16 July 2021 9:27 AM GMT
Union Government has approved the draft Model Tenancy Act on 02.06.2021, which comprises of uniform sets of law pertaining to tenancy which is being framed to boost the property related renting activities such as letting or taking premises on rent in the country, in order to attain it's mission i.e. 'housing for all' by the year 2022. The said Act has introduced various new elements...
Union Government has approved the draft Model Tenancy Act on 02.06.2021, which comprises of uniform sets of law pertaining to tenancy which is being framed to boost the property related renting activities such as letting or taking premises on rent in the country, in order to attain it's mission i.e. 'housing for all' by the year 2022. The said Act has introduced various new elements & seek changes in the existing rent control laws in order to protect the interests of both landlords & tenants. Further, an approach is being made to foster the relationship between the landlords & Tenants, so that it encourage the landlords to let out their premises on rent. The Model Tenancy Act has also propounds to set up "Rent Authority" for regulating or administering renting of premises in a more efficient & transparent way to protect the interests of the Landlords & Tenants by establishing speedy dispute resolution mechanisms & Rent Courts & Tribunals to hear the appeals. That In terms of Section 2(d) of the Model Tenancy Act, the provisions of the act shall be applicable to both residential & commercial premises including the premises which shall be given to any educational institution on rent; but shall not be applicable to those premises which shall be given for any industrial use. The Draft Model Tenancy Act has been circulated to the States & Union Territories for its adoption & implementation & now waiting for their necessary actions in the said regard.
This article discusses various key features of the Act & tries to analyse "how it is going to affect the existing tenancy system" in India. Further, some real time issues which are being faced by the landlords & tenants are also examined & it is seen whether or how this new tenancy act shall be able to tackle such issues in the country? Furthermore, it critically analyses certain practical deadlocks, which may come into conflict with the provisions or norms mentioned under the said Act.
Key Highlights Of The Act: It's Effects & Implications On Future's Tenancies In India
Appointment Of Rent Authority, Rent Court & Tribunal: Way For Effective Regularization Of Renting Of Premises & Speedy Disposal Of Disputes;
Under the Model Tenancy Act (Chapter VI & VII), there are provisions for appointment of "Rent Authority" who shall be responsible for regulating or administering the renting of premises in a more effect & transparent manner for the benefits of the Landlords & Tenants. As per the Act, said Rent Authority shall also be empowered to hear & dispose-off the disputes between the landlords & tenants speedily & Rent Courts & Tribunals shall also be established to hear the appeals.
Section 30 of the Act speaks about the Appointment of the Rent Authority. In terms of section 30, the District Collector Or District Magistrate shall be empowered to appoint an Officer or Rent Authority (not below the rank of Deputy Collector) with the previous approval of the respective State or Union Territory Government for a particular area or district. The said Rent Authority shall be responsible for performing following major functions as mentioned under Sections 4, 9, 10, 14, 15 & 20 of the Act:
a) Accept any rent agreements or documents pertaining to a tenancy & provide unique identification number (UIN) to the parties & upload details of such tenancy along-with relevant documents in a compulsory government website (Sec. 4)
b) Fix or Revise the rent of the premises on the application of the landlord or tenant (Sec. 10)
c) Accept deposit of rent & other charges in case, the landlord has refused to accept the rent & other charges from the tenant or refused to issue any rent receipt for a two consecutive month or period & pass an order after investing the matter or dispute (Sec.14)
d) Grant of Permission in case, the Tenant choose to vacate the premises on account of any failure or refusal of the landlord to carry out any repair work which is necessary for habitation in the premises (Sec. 15)
e) Examine or pass any interim order on an application being moved by a landlord or tenant for restoration of supply of any essential service in the premises. Further, the rent authority may award any compensation or impose any penalty upon a landlord or tenant, if found guilty for cutting or withholding any essential service in the premises after carrying out proper investigation (Sec. 20)
Section 32 speaks about establishment of Rent Courts or Rent Tribunal, which shall be responsible for adjudicating an appeal against any order being passed by the Rent Authority within it's territorial jurisdiction. As per section 40 of the said Act, no civil court shall have jurisdiction to try any matter or dispute falling under the purview or ambit of Rent Courts. Further, as per section 36, the Rent Court & Tribunal shall have all or similar powers lying with the Civil Courts under Code Of Civil Procedure, 1908 for discharging it's functions under the Act.
It is pertinent to mention that in a State like Delhi, there are courts of Rent Controllers or Additional Rent Controllers which are responsible for adjudicating matters pertaining to tenancy. But, said Courts of Rent Controllers (RCs) or Additional Rent Controllers (ARCs) are only empowered to adjudicate any dispute which falls under the ambit of Delhi Rent Control Act, 1958. That in terms of section 3(C) of the amended DRC Act, 1988, the provisions of said Act shall not be applicable to the premises whose rent exceeds Rs. 3500/- Per Month.[i] As such, due to this restriction or limitation, many landlords or tenants are constrains to take shelter of the Civil Courts in case of any dispute pertaining to their tenancies. Further, in Delhi said Courts of RCs or ARCs are not only designated with tenancy disputes but also assigned with other civil matters which causes huge pendency of cases with them & due to huge pendency of cases with the civil courts, it takes quite longer period of time to dispose-off such disputes which creates great agony among the landlords & tenants. Further, cost of such litigations are also quite huge which creates certain burden on the landlords or tenants.
However, under the Model Tenancy Act, there is no such cap or ceiling which shows that the Act shall be applicable to all the premises irrespective of their rents & parties shall be free to approach any Rent Authority/Rent Courts/Rent Tribunals in case of any dispute. Further, the said Act suggests that after its commencement all the existing Rent Control Laws shall be treated as repealed & will become inoperative within the territory. As such, it may not be wrong to anticipate that after the commencement of the said Act, the process of dispute resolution between the parties will be much easier, simplified, time & cost effective etc. which shall encourage the landlords or tenant to let or take premises on rent without any undue fear or apprehension.
End of Existing Rent Control Laws: Way To Eliminate Barriers On Revision Or Fixation Of Rent
As per Section 47 of the Model Tenancy Act, all the existing rent control laws which are operational in a particular State or Union Territory, shall become inoperative after the commencement of the Act. However, all the pending disputes or proceedings which are initiated prior to it's commencement, shall be dealt according to that existing rent control laws which were in force at the time when such disputes or proceedings were arose in that particular territory.
In light of aforesaid provision, it can be construed that more or less any fair or unfair advantage which are available to the tenants under the existing rent control laws, shall be effected after the commencement of this new tenancy act. For e.g. Under Delhi Rent Control Act, 1958, there are various provisions which gives undue advantage to the tenants in certain cases such as fixation or revision of rents & evictions etc. Further, as discussed above, existing rent control laws like DRC Act, does not applicable to each & every types of tenancy due to aforesaid ceiling or capping of rent amount. As such, there had been several instances where the tenants had to suffer in the hands of landlords for their sudden increase of rents, unlawful evictions & negligent behaviours etc.
Moreover, though the new tenancy act, the Government has tried to adopt a balanced approach in order to protect the interests of both the parties (landlord & tenants) by removing certain barriers such as fixation or revision of rents which are available under existing rent control acts such as Delhi Rent Control Act, Maharashtra Rent Control Act & West Bengal Premises Tenancy Act etc. Under the Model Tenancy Act, there is no barrier in terms of fixation or revision of rents & parties are free to decide their amount of rent & also free to set their independent terms & conditions for revision of periodic rents in their tenancy agreements. Further, existing rent control laws like DRC Act also imposes certain restrictions in the cases of evictions & due to this reason many landlords are being refrained to let out their premises on rent under a fear or apprehension that it would be difficult for them to get their premises back from the possession of the tenant at the time of their needs. It is pertinent to note that this new tenancy act have taken care-off, most of such worries of the landlords or tenants by giving them freedom to set out their own tenancy terms & conditions in their rent/tenancy agreements without any unnecessary restrictions.
Compulsory Rent Agreement: Way To Foster The Relationship Between A Landlord & Tenant
That in terms of Section 4(1) of the Act, it is mandatory to have written tenancy agreements to let or take any premises on rent after the commencement of the Act. Further, it shall be obligatory for the Landowner & Tenant to jointly inform the Rent Authority about such agreement within a period of 2 months from the date of such agreement in the manner specified under First Schedule of the Act. As per sub-section (2), if landlord & Tenant fails to present copy of such rent agreement jointly within the said specified period, then either landlord or tenant shall be able to file a copy of such rent agreement within a period of one month from the expiry of the period as mentioned under sub-section (1). It is pertinent to mention that in the said agreements, the landlords & tenants are free to choose their own terms & conditions for their tenancies such as time period of tenancy, rent, revise of rents, renewal, payment of security deposits & re-entry of tenants after eviction etc. Further, in terms of Section 12 of the said Act, it is mandatory for the landowners to provide a signed copy of such agreement to the tenant within 15 days from the date of signing or execution of such agreement.
Validity of Tenancy agreement:
That in Section 5(1) of the said Act, it is mentioned that the 'period of tenancy' shall be as agreed by the landlords & tenants in their tenancy agreements. If we plainly go by the wording of the said section, it shows that landlords & tenants are free to decide the period of their tenancy for any period of time & terms & conditions of the agreements shall be remained valid till such end date or period of time as agreed in the agreement.
Now, the question arises "Whether Section 5(1) of the Model Tenancy Act shall over-ride the provision as mentioned under section 17 of the Registration Act, 1908"?
It is pertinent to mention that as per section 17(1)(d) of the Registration Act, 1908, it is mandatory to register any rent/lease agreement, whereby any immovable property is being leased/rented out for a period of one year or more. However, new tenancy Act lacks any clarification on this aspect i.e. "whether the aforesaid obligation shall be waived-off after it's commencement?" & same would only be clarified when proper rulings will come in regard to the said aspect.
Further as per Section 6 of the said Act, the terms of the agreements shall also be binding upon the successors of the landlords or tenants after their deaths & they shall have the same rights or obligations as agreed by their predecessors in such agreements till the end of the tenancy period.
Rights & Obligations Of The Landlords & Tenants: Way To Curb Unnecessary Disputes
That chapter IV (Sections 12 To 20) of the said Act, talks about the rights & obligations of the landlords & tenants during the period of their tenancies. It is pertinent to mention that apart from the obligations which shall be emerged from the terms & conditions of any tenancy agreement, the new tenancy act casts certain mandatory obligations upon the landlords & tenants in order to curb any unnecessary disputes during the period of any tenancy. Some of the key obligations are mentioned hereunder:
a) It is mandatory for the landowners to provide a signed copy of such agreement to the tenant within 15 days from the date of signing or execution of such agreement. (Sec. 12)
b) It is mandatory for the tenants to pay timely; the rents & other charges as agreed in the tenancy agreements & it is mandatory for the landlords to issue rent receipt against such payment of rents. (Sec. 13)
c) In case, the landlord refuse to accept any rent & other charges or refuse to issue any rent receipt, then Tenant shall pay the rent via postal order or any other accepted methods for two consecutive months & if the landlord further refuse to accept the rent & other charges, in that case the tenant shall be obliged to deposit such rent & other charges with the Rent Authority. (Sec. 14)
d) It is mandatory for the landlords & tenants to keep the premises in a good condition & carry out necessary periodic repairs as required for habitual use throughout the tenancy period. It is pertinent to mention Second Schedule (Part A & B) of the Act specifies or differentiate about such types of repairing works which needed to be carried out by the landlords & tenants, in case of any requirement for the same during the tenancy period. In Short, the Landlords shall be responsible for mentioned under (Part A) such as any structural repairs, whitewashing, changing & plumbing of pipes & internal & external electrical wiring etc. & Tenants shall be responsible for carrying out repairs which are mentioned under Part-B like repairing or changing of sanitary ware and fittings, electric switches & sockets, door knobs & locks etc. (Sec. 15)
e) It is the obligatory for the tenant to keep the premises safe & healthy & must not cause any damage either intentionally or negligently during the period of tenancy. Further, the tenant is bound to inform the landlords immediately about any damage being caused to the property. (Sec. 16)
f) It is mandatory for the landlord or property manager to intimate the tenant through any written or electronic mode about his schedule to visit the rented premises for carrying out any repairing work or for any inspection or for any reasonable purpose, before 24 hours of such visit (Sec. 17)
g) It is mandatory for the landlord to provide the details of any property manager which is being engaged by him & about the functions which shall be performed by such manager. (Sec. 18 - 19)
h) It is mandatory for the landlord or tenants to keep uninterrupted supplies of the essential services in the premises & shall not cause any act which may cause any hindrance to such supplies (Sec. 20)
Equal Protection Policy: Way To Deal With Real-Time Problems or Issues
Through this new tenancy act, the legislative body has tried to curb the disputes between the landlords & tenants by giving them freedom to set out their own terms & conditions in their tenancy agreement such as time period of tenancy, rent, revise of rents, renewal, payment of security deposits & re-entry of tenants after eviction etc. Further, the new tenancy act has tried to curb any unfear advantage which is being provided to the landlords or tenants under existing rent control laws & by adopting a balance approach upon understanding the present practice or situation in the country & has also tried to protect the interest of both then landlords & tenants equally. That such endeavors may surely going to help as it would restricts mal-practices which are often being adopted by the landlords like unethical demand of maintenance charges, sudden hike in rent & other charges, new demand or hike in security deposits & threat for evictions etc., during or mid-way of the tenancy period. Similarly, it will also protects the interests of the landlords against any un-welcome stay in the premises beyond the period which was agreed in the tenancy agreement. Further, the provision mentioned under Section 6 of the Act which bound the successors to the agreement created by their predecessors, will also help to bring a cordial relationship between the landlord & tenants & further it will also give them a sense of security against any such ill-practices during or mid-way the tenancy. Below here a list of few common problems which are being faced by the Landlords & Tenants in today's period & the reliefs which are being provided under this new act to tackle those problems.
a) Demand of Hefty Security Deposits Or Sudden Demand of Increased Security Deposits: In many urban colonies like in Delhi & Mumbai, the security deposits which are being demand by the Landlords for giving their premises on rent, are often quite huge which constrains many tenants to move to remote areas or to look for sharing accommodation. This factor often discourages many low or mid-income group people who hails from different states for any job or other economic reasons, to stay with their own family at urban cities. It is pertinent to note that in metro cities like Delhi, Mumbai & Bangalore etc. many landlords typically demands security deposits which is equivalent to the amount ranging up-to 3-6 months or even a year of rent amount. That to curb such type of practice, Section 11 of the Model Tenancy Act has provided a cap or ceiling over a demand of maximum security deposit amount & rule that landlords cannot claim security deposits more than two months of rent amount. However, there is no restrictions in demanding any less or even no security deposits at the time of letting or taking premises on rent & the landlords & tenants are free to set their own terms in their tenancy agreement pertaining to the security deposits. Further, Section 15(6) of the Act, makes it obligatory for the landlords to refund the security deposits or any advance rent within a period of 15 days of intimation being made by the tenant to vacate the premises in case; when the premises becomes inhabitable for use due to any negligence of landlords or due to occurrence of any force majeure event & the landlords has refused to carry out suitable repairs to fix the issue.
b) Denial for carrying out repair works: It is one of the frequent issues which is being reported mostly by the landlords & tenants & the same often leads to sour in relationship of the landlords & Tenants. That Section 15(1) of the Act, has provided a mandatory obligation upon the landlords & tenants & listed certain things in Second Schedule (Part A & Part B), which needed to be repaired by the landlords & tenants respectively in case, the same are required for suitable habitation during the period of tenancy. Under the Act, it is provided that in case any party (landlord or tenant) has failed or refused to carry out any repair work as per the said schedule, then either the landlord or tenant can get it done by himself after deducting the cost from the security deposits or rent amount respectively.
c) Sudden termination of tenancy: This is one of the most common problem or relatable threat or apprehension which are being faced by tenants in today's period. That Section 21 of the Act, provides that the tenants shall not be evicted from the rent premises during the continuance of tenancy agreement unless there is a written agreement between the landlord & tenant in the said regard. That sub-section (2) of the Section 21 suggests that a tenant can be evicted from the premises during the continuance of tenancy agreement with the permission of the Rent Authority, only in such cases: where the tenant has failed to pay the rent; where the tenant has parted or sub-let the premises without taking any approval; where the tenant has continued with his misuse of the premises even after receiving a notice from the landlords for such types of acts; where the vacant possession of the premises is required for carrying out any major constructions, alterations, re-structuring etc.; where the landlords has already made arrangements to sell out the premises after receiving any notice from the tenant regarding his intention to vacate the premises etc. It is pertinent to note that as per the Section 21(3) of the Act, a tenant shall not be vacated from the premises on account of any non-payment of rent, if he pays or deposits the same with the landlord or rent court with interests within one month from receiving the demand notice.
That the aforesaid provisions clearly shows that new tenancy act has tried to protects the interests of the bonafide tenants from any sudden or unpleasant termination of tenancy & would definitely going to encourage the tenants to opt for rented premises without any unnecessary fear or apprehension of any mid-way termination of their tenancies. It is very imperative to note that during the Pandemic like Covid-19, it has been noticed several times that landlords often choses to let their premises with a less rent amount, when the demand for rented premises decreases at the time of lockdown periods. But when the demand increases due to relaxation in norms, the said landlords mischievously forced the tenants to either pay increased rent or vacate the premises by giving them one month or less notice period. That the aforesaid provisions of this new tenancy act, surely going to protect the interests of the tenants in such type of cases.
d) Refusal for vacating the premises or delay in recovery of possession: This is again one of the most common problem or relatable threat or apprehension which are being faced by the Landlords & same often discourages them to let out their premises on rent. That Section 23 of the Act, provides penalty upon the tenant who fails to vacate the premises after the expiry of tenancy period or after passing of termination of tenancy order. As per the said section, such tenants shall have to pay twice of rent amount for first 2 months; then four times of rent amount for their subsequent stays in the premises after said 2 months. Further, Section 22(1) of the Act entitles the legal heirs of the deceased landlords to recover the possession of the premises by filing an application with the rent court in case of any bonafide requirements. Further as discussed above, the landlords shall also seek vacant recovery of possession of their premises, if the tenants hits any conditions as enumerated under section 21(2) of the Act. As such, the aforesaid provisions of this new tenancy act, surely going to protect the interests of the bonafide landlords against any miscreant tenants.
e) Illegal sub-letting of the premises: This type of practice is quite prevalent in the urban cities because of the high rent amount & people prefers to share their premises with third party to save the cost. Such type of practice is also very common in commercial complexes as the shop-owners had to suffer from cash-crunch due to loss of business mainly at the time of recessions & they feels it would help them to cut their business costs. However, it has been noticed that these types of sub-letting practices, often leads to disagreements between the original landlords & tenants & many times the tenants does not intimate about such sub-letting due to one & another reasons. That Section 7 of the Act provides that the tenant shall not be able to sub-let or create any third party rights over the premises, without entering into a supplementary agreement with the landlord to their tenancy agreement & it is also obligatory for them to inform the Rent Authority about such supplementary agreement within a period of 2 months of it's execution. As such, this new tenancy act also have the ingredients to protect the interests of the landlords against any illegal sub-letting.
Analysis of the Act:
It seems from the provisions of the Model Tenancy Act that it will going to bring a new & improved dimension in future's tenancies in India. The Act has tried to cover all the realistic issues or problems which are being faced by the landlord & tenant in recent times & provides safeguards in order to protect their respective interests. But, there are certain factors which may needs to look upon so that it becomes more feasible for the citizens to adhere with the provisions or norms as envisaged in the Act. Moreover, it will be quite early to point out any wrong or cons of the Act as it's still under process of implementation & it can only be highlighted at the time when it will come into practice. However, there are certain issues which needed to be addressed in the light of current practice & situations which are being prevalent in recent period of time.
As discussed above, under the Act it is mandatory to have a written agreement to let or take premises on rent. The Act also made it mandatory to inform the Rent Authority about such tenancies who shall upload the details on a website & also provide UIN to the landlords & tenants. Further, the Act empowered District Collector to appoint a 'Rent Authority' for a particular area or district, who shall be responsible for regulating or administering the renting of premises & also hear the grievances of the landlord or tenant in case of any dispute. It is pertinent to note that in a metropolitan cities like Delhi, Mumbai, Kolkata & Bangalore etc. which are densely populated, major population are staying in rented premises, as such, it is quite doubtful that 'how these authorities shall be able to perform such functions speedily & effectively?". Further, in India it is a quite prevalent practice of giving premises on monthly rents with or without any rent agreement. Furthermore, in India premises are being given on rent through un-registered rent agreement for a period of 11 months or less. As such, it is quite doubtful that "how the said mandatory provision of having compulsory rent agreement or mandatory obligation to inform the rent authorities about the tenancies, shall going to encourage the landlord or tenant to let or take premises on rent in a long run?''. It is quite obvious that aforesaid exercises are time & cost consuming which may motivates the landlord or tenant to skip or avoid such statutory obligations intentionally, in a long run.
Further, Section 47 of the Act says that all the existing rent control laws which are operational in a particular State or Union Territory, shall become inoperative after the commencement of the Act. However, all the pending disputes or proceedings which are initiated prior to it's commencement, shall be dealt according to the existing rent control laws which were in force at the time when such disputes or proceedings were arose in that particular territory. The said section suggests that Act shall be applied prospectively, as such, no benefit has been given to the disputes/litigations which are now pending in the courts pertaining to tenancies. It is very crucial to note that Section 47(2) of the previous Draft Model Tenancy Act, 2019 had an additional provision in the second part of the said section or sub-section, which is not present in the Draft of the present Model Tenancy Act. The said additional provision had proposed to give liberty to the plaintiff(s) to withdraw any pending case or proceeding which is being filed under any existing rent control law prior to the commencement of this new Model Tenancy Act, within a period of 120 days from date of such commencement. As such, the premises which are lying almost vacant or not been in used or are not being used optimally due to any tenancy dispute, shall not get much benefit under this new Act. In India, we all are quite aware that the tenants despite not using the rented premises optimally, chooses not to vacate their rented premises for any ulterior motive by taking undue advantage of existing rent control laws. It shows that for these types of cases, the new Model Tenancy Act, shall not be very helpful to the landlords who are being victimised in the hands of such types of tenants.
Further, one of the main objective of the government to introduce Model Tenancy Act, is to provide "housing for all" by the year 2022. However, the government has refused to give tax exemptions for HRA (Housing Rent Allowances) under new Income Tax Regime. Due to the said reason, it be quite interesting to observe "how this new Act will encourage the tenants to opt for renting premises" in a long run.
The Model Tenancy Act can be expected to pave a better way for rental habilitation in the country. As the draft of the Model Tenancy Act has been circulated to the States/UTs for their approval, it would be very interesting to observe the approach of the respective State or Union Territory Government regarding it's adoption & implementation as they are the final authority to take call upon the same. Nonetheless the benefits of the Act, the existing conflicts of interests between States or UT's Government & the Central Government, might be one of the issues which going to effect the process of it's implementation in the Country. But, we shall hope that States & UTs Government with all their endeavors & spirits, will adopt majority of the provisions as mentioned under the Act for the benefits of their respective citizens.
Views are personal.
The Author is an Advocate practicing at the Supreme Court of India.
[i] The Delhi Rent Control Act, as amended by Act No. 52 of 1988 came into effect from 1-12-1988. Section 3(c) of the amended Act provided that the provisions of the Delhi Rent Control Act will not apply to any premises whose monthly rent exceeded Rs 3500.