How the Model Tenancy Act removes ambiguity and mistrust in the rental landscape
In the absence of a formal and regulated rental court, disputes and mistrust between landlords and tenants in the rental sector have been high. So much so that a large number of owners have decided not to rent the property and to leave it vacant. The recently approved Model Tenancy Act (MTA) aims to bridge this chasm by streamlining India’s rental landscape and bringing rental laws into the 21st century.
Here is an overview of how the law aims to identify and stop the gaps.
What is the Model Rental Law? A quick explanation
The law, which is seen as a long overdue update to the 1948 Rent Control Act, aims to rid the rental sector of arbitrariness and bridge the gap between landlords and tenants through formal and written agreements thus rejecting verbal contracts, in addition to many other things. According to the government, the MTA “aims to create a dynamic, sustainable and inclusive rental housing market in the country”. It will achieve this by creating “an adequate rental housing stock for all income groups, thereby addressing the problem of homelessness.” The Model Tenancy Act will allow the institutionalization of rental housing by gradually moving it to the formal market.
The rental market has until now been subject to primitive laws which prevented the flourishing of a quality rental market due to the lack of clarity and stability of the system which discouraged landlords from renting their homes. First written in 2019, the Model Tenancy Act aims to help the rental property market and overhaul the legal framework around it. The law aims to bring vacant properties to market, overcome procedural registration bottlenecks, increase rental income and provide housing for rapidly urbanizing India. Some of its main provisions include:
The end of ambiguity (verbal agreements)
Oral agreements, which dictated the terms of most rental contracts, were often a cause of minor disputes and disputes between stakeholders. To remedy this problem, the law requires a written agreement by mutual consent between landlord and tenant. The agreement will detail the length of the tenancy, acceptable practices, amount of rent, etc., and submitted to the district Loyer Authority. To facilitate this, the law requires the installation of a digital platform in the local vernacular for the submission of all important documents.
An easier grievance process
In accordance with the provisions of the law, states that choose to implement it will be required to put in place a three-tier grievance system for a more fair and transparent dispute resolution process. A district-level judge will oversee dispute resolution. In the event of a dispute, the injured party will first apply to the Rent Authority, before going to the higher levels: “Court of Rent” and “Court of Rent”.
The biggest fear of any landlord was that the tenant could squat the property and then have to fight a long legal battle to get their property back. But, with a clear 60-day deadline for resolving any disputes, the law gives homeowners a lot of confidence.
Clear delineation of responsibilities
The biggest subject of dispute was maintenance and arbitrary charges deducted by the owner from the security deposit. The new law balanced the scales by clearly delineating the responsibilities of landlords and tenants. Unless otherwise agreed in the written agreement, the owner will pay for structural repairs, whitewashing, painting of doors and windows, as well as maintenance of plumbing and electricity, among others. The tenant, meanwhile, will assume responsibility for any repair of damage caused by it, as well as activities such as cleaning pipes, repairing switches, sockets, kitchen appliances, replacing panels. glass, maintenance of gardens and open spaces, etc.
The new law also prohibits the subletting of property by the tenant without the owner’s consent. MTA prohibits any structural change of the property by the tenant without the consent of the landlord while delineating the vacation provisions of the property by the tenants.
Provisions for the protection of tenants’ rights
The law lowered the ceiling for security deposits by a tenant to two months. Homeowners are prohibited by law from withholding essential supplies for any reason. The MTA also requires that tenants be served 24 hours’ notice before any repairs are done on the property, which could reduce the provision of utilities, structural repairs by landlords, etc. In the event that a landlord does not reimburse the rent, they will have to pay simple interest on the amount returned to the tenant at regular intervals. In addition, the law guarantees that tenants cannot be evicted during the term of their tenancy unless the details of the tenancy are provided in writing by both parties. The law also requires three months’ notice before a rent increase to safeguard the economic interests of tenants.
A much needed boost to strengthen the rental landscape
Through this law, the government intends to make the real estate sector more conducive to the creation of a society geared towards migration while facilitating a 50-50 split between rental and ownership. If followed in letter and in spirit, the law can be the key to unlocking a huge stock of vacant properties to fill the massive housing shortage that is disproportionately affecting Indians in low to middle income groups. He noted that according to the 2011 census, around 110 lakh houses were vacant.
MTA marks a turning point in the Indian real estate market. Its implementation can lead to several constructive developments such as uniform legislation in all states; protection of the rights of tenants and landlords; and a clear delineation of responsibilities and arrangements of stakeholders. It is the solution to a problem that is too long in the tooth and may well turn out to be the required quick fix for the rejuvenation of rental property in India by unlocking vacant homes for rental purposes.
(By Saurabh Garg, Co-Founder and CBO, NoBroker.com)