All about Model Tenancy Act 2021

Date: 2-July,2021Last Updated: 26-September,2022
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The introduction of the MTA or Model Tenancy Act is supposed to put an end to all the confusion and disagreements regarding renting and leasing. For the longest time, there was an ongoing debate whether the terms stated in the current Rental Act in India are fair to both; the landlord and the tenant.

Against the backdrop of these disputes, the Ministry of Housing and Urban Development came up with the Model Tenancy Act, which is expected to provide a level ground for both the tenants and the landlords in the long run. The states, however, have been given the option that they can choose whether they want to acquire the Act without any modification or they want to refer and make minute changes in the rental Act under use.

What led to the creation of the Model Tenancy Act?

The idea has been in the pipeline since 2015, when the idea of Prime Minister Awas Yojana was about to be realized. The proposal stated that 20% of the houses that were built under the PMAY scheme would be separately kept for rental purposes exclusively. A task force was created in the year 2013, the report of which hinted that affordable renting promotes inclusive growth.

Additionally, reasonable renting addresses the issue of people who are not privileged enough. A separate sector was included in the PMAY-U that specializes in rental properties in the urban part of the PMAY. An extra disbursement of Rs 6000 crore, which is around 75% of the total expenses, was issued by the central government in order to bring the plan to life. The rest of the expenses are expected to get covered by the involvement of the state and local urban bodies, the CSR activities of the private sector and a few NGOs.

What does the Model Tenancy Act state?

The inspiration for drawing the Model Tenancy act has been drawn from the surrounding by noticing the type of conflicts that took place in the past because there was no proper system of laying the laws for tenants and landlords to follow in order to maintain peace. The Model Tenancy Act thus will definitely revolutionize the tenant law in India or the rental law in India.

A few features of the Model Tenancy Act that are supposed to bring transparency to the rental ecosystem are as follows.

Features of Model Tenancy Act

  • The Model Tenancy act is planning to introduce a three-tier system. This system is supposed to lighten the responsibilities of the other courts, which were previously responsible for sorting disputes. The three-tier system will include a rent tribune, rent authorities and rent court.

  • The next rule instils a statement about the limit of the deposit that the landlords are allowed to take. The deposit should not be more than two months' rent combined for a residential complex. If it is non residential, it should not exceed 6 months' rent.

  • The rules and the regulations that the tenants are supposed to abide by should be very accurately and transparently put. It should include everything; the rent amount to be paid, any extra expenses, any maintenance fees, time period of retention of the agreement and every other minor and major detail, including the consequences of not following the regulations written in the agreement.

  • The rules and regulations around the eviction of tenants mostly favoured the landlords, and this was a matter of dispute. The new Model Tenancy Act aims at equalizing the power between the landlord and the tenant so that it is not unfair to any. The time limit when the landlord is supposed to inform the tenant of the eviction, the amount to be deducted from the deposit etc., are specified clearly in the new Model Tenancy Act.

  • The rules regarding property managers also tightened after the introduction of MTA in 2021. The rules, along with the consequences, are mentioned crystal clear in the new Act. The property managers are required to produce details like PAN card, aadhar card, name, address and contact details according to the Rental authorities record. The property manager can be anyone who takes care of the property and its rentals on behalf of the owner. This will make the role of property managers more transparent and acceptable in the future. This legal support will also help the property managers to land more work and grow professionally in the residential sector.

  • The MTA also states that occupying the rental property can only be done with the prior permission of the landlord. Under no circumstance will be an otherwise action be executed or accepted.

  • No change can be done to the existing structure and the design of the house without the consent of the owner of the rental property.

  • The tenants cannot stay at the property once the lease or the rental agreement has expired. Renewal of the agreement is a necessity.

  • No kind of verbal negotiation will be accepted. The agreement should be written, and all the rules should be stated clearly for the tenant and the landlord to understand.

Why was Model Tenancy Act framed?

The census of 2011 revealed around 1.1 crore houses running the potential for being rented were vacant. We all know renting a house promotes a source of income, and the vacancy of houses that can be rented hinders that source of income. There were a lot of factors that resulted in the vacancy.

With the limits posed by the rental laws, along with the fear of repossession by the tenant, the landlords needed more reassurance that their property is protected. There was an urgent requirement in bringing out a system that would favour both the tenant and the landlord lawfully and equally. Another requirement was the laws and regulations being understandable and transparent.

All the rules to be abode by should be mentioned clearly. The implication of the Act aims at making the rental sector of the country more approachable. Bringing discipline can compile the sector and make the terms clear to anyone who is interested in learning and stepping in.

Matching Steps with the Contemporary Culture

On the one hand, the whole system of drawing a rental agreement will be digitized, and the rental authorities will keep a tab on it. The digital platform will be available in the local language so that it is easy for people to understand.

This is supposed to simplify the system and bring unity to the rental system in the near future.

So we hope that you found this article interesting and watch this space for more updates on the realty sector.

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