Model Tenancy Act - an overview

The Model Tenancy Act, 2021 (MTA), was approved by the Union Cabinet in June 2021.

It’s goal is to protect the interests of landlords and tenants and provide a quick mechanism to resolve disputes between them. Today, disputes take years to resolve in the Courts. There are multiple issues of on either side, as has been covered in previous chapters, which arise due to limited protection from the law. This ACT seeks to fix that.

The key features include:

Protection of Tenant’s Interests

1. The amount of security deposit paid by the tenant shall not exceed two months’ rent in case of residential premises and six months’ rent in case of non-residential premises.

2. The amount of security deposit shall be refunded to the tenant on the date of taking over the possession of the premises, after making due deduction of any accrued liability.

3. If the landlord fails to refund any amount collected from the tenant in advance, he shall be liable to pay simple interest to the tenant at such rate as may be prescribed from time to time. This interest shall be levied on the amount which he has omitted or failed to refund.

4. No landlord or property manager can withhold any essential supply to the premises occupied by the tenant

Protection of Landlord’s interests

1. In case the tenancy ends without being renewed and the tenant fails to vacate the premises at the end of the tenancy, the tenant shall be liable to pay enhanced rent to the landlord. The amount of the rent shall be twice the monthly rent for the first two months and four times the monthly rent thereafter till the tenant continues to occupy the said premises.

2. The tenant shall not make any structural changes in the rental premises without the landlord’s consent

3. If tenancy has not been renewed, the tenancy shall be deemed to be renewed on a month-to-month basis on the same terms and conditions as in the expired tenancy agreement, for a maximum period of six months, but at enhanced rent, as mentioned in point number 1.

The Model Act requires the landlord and tenant to sign a written agreement which specifies the rent, period of tenancy and other related terms. This agreement has to be submitted to the Rent Authority.

The Model Act establishes a three-tier quasi-judicial dispute adjudication mechanism consisting of: (i) Rent Authority; (ii) Rent Court; and (iii) Rent Tribunal. No civil court will have jurisdiction over matters pertaining to provisions under the Model Act. Rent Authorities and Rent Courts may be established by the District Collector with the approval of the state government. The state or union territory government may establish a Rent Tribunal after consulting with the jurisdictional High Court.

While an Act like this is much needed to protect interests of both parties, it’s effectiveness will be based upon how it is executed by the States.

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