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6/7/21

Beneficial rules cannot be imposed on tenants, nor can landlords be harassed; Learn everything about the new law

Bhaskar Explaner:  Beneficial rules cannot be imposed on tenants, nor can landlords be harassed; Learn everything about the new law

The Union Cabinet last week approved the Model Tenancy Act
The law was drafted in 2019 and will now be sent to these states
The state may change the Rent Control Act or adopt a new law

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Renting a house or borrowing money can be a daunting task. To address these problems, the central government last week approved the Model Tenancy Act. The law will act as a framework on rent and related issues. The State may, by amending its Rent Control Act, apply the law to itself as it stands.

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Thus the rules for both the tenant and the landlord have been made different in this law. How much is the advance fare? How will a formal rent agreement be made? What happens if the rent agreement expires? All such questions are answered here. The provisions in the agreement are also standardized so that no favorable terms are imposed on the tenant. We have enlisted the help of Senior Supreme Court Advocate Ashutosh Shekhar Parcha to understand the provisions of this new law. Let us know how this will affect you-

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What is the Model Tenancy Act?

The Rent Control Act 1948 is currently in force in the country for cases involving tenants. States have made their own laws based on it. Maharashtra has the Rent Control Act 1999, Delhi Rent Control Act 1958 and Chennai has its own Tamil Nadu Building (Lease and Rent Control) Act 1960.
Land is the subject of the states, so the rule runs theirs. The Model Law Center is an effort to have a uniform law across the country. This will determine the framework for them, under which they can shape their own rules.


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The purpose of the Model Tenancy Act is to create a framework for tenant-related matters in the country so that people of all incomes can get a rented house. The law seeks to institutionalize the process of renting a house by gradually transforming it into a formal market.
The rental market promotes institutionalization so that vacant houses can be used properly. The rental market in the United States, for example, is dominated by several large companies. There are also a large number of property managers working there.



What were the shortcomings of the Rent Control Act that necessitated its replacement?

It is clear from the name that this controlled the rent. The idea behind it was not to increase the rent in a profitable way and not to evict the tenant without a reason. It was also misused. The tenants occupied the houses. Following this, the landlord is afraid of having a tenant.
The Rent Control Act does not provide a transparent, professional and appropriate ecosystem for tenants and landlords. It hasn't changed much in two decades. The upper rental limit is also from the 1990s. That is the reason why according to the 2011 census, more than one crore houses are vacant today.
Until now, all rent agreements have been informal. The landlord set the rules in favor. In cities like Mumbai and Bengaluru, one-year security deposits were taken. Landlords had difficulty dealing with tenants who knew the law.
Older rent control laws are more politically sensitive. In areas like South Mumbai where the property has been occupied by tenants for decades. Tenants occupy residential and commercial property at a nominal rental amount.



What will be new for tenants and landlords?

Landlords are getting much lower rents even after years due to the upper limit in the old rent control law. The amount of rent is not fixed in the new law. But rent agreements have been made unavoidable. It must be submitted to the district rent authority.




The tenant will have a digital platform to submit an agreement or any document, which will be available in the language prevalent in the state. This agreement will clarify the roles and responsibilities of the landlord and tenant and avoid disputes. Verbal agreements will not be recognized.
The tenant will have to pay a security deposit, which will not exceed two months' rent. There may be a one-month rental deposit for non-residential property.


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If the tenant misuses the premises the rent court will allow the landlord to re-occupy the property. Abuse involves unethical or illegal activities, such as harming the community or harassing neighbors.
If the tenant refuses to vacate the building even after the expiration of the agreement, the landlord may charge double the rent for the first two months and four times the rent thereafter.



What is the basis for making new laws?

Prior to the launch of Housing for All Mission (Pradhan Mantri Awas Yojana-Urban or PMAY-U) by 2022, it was decided in 2015 that 20 per cent of the 20 million houses to be built would be for rent. The decision was based on a 2013 report to the Centre's Retail Housing Task Force. It said that affordable affordable rental housing instead of affordable ownership housing would alleviate the hardship associated with the poor class and pave the way for economic growth.


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The central government has set aside Rs 6,000 crore for the rental component in PMAY-U. The center will provide 75 per cent of the cost of building rental housing stock. The remaining amount will be collected by state, city and local units or through NGO or CSR activities.

Do states need to enforce this law?

No. The State and Union Territories may make necessary changes to its rate control laws or enact new laws. However, it is not bound by these rules. Because of this the issues associated with tenancy are driven by political will.
The new law provides for dispute resolution at three levels. Rent authority will be created at district level. This will be possible only when the states have the time, resources and efforts. It will be less of a burden for the lower level judiciary.
The Model Act will apply to new cases, not old ones. If there is an old dispute, it can only be resolved under the old law. New laws will not apply to it.



How is this beneficial for the economy?

The government believes that these laws will formalize the rental housing market. Vacant properties will be made available for rent. Rental yield will be increased. The problem associated with the registration process can be eliminated. Transparency can be enhanced and discipline can be brought.

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