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Model Tenancy Act

Model Tenancy Act

Why in news?

  • The Union Cabinet has approved the Model Tenancy Act to be sent to the States and Union Territories to enact legislation or amend laws on rental properties.
  • The draft Act had been published by the Ministry of Housing and Urban Affairs in 2019.

About Model Tenancy Act

  • The act aims To create a vibrant, sustainable, and inclusive rental housing market in the country.
  • It will address the issue of homelessness by creating adequate rental housing stock for all the income groups. It aims towards the goal of housing for all by 2022.
  • The act will institutionalize rental housing by gradually shifting it towards the formal market.
  • The Act will apply to premises rented for residential, commercial, or educational use but not for industrial use. It also won’t cover hotels, lodging, etc.
  • This model law will be applied prospectively and will not affect existing tenancies.

Highlights of the Model Law

  • Written agreement is a must for all new tenancies. The agreement will have to be submitted to the concerned district ‘Rent Authority’.
  • Applicable prospectively and will not affect the existing tenancies.
  • Compensation in case of non-vacancy: On the expiry of extended period of six months of agreed tenancy period or the termination of tenancy by order or notice, the tenant shall be a tenant in default and liable to pay compensation of double of the monthly rent for two months and four times of the monthly rent thereafter.
  • The law also speaks about roles and responsibilities of landlord and tenants.
  • 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 were in the expired tenancy agreement, for a maximum period of six months.
  • A landowner or property manager may enter a premise in accordance with written notice or notice through electronic medium served to the tenant at least twenty-four hours before the time of entry.
  • No landlord or property manager can withhold any essential supply to the premises occupied by the tenant.

Need For The Act

  • Restrictive Laws: As per Census 2011, more than 1 crore houses were lying vacant in urban areas. The existing rent control laws are restricting the growth of rental housing and discourage owners from renting out their vacant houses due to fear of repossession.
  • Large scale informalisation in sector: One of the potential measures to unlock the vacant house is to bringing transparency and accountability in the existing system of renting of premises and to balance the interests of both the property owner and tenant in a judicious manner.
  • Lack of Uniformity: Since it is a state subject, states have enacted their laws and it differs from one state to another.
  • Housing Poverty: 2013 report by a Task Force for Rental Housing held that affordable rental housing “addresses the issues of the underprivileged and inclusive growth, in an even more direct manner than affordable ownership housing”. Model Tenancy Act helps bring investment in the sector as the sector provides better safeguards.

Significance

  • The authority will provide a speedy mechanism in resolving disputes and other related matters.
  • It will enable creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness.
  • It will help overhaul the legal framework with respect to rental housing across the country.
  • It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage.
  • It will enable institutionalisation of rental housing by gradually shifting it towards the formal market.

Challenges with the Model Tenancy Act

  • Prospective effect: The new model act would have a prospective effect. This means it would be applicable to future disputes only, hence past disputes would continue to linger on for years.
  • Non-Binding nature: Land and Urban Development is a state subject. The states may or may not adopt the proposed law, as done by them in the case of Real Estate (Regulation and Development) Act.
  • Lacunae in the formation of the Act: The act fails to properly define the term ‘habitation’. Further, it fails to mention the penalty if the owner delays in paying back the security deposit. Also, it is altogether silent on sudden leave and license arrangements.
  • Inadequate Security Cover: Security Cap for two months may not be enough to cover damages, especially during the last month when tenants adjust their rent in the security deposit.

 

ALSO READ : https://www.brainyias.com/direct-tax-vivad-se-vishwas-bill-2020/

Mussoorie Times

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