Business Other News 29 Jul 2019 Money talk: Centre ...

Money talk: Centre’s Model tenancy law to strike a balance

DECCAN CHRONICLE. | ADHIL SHETTY
Published Jul 29, 2019, 2:39 am IST
Updated Jul 29, 2019, 2:39 am IST
The Model Tenancy Act aims to reform the lessor-lessee relationship. Here are some of its salient features.
Current rental agreements will not be in the ambit of the Act. Only new agreements will be enforced under the Act. For the implementation of the Act, it has also been proposed that Rent Authorities, Rent Courts and Rent Tribunals be set up in states and UTs. The Act in its current form aims to direct tenancy law. States and UTs will now create their versions of the law-but how effective these laws will be remain to be seen.
 Current rental agreements will not be in the ambit of the Act. Only new agreements will be enforced under the Act. For the implementation of the Act, it has also been proposed that Rent Authorities, Rent Courts and Rent Tribunals be set up in states and UTs. The Act in its current form aims to direct tenancy law. States and UTs will now create their versions of the law-but how effective these laws will be remain to be seen.

The ministry of housing and urban affairs has drafted the Model Tenancy Act (MTA) 2019 which aims to relook at the landlord-tenant relationship while attempting to alleviate the pains of each group. The 2011 Census said that 1.1 crore houses lay vacant in urban areas, indicating landlords’ fears that their properties may be usurped. Meanwhile, tenants feel that landlords impose stringent conditions on them and demand hefty deposits and charges. To balance the needs of the two groups, a draft law has been circulated to the states and Union Territories, who must provide their feedback and then align existing state laws to the model act. Here are a few key takeaways from the draft.

NO WITHHOLDING
Disconnection of utilities is often resorted to in cases of default. However, Section 20 of the MTA says no landlord can withhold essential supplies and services to the tenant. The Act describes these essentials as water, electricity, piped gas, lights in common areas such as lifts and staircases, parking, sanitary services, etc.

 

EVICTION OF TENANT
The Act proposes that tenants can be evicted only in accordance of the provisions in Section 21.2 which says that the Rent Court upon receiving an application for an order for recovery of the property in situations where the lessor and lessee have disagreed on the amount of rent to be paid, and where the tenant is in default of rent and other charges.

Current rental agreements will not be in the ambit of the Act. Only new agreements will be enforced under the Act. For the implementation of the Act, it has also been proposed that Rent Authorities, Rent Courts and Rent Tribunals be set up in states and UTs. The Act in its current form aims to direct tenancy law. States and UTs will now create their versions of the law-but how effective these laws will be remain to be seen.
— The writer is CEO, BankBazaar.com

 

CAP ON SECURITY DEPOSIT
Security deposits are a bone of contention in urban areas. In places such as Bengaluru and Mumbai, the deposit may be 10-12 times the monthly rent. In cities like New Delhi, it may be 2-3 times the rent. The MTA aims to cap the deposit at two times the monthly rent for residential properties and one month for non-residential properties. While tenants will welcome this cap, landlords may oppose it. The safety deposit protects landlords against damages. A two-month deposit may not adequately cover structural damage. As such, a low deposit limit will discourage landlords from furnishing their properties which will ultimately drive rents down.

 

RENT REVISION
As per the MTA, landlords can't hike the rent during the agreement tenure. The rent must be revised only after a notice of three months. The tenant can either accept the revision or provide notice for termination. If the tenant doesn’t respond to the notice and doesn’t terminate the agreement, he is deemed to have accepted the rent hike. The landlord gets to hike the rent at market rates while the tenant also gets fair warning.

RENEWAL OF TENANCY
If a tenancy agreement expires, and where the tenant has not vacated the property, the Act will consider the tenancy renewed on a month-to-month basis on the same terms as in the expired agreement, for a maximum period of six months. But there’s a catch here. If the tenant continues to occupy the property after the expiry of the six-month block, he will be liable to pay the landlord penalties as prescribed in Section 22 of the MTA.

 

NO SUBLETTING WITHOUT PERMISSION
Tenants will not be able to directly or indirectly sublet or assign, whole (or part) of the property for a rent higher than the rent (or the proportionate rent) charged by the landowner. Subletting cannot be done without the express consent of the landlord. The tenant must provide the landlord with all details of the sub-tenant along with the dates of commencement or termination of the sub-tenancy, and pay all related charges.

PENALTIES FOR LATE VACATION
As per Section 22 of the MTA, the landlord will be entitled to two times the monthly rent for the first two months and four times the rent thereafter, in situations where the tenant has not vacated the property after being served notice, or after the expiry of the six-month extension, or where the tenancy has been terminated by order. This gives landlords powers against squatters who could earlier drag landlords through lengthy court proceedings.

 

LANDLORD MUST PROVIDE RECEIPTS
Chapter IV of the MTA states that the tenant will be entitled to written receipts for rent, advances and charges which need to be paid electronically. If the landlord refuses the electronically transferred rent or refuses to provide a receipt, the rent needs to be paid by postal order for two months. If the landlord refuses this as well, the rent needs to be deposited with the Rent Authority, which will then investigate the case.

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