Most of us have entered a rental agreement either as a landlord or as a tenant. Real estate rentals are one of the best sources of passive income in 2021. However, the Ministry of Housing and Urban Affairs reflected on the regulations of the Rent Control Act of 1948 that were restricting the growth of rental housing and discouraged landlords from renting out their vacant houses. To address the shortcomings of the earlier laws, the Government of India proposed a landmark draft of the Model Tenancy Act (MTA) in 2019. As per the provisions of MTA, the implementation of a robust system safeguarding the interests of tenants as well as landlords is envisioned. On 2nd June, the Centre gave its approval to bring the Model Tenancy Act into force.
What is in Model Tenancy Act 2021 for you?
The Model Tenancy Act aims to put forth a transparent system by regulating the shadow rental markets, increase rental yields, protect the rights of the tenant as well as landlords and mobilize the vacant houses to generate revenue. The newly imposed act makes written rent agreements a compulsion. It, however, will not affect the existing agreements in force.
The MTA proposes to establish separate authorities, courts, and tribunals for handling rental grievances redressal. The Central Government has issued State and Union territories for the adoption of the Model Tenancy Act by amending the existing laws or passing fresh legislation. Moreover, states and union territories have to set up a digital platform in their respective languages for the submission of rental agreements governed by the Rent Authority.
Key implications for Landlords
- The Centre indicated that the maximum amount of Security Deposit for residential properties to be 2 months rent and for commercial properties to be 6 months rent. However, the respective state legislatures have the final control over the same.
- The landlord is responsible for any maintenance and repair works including structural repairs, painting, plumbing, electrical wiring, and other miscellaneous maintenance. If the written agreement states otherwise, the same will be followed.
- Supply of any necessities like water, electricity, gas, etc. cannot be withheld by the landlord or any third-party property manager.
- The tenants cannot be expelled during the period of the agreement unless otherwise mentioned at the time of the contract.
- Revisions in the rent are allowed as per the terms and conditions in the agreement. If no clause about revision is mentioned in the agreement, then the owner will have to serve a notice of 3 months before the applicable revision.
- The landlord will have to serve a notice in advance for entering the premises occupied by the tenant. The notice must be in writing or through any electronic communication medium and must be given 24 hours in advance. The reasons for entering the premises can be for carrying out the repairs or inspection of the premises or any other reason mentioned in the Act.
Key implications for Tenant
- The tenant will be primarily responsible for drainage cleaning, socket repairs, kitchen fixture repairs, maintenance of commonly used open spaces, replacement of glasses for windows and doors, and so on unless specifically mentioned otherwise.
- Any damage caused by the tenant due to negligence or intentionally, he/she will be liable for the same.
- In case of rent revision by the owner, if the tenant fails to give notice of termination then he/she is deemed to have accepted the revision of rent.
- On the expiration of the tenancy agreement and if the same is not renewed and the property is not vacated, the tenancy agreement is deemed to be renewed for 6 months on a monthly basis.
- Even after the expiration of the above 6 months period, if the tenant does not vacate the property, then he/she is liable to pay compensation to the landlord. The compensation is double the monthly rent for two months and thereafter four times the monthly rent.
The above implications are the key provisions under the Model Tenancy Act. In case of any conflict related to repairs work by either party, the matter can be intervened by Rent Courts to provide justice.
The enactment of MTA is of prime importance in organizing the rental process and to make sure that both the tenants and the landlords are conferred with their rights on the agreement. This Act will also end the unnecessary demands of landlords and will also ensure that the tenants respectfully use the property and not be a nuisance to the neighbours. Landlords of vacant plots will be instilled with confidence to rent their properties and not fear repossession. Since the Model Tenancy Act doesn’t propose any price ceiling for rents, the landlords of old properties which were let out at nominal rates to tenants will benefit the most. Thus, the landmark enactment is a positive change in the real estate rental industry benefitting all the stakeholders.
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Model Tenancy Act 2021 FAQ's:
A model tenancy agreement is a rental agreement as per the regulations of the Model Tenancy Act 2021.
A model tenancy act aims to put forth a transparent system by regulating the shadow rental markets, increase rental yields, protect the rights of the tenant as well as landlords and mobilize the vacant houses to generate revenue.
Yes, for new rental agreements, landlords and tenants have to make a written agreement as per the provisions of the Model Tenancy Act 2021.
The Government of India put forth the Draft Model Tenancy Act in 2019. The said Act got approved in the cabinet on 2nd July 2021. Thus, with the enactment of MTA, new rental agreements must follow the provisions laid under the act.
The Model Tenancy Acts got approved by the Central Government on 2nd June 2021.