In order to ensure that the rights and interests of both landlords and tenants are balanced and also ensure that there is adequate rental housing in India, the Ministry of Housing and Urban Affairs has formulated the Model Tenancy Act, 2019. The Finance Minister alluded to the fact that promoting rental housing on the part of the government would necessitate several reform initiatives including the finalization of a Model Tenancy Law replacing the archaic current Rental Laws that do not throw light on the linkage among the Lessor and the Lessee in a realistic and fair manner.
The conviction of the government is that the Draft MTA will work as a catalyst vis-à-vis revamping rental housing and the relative legal backbone throughout India and may encourage the segment’s private participation. Needless to mention that experts in the industry along with developers have a preference for the Act.
The government is ultimately responding adequately in revamping the archaic laws which were outstanding for a long time. At a time when there is a shortfall in affordable housing, rental housing potentially can contribute to the Government’s aim in making Housing for All come to fruition within two to three years at the most.
Vacant housing is because of dark property rights and inept implementation of rental contract laws, which this Act aims at addressing. The10 things regarding the Model Act which all landlords and tenants ought to be aware of are:
1. The new draft Model Tenancy Act, 2019 aims at capping security deposits at two months’ rental in the case of housing and one month’s rental for any other property. Nonetheless, however well-intended, this ceiling may harm landlords particularly in cities where typically hefty security deposits are the norm. A security deposit of two-month would be insufficient for compensating the landlord if the property has been damaged majorly.
2. Under The Act, recalcitrant tenants are penalized for declining to move out of their rental properties after the expiry of the rental period. In such a situation the landlord would be able to claim compensation which would be double the monthly rent for two months and four times the monthly rent thereafter. Property owners fearing tenants staying put in their properties which is deemed risky to let out their properties can now breath easy because of the Act.
3. The Act specifically mentions that the landlord cannot deny a tenant essential utilities and accessing common facilities which have been the tenant’s common grouse in the past.
4. The landlord cannot increase the rental without notice of at least three months to the tenant, and also is not permitted to increase rent midway through a rental term.
5. Once this Model Act becomes effective, letting would cease and on the flip side taking on rent any premises except by an agreement in writing.
6. In no later than 2 months of the performance of the rental agreement, it would be compulsory for landlords and tenants alike to inform the Rent Authority about the tenancy agreement. Within a week the Rental Authority would roll out a unique identification number to both parties.
7. Once the Model Act commences, a tenant without the prior written consent of the landowner would be constrained subletting the entire or part of the premises occupied by him, or optionally transfer or assign tenancy agreement rights wholly or partly.
8. The landlord-tenant agreement terms would devolve to their successors who would have equal rights and obligations according to the tenancy agreement, for the unused tenancy period.
9. It ought to be noted that there would not be any impact or effect on current tenancies as the Draft Model Tenancy Act would be effective prospectively.
Industry experts, nonetheless, fear that similar to RERA, the rules of the rental Act rules are prone to be convoluted at the state level as land is basically a state subject.
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