In a bid to promote rental housing, the government has launched numerous reformatory measures while presenting the budget 2019-20. The housing ministry placed a policy in public domain on July 10, 2019 for states and union territories to regulate this segment.
The model tenancy act 2019 will take forward what was proposed in the draft Model Tenancy Act 2015. At a time when the government is chasing the goal of Housing for all by 2022, the existing rent control laws are restricting the growth of rental housing segment and discouraging the landowners from renting out their empty spaces.
Since the policy is not binding on states/UTs as land is a state subject under the Indian constitution, the existing rental contracts are outside the purview of the policy. With respect to landlords, tenants, and the sector, following changes have taken place:
The policy proposes of setting up a rent authority to bring transparency and fix accountability issues in the rental housing segment. The landlord and tenant will be required to prepare a written rent agreement after mutually agreeing upon the terms and conditions. The authority will have to set up a website to update the details of all rent agreements on the lines of functioning of real estate regulatory authorities.
Quick resolution to disputes:
The landlords and tenants will have to approach the rent authority for the settlement of disputes. They can also challenge the same in rent court within 30 days from the date of order, if they are unsatisfied with the verdict. Only rent courts have the jurisdiction to hear and decide the applications relating to disputes between landowner and tenant in the areas to which this act extends to. As per the policy, the court/tribunal should not take more than 60 days to dispose the case.
The rent related disputes at this juncture are resolved by civil courts. Reaching a verdict is a long drawn process since the number of complaints lying with the civil courts are countless. With a specific platform to address such disputes, finding resolution would be much easier.
Important terms of engagement
Landlords won’t be able to seek a security deposit of more than 2 months, which would be returned to the tenant at the end of the stay.
The landlord cannot increase the rent amount if the policy states that a rent agreement is made for a specific period, unless stated otherwise. Before revising the rent, the landlord will have to file a written notice three months in advance. If the landlord spends an amount on the improvement, addition or structural altercation, they can increase the rent.
Entering the premises:
A tenant notice of 24 hours is necessary for the landlord to visit the place, with the visiting time falling between 7 am to 8 pm.
Rented premises maintenance:
It is the duty of both the parties to maintain the premises. The rent agreement must specifically mention who takes care of damages. The tenant can deduct the money from the rent if the landlord refuse to do it. The landlord can deduct the amount from security deposit in reverse situation.
Subletting the property:
Without prior permission from the landlord, tenants cannot sublet any part of the rented building. The tenant cannot charge an amount more than what they pay, if granted permission by landlord.
The landlord will be liable to get double the monthly rent for 2 months after the termination of rent period and four times the monthly rent thereafter.
In case the tenant does not pay rent for two months, the landlord could move to the rent court. If the matter is corrected by the tenant within one month of reaching to the court, they will be allowed to stay if they have become the defaulters only once in that year. The tenant will have the right to leave the premises within 15 days if the place is not suitable for tenancy.
Impact of Model Tenancy Act 2019 on the rental housing market
There are more than 1.1 crore properties that are lying vacant across urban India due to the current system. Fearing squatting, the property owners don’t rent their premises, resulting in high rents. The Model Tenancy Policy would help the rental housing segment by addressing these issues.
With better confidence, landlords will be able to unlock rental housing inventory lying with them. Rents will rationalize in cities, such as Mumbai, Bengaluru, and Delhi with the increase in supplies, where a good rental accommodation is difficult to get.