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Model Tenancy Act approved by Union Cabinet – Ministry of Housing and Urban Affairs

Model Tenancy Act approved by Union Cabinet – Ministry of Housing and Urban Affairs

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  • GS3 || Indian Society || Urbanization || Government Schemes

Why in the news?

Union Cabinet has authorized “Model Tenancy Act” for dissemination to all States and Union Territories for adaption by adopting new legislation or revising existing rental rules as appropriate.

About Model Tenancy Act:

The Model Tenancy Act seeks to make the rental housing market in the country more lively, sustainable, and inclusive. It will allow for the development of enough rental housing supply for people of various income levels, therefore solving the issue of homelessness. The Model Tenancy Act will help to institutionalize rental housing by moving it toward the official market.

Background:

  • The Model Tenancy Act has been in the works since 2015, but it has been stalled until now. All urban and rural regions will be covered under the act. Existing tenancies are not likely to be affected by the new Act.
  • Prior to the commencement of the Housing for All by 2022 Mission in 2015, the government agreed that 20% of the two crore dwellings to be built would be entirely for rent.
  • The conclusion was based on a 2013 task force study on Rental Housing, which found that affordable rental housing tackles challenges of poverty and inclusive growth more directly than affordable ownership housing.
  • Aim of the Act:
  • To develop a thriving, long-term, and inclusive rental housing market in the country, which will address the issue of homelessness by providing appropriate rental housing stock for all income categories. By 2022, it aspires to provide homes for everybody.
  • It will progressively institutionalize rental housing by bringing it into the formal market.
  • Coverage:
  • The Act will apply to rental residential, commercial, or educational properties, but not to industrial properties. It also won’t cover things like hotels and housing.
  • This model law will be adopted prospectively, and current tenancies will not be affected.

Changes Proposed In the Model Tenancy Act, 2019:

  • Rent Authority: Rent agreements are now registered at the sub- registrar’soffice. The proposal proposes the establishment of a rent authority to provide transparency, accountability, and justice to the rental housing segment. The authorities will create a website where it will keep track of all the rent agreements it has recorded. This would be on the lines of the functioning of the real estate regulatory authorities.
  • Speedy dispute resolution: In the event of a disagreement, landlords and renters will have to go to the rent authority for a resolution. If they are dissatisfied with the authority’s decision, they have 30 days from the date of the decision to file a complaint with the rent court/rent tribunal.

Important Contractual Provisions:

  • Security deposit: Landlords cannot demand a security deposit of more than two months’ rent. The tenant would receive a refund of the deposit.
  • Rent revision: According to the rules, if a rent agreement is formed for a specified term, the landlord cannot increase the rent amount within that term unless the agreement specifically indicates that this is allowed.
  • Before increasing the rent, the landlord must provide three months’ notice in writing. Landlords can raise the rent if they have spent money on improvements, additions, or structural changes that aren’t considered “repairs.”
  • Entering the rented premises: To access the premises, the landlord must give the renter a 24-hour notice (which can be given by any technological method). The visitation hours must be between 7 a.m. and 8 p.m.
  • Maintenance of the rented premises: Both parties are responsible for keeping the premises in good repair. In the event of damage, the lease agreement must specify who is responsible for what.
  • The landlord can deduct the money from the security deposit if the situation is reversed. If the sum is greater than the deposit, the renter is responsible for the difference.
  • Subletting: Without the landlord’s approval, tenants cannot sublease a portion or the entire rental building. Tenants cannot charge more than the rent they pay themselves unless they have authorization to do so.
  • Compensation for overstay: Following the end of the rent period, the landlord is entitled to double the monthly rent for two months and then four times the monthly rate for the tenant’s use and possession.
  • Eviction: If the tenant does not pay rent for two months, the landlord may file a complaint with the rent court. If the renter corrects the condition within one month of the case going to court, they will be permitted to stay if this is their only default that year. In the event that the premises are unfit for occupancy, the tenant has the right to vacate after giving a 15-day notice period.

Why do we need the Model Tenancy Act?

  • According to the 2011 Census, almost 1 crore residences in metropolitan areas were unoccupied. This is purportedly owing to current rent control rules, which are limiting the creation of rental housing and prohibiting owners from renting out their unoccupied homes for fear of losing their property.
  • In the absence of a model law, informal agreements with arbitrary terms and, in many cases, litigation emerging from conflicts are the norm. In informally worded agreements, both the renter and the owner are frequently found on the losing end of a bargain.
  • The Model Tenancy Act attempts to solve this issue by facilitating the unlocking of unoccupied dwellings for rental housing purposes and fostering a thriving, diverse rental housing market, sustainable and inclusive rental housing market in the country.

Challenges:

  • As with RERA (Real Estate (Regulation and Development Act), the danger is that states would opt not to adopt the Model Act’s principles, weakening its core.
  • States may opt not to follow recommendations, compromising the spirit of the Model Act, as they did with RERA (Real Estate (Regulation and Development Act).

Mains oriented question:

The Act can fuel the rental housing supply pipeline by attracting more investors, and more rental housing stock will help students, working professionals and migrant populations to find urban accommodation, especially in COVID-19-like exigencies. Comment. (200 words)