Abstract
With a growing number of people who prefer renting out properties instead of buying them and not to forget the soaring property prices and the unstable economy, it seems appropriate to introduce a legislation to systemically organize the rental market and address the lacunae faced by the Parties involved. The new Model Tenancy Act, 2021 claims to provide a sustainable and inclusive environment for landlords and tenants to coexist peacefully in this ecosystem. The idea behind this Act is to unify the rent and tenancy laws across various Indian states, unlike the current system, wherein each state has its rent control legislation, which most Parties seek to avoid. Thus, in this blog post, the authors examine the provisions of the proposed Act and critically analyze the same to see if the proposed Act has genuinely achieved the objective sought by the legislators.
Introduction
When India gained independence and the legislators drafted the Constitution, the responsibility of governing the relationship between a landlord(s) and a tenant(s) and that of collection of rents was conferred on the state governments [1]. Ever since, rental agreements and the landlord-tenant relationships have been governed by the rent control Acts enacted by different states, such as the Delhi Rent Control Act, 1958, the Maharashtra Rent Control Act, 1999, the Uttar Pradesh Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972, and other similar state Acts.
However, these state laws are ineffective and burdensome, especially on the landlords, due to which the citizens may prefer an informal arrangement and avoid the execution of rental agreements. These issues were also highlighted under the National Urban Rental Housing Policy released by the Government of India in 2015 [2]. Further, the National Urban Rental Housing Policy noted that due to the existing rent control legislations, India’s rental housing market had become unappealing; this is not limited to one state or a group of states but has been a pan-India scenario. Despite a massive housing shortage, more than eleven million housing premises had remained vacant, firstly, due to the ineffectiveness of the state rental control laws and secondly, due to the absence of a common and unified rental housing framework [3].
To alleviate these concerns, the Ministry of Housing and Urban Affairs (MoHUA), Government of India, released the Model Tenancy Act, 2021 (hereinafter “Model Act”), to be adopted by the Indian states and union territories, as and when they deem it appropriate. The reason for its enactment is “…to establish Rent Authority to regulate renting of premises and to protect the interests of landlords and tenants and to provide speedy adjudication mechanism for resolution of disputes and matters connected therewith or incidental thereto.”[4] Thus, considering the enactment of the Model Act, it is imperative to briefly examine its provisions for a comprehensive understanding.
Highlights of the Model Act
Applicability
The applicability of the Model Act extends to all kinds of premises, except those owned by:
- the government at the center, state, union territory, any local authority, government undertaking/enterprise/statutory body/cantonment board;
- company/university/organization being rented as part of a service agreement;
- any notified religious/charitable institution;
- auqaf registered under the Waqf Act or any legally recognized trust; and
- premises specifically exempted by any state government or union territory administration [5].
However, it is noteworthy to mention that the aforementioned exempted properties may come under the purview of the Model Act if the owner and the tenant of such premises agree to be governed by the provisions of the Model Act [6].
The Tenancy Agreement
The following aspects of tenancy would be governed by the clauses, sub-clauses, terms and conditions of the tenancy agreement:
- No tenancy can take place without a tenancy agreement, about which the Rent Authority under the Model Act shall be informed jointly by the landlord and the tenant; [7]
- The authorization of a property manager by the landlord to deal with the tenant; [8]
- The duration of a tenancy, its renewal/extension, consequences of staying beyond the agreed duration of the tenancy, and exceptions to the same; [9]
- The sub-letting of the rented premises, which would be possible only by the execution of a supplementary agreement to the tenancy agreement; [10]
- The amount of rent payable; [11]
- The enhancement or change in the amount of rent, costs payable due to improvement, alteration, and/or additions in the rented premises; [12]
- The security deposit, which (a) in case of a residential accommodation, shall not be more than the amount payable as rent for two months and (b) in case of a non-residential accommodation, shall not be more than the amount payable as rent for six months; [13] and
- The duration within which the agreed rent amount shall be paid. [14]
Online Platform and Database
The Model Act also provides for creating an online “platform” by every state adopting the Model Act to submit documents about a tenancy agreement. [15] Further, it provides for creating an online “database” by the state, whereby details about all tenancy agreements are readily available. [16]
Rights and Obligations of Landlords and Tenants
The Model Act also provides the rights that a landlord and a tenant can exercise after executing a tenancy agreement.
Under the Model Act, a landlord is conferred with rights such as that:
- to carry inspections and maintenance at reasonable times, after a notice of at least twenty-four hours; [17]
- to penalize the tenant for costs incurred due to the tenant’s failure to maintain the premises or due to making alterations/additions without the written consent of the landlord; [18]
- to evict the tenant after making an application regarding the same to and obtaining permission from the relevant Rent Court; [19] and
- the right to charge enhanced rent if a tenant refuses to vacate the rented premises, [20] among other rights.
Regarding a tenant, the Model Act confers rights such as that:
- to get a receipt of payment of rent from the landlord; [21]
- to deposit the rent amount with the relevant Rent Authority, in case the landlord refuses to accept the same or when the recipient of the rent cannot be ascertained; [22]
- to carry out repairs and maintenance of the premises if the landlord refuses to do the same and deduct the costs from the future rent; [23]
- to be informed of the details of the property manager appointed by the landlord, if any; [24]
- to get uninterrupted essential supplies and services such as electricity, gas, water, sanitary services, and other essentials; [25]
- to get a refund of the advance rent paid by the tenant; [26] and
- to abandon the rented premises if it is rendered uninhabitable due to the landlord’s failure to carry out necessary repairs and maintenance, [27] among other rights.
In finality, Schedule 2 of the Model Act divides and provides for the maintenance obligations that the landlord and the tenant shall undertake pertaining to the rented premises. [28]
Establishment of Adjudicatory Bodies
The Model Act has introduced a new dispute resolution process by establishing adjudicatory bodies that solely deal with tenancy disputes. The authorities, as established by the Model Act, have been provided below, in ascending order:
- Rent Authority: A public officer holding the position of Deputy Collector or above shall be appointed as the Rent Authority of the area of their jurisdiction. [29] The Rent Authority shall be the first point of contact for grievance redressal under the Model Act. [30]
- Rent Court: A public officer holding the position of Additional Collector/Additional District Magistrate or an officer of similar designation, or above, shall be appointed as the Rent Court of the area of their jurisdiction. [31] The Rent Court shall hear appeals against the Orders of the Rent Authority and decide matters pertaining to eviction. [32]
- Rent Tribunal: A District Judge/Additional District Judge shall be appointed as the Rent Tribunal of the district of their jurisdiction after consulting the relevant High Court. [33] The Rent Tribunal shall hear appeals against the Orders of the Rent Court. [34]
Critical Analysis
After carefully analyzing the Model Act, we believe attempts have been made to improvise and enact a better legislation than the already existing state rent control acts. However, it still seems like one step forward and two steps backward, as we would be elaborating upon in the succeeding arguments.
Lack of Provisions to Provide Information Regarding Available Vacant Premises
A concern that the MoHUA highlighted was the vast number of vacant premises that exist in India and to open them up for rental purposes. [35] However, the Model Act does not seem to provide any solutions regarding the same. There are no provisions under the Model Act that mandates providing information regarding the available vacant premises. What should have been part of the Model Act is a provision requiring for the creation of a database of “available vacant premises”, which would provide the size of the vacant accommodation, the general area where it is situated without disclosing the exact location, the rent payable for the same, the facility to book an appointment after registering with the relevant identity documents, and other relevant details.
No Steps Taken to Make Rental Housing Affordable
MoHUA had also highlighted that one of the main objectives of the Model Act is to make rental housing available to low-income households. [36] However, the Model Act does nothing to make rental housing more affordable. At the present juncture, the rental housing market in India is rampant, with intermediaries and brokers taking advantage and charging exorbitant amounts, which is in addition to the rent and security deposit payable for an accommodation. No steps have been taken in this regard.
As emphasized in the preceding arguments, creating an online database would also help resolve this conundrum of intermediaries. By having access to such a database, a prospective tenant may directly search possible premises that could be rented out and get in touch with the landowner directly.
The Conundrum of Arbitrariness for “Enhanced Rent” under Section 5 of the Model Act
Under Section 5 of the Model Act, a tenant is liable to pay “enhanced rent” if he does not vacate the premises at the end of a tenancy agreement or if such an agreement’s duration ends and has not been renewed. This provision seems arbitrary as it imposes an undue burden on the tenant, especially when the agreement renewal or vacation of the rented premises is rendered impossible by the landlord, with the motive of extracting enhanced rent. A proviso can be inserted to rule out such frivolous attempts by landlords.
The problem of Inclusivity in the Force Majeure Clause under the Model Act
The Model Act has introduced a force majeure clause under a couple of provisions. Under this clause, “situation[s] of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature” have been covered. However, the clause fails to cover human-made calamities such as epidemics, pandemics, terrorist attacks, and other human-made calamities. The present scenario, where we are facing a pandemic, should make the government realize that human-made calamities can affect the performance of a duty/obligation and the exercising of a right as complex as under a natural calamity. Despite this reality, the force majeure clause has left out human-made disasters from its ambit.
Further, the force majeure clause has been inserted only under two provisions of the Model Act, under Section 5 (whereby the period of tenancy can be extended in case of force majeure) and under Section 15 (whereby a landlord shall not charge rent in case the premises is rendered uninhabitable due to force majeure). It is relevant to mention that almost all provisions under the Model Act require being subject to a force majeure clause. For instance, under the provision of revision of rent (Section 9), if the tenant cannot pay an enhanced amount due to a calamity, the existence of a force majeure clause would prove helpful. Additionally, if the performance of an obligation/duty by the landlord or the tenant is rendered impossible due to a calamity, the existence of a force majeure clause assures that the affected Party cannot take adverse action against the non-performance.
Unrealistic Time Frames for Speedy Resolution of Disputes
The Model Act has also provided certain time limits within which disputes shall be resolved (under Sections 35 and 37). However, the problem with these periods (of 30, 60, and 90 days) provided under the Model Act is that they are highly unrealistic. This becomes especially true when we consider the existing backlog of cases in the Indian courts, and the onerous time it takes to get disposed of in India. The government should consider the ground reality and revise these time frames or try and devise another way to ensure timely adjudication and disposal. This is also important because once a dispute arises and a Court/Tribunal decides to adjudicate on the same, the rights and obligations of the concerned landlord and tenant are left in limbo. This could result in unexpected and unforeseen difficulties for both the landlord and the tenant.
Need for Including a Clause for Personal Necessity with the Eviction Clause
The eviction clause must include a clause for personal necessity whereby the landlord evicts the tenant when he requires the premises for his or his family members’ personal necessity. Indeed, the concept of personal necessity must be meaningfully construed for the relief to be granted to the landlord to be practical, and at the same time, it must be reasonable for both the Parties. It shall be seen as a separate class of eviction to accord it the speedy proceedings it needs. This provision is prevalent in the various Rent Control Acts currently in play in different states.
Privacy Concerns Regarding the Use of Personal Information
Under the First Schedule of the Model Act, which provides for the format to follow while informing the Rent Authority of a tenancy agreement, there are specific personal details that need to be disclosed, such as addresses of the tenant, landlord, and property manager, their Aadhaar card numbers, PAN numbers, mobile numbers, and email IDs. Although it is understandable that this information is quintessential, the Model Act has been unclear whether such information would be published in the public domain under Section 4(4)(b). Under the Model Act, it should be comprehensively clarified which personal details would be for the state government’s record and which details would be made available in the public domain to avoid privacy infringement issues. [37]
Further, the requirement of submitted Aadhaar details for the tenancy agreement would violate the judgment of the Hon’ble Supreme Court of India, in Justice KS Puttaswamy v. Union of India. [38] In that case, it was held that requiring an Aadhaar card or number may only be made mandatory for expenditure on a subsidy, benefit, or service incurred from the Consolidated Fund of India. [39] Since registration of a tenancy agreement does not incur any such expenditure, the mandatory requirement of linking Aadhaar details would violate the judgment mentioned above. [40]
Failure of the Model Act to Consider Social and Communal Restrictions
Social and communal restrictions are another major problem most people face while renting out a property. The Indian Constitution provides each individual with the right to practice their religion, and ideally, that should not stand in the way of denying someone their rental property. However, residential societies draw up unreasonable rules ranging from the food consumed by the tenant to screening potential tenants based on their religion. The aim of the lawmakers must be to make an inclusive and non-discriminatory legislation to protect tenants from such unlawful practices. Some initiative also needs to be taken in this direction, which the government has failed to consider.
Conclusion
The idea of introducing a unified Act is to create an inclusive, sustainable, and effective rental market in the country. The effort to codify the provisions in black and white are indeed welcome; however, there are key challenges that need to be revisited.
While most states adopted their own Rent Control Acts in the past, dispute resolution suffered majorly as these laws were considered pro-tenant. Not much has changed concerning the litigation hierarchy. This is because, even with the Rent Control Acts in force in various states, a petition for eviction would be filed before a Rent Controller, and the Appeal would lie before an Additional District Judge. The Appeal from the Order of the Additional District Judge would then lie before the High Court. In the instant case, with the establishment of the Rent Court and the Rent Tribunal, it is effectively a case of old wine in a new bottle. The lack of a provision for appealing the Orders of the Tribunal implies the filing of writ petitions under Article 226 or 227 of the Constitution of India before the High Courts. Not much seems to have changed in that arena. Further, establishing a digital database to make rental properties more accessible is a step towards the future. However, specific measures need to be taken, keeping in mind the data protection and privacy concerns.
Ultimately, the biggest drawback is that the Model Act is not mandatory, which leaves the states to decide their laws. Although it is agreed that the Centre does not have the power to legislate on rent and tenancy matters as per the Indian Constitution, uniformity may not be achieved by making it optional.
About the Authors
Mr. Manan Parmar is a Corporate, Commercial, and Immigration Law Advisor at SMA Legal, Chandigarh.
Ms. Drishtana Singh is an Independent Legal Practitioner and Consultant, practicing at the High Court of Punjab and Haryana.
Editorial Team
Managing Editor: Naman Anand
Editors-in-Chief: Akanksha Goel & Aakaansha Arya
Senior Editor: Gaurang Mandavkar
Associate Editor: Pushpit Singh
Junior Editor: Aribba Siddique
Preferred Method of Citation
Manan Parmar and Drishtana Singh, “The Model Tenancy Act, 2021 — Not the Best Role Model” (IJPIEL, 27 August 2021)
<https://ijpiel.com/index.php/2021/08/26/the-model-tenancy-act-2021-not-the-best-role-model/>
Endnotes
[1] India Const. seventh schedule, list II, entry 18.
[2] MOHUA, National Urban Rental Housing Policy, Ministry of Housing and Urban Poverty Alleviation, Government of India (Oct., 2015), http://mohua.gov.in/upload/uploadfiles/files/National_Urban_Rental_Housing_Policy_Draft_2015.pdf, at 11.
[3] Khaitan & Co. & Knight Frank LLP, 2021: A New Era for Rental Real Estate in India, Knight Frank (2021), https://content.knightfrank.com/research/2264/documents/en/a-new-era-for-rental-real-estate-in-india-indian-real-estate-residential-office-8206.pdf, at 1.
[4] The Model Tenancy Act, 2021, preamble.
[5] Id. at § 3(1).
[6] Id. at § 3(2).
[7] Id. at § 4(1).
[8] Id. at § 4(5).
[9] Id. at § 5.
[10] Id. at § 7(1).
[11] Id. at § 8.
[12] Id. at § 9.
[13] Id. at § 11.
[14] Id. at § 13(1).
[15] Id. at § 4(3).
[16] Id. at § 4(4)(b).
[17] Id. at § 17.
[18] Id. at § 15(3).
[19] Id. at § 21(2).
[20] Id. at § 23.
[21] Id. at § 13(2).
[22] Id. at § 14.
[23] Id. at § 15(4).
[24] Id. at § 18.
[25] Id. at § 20.
[26] Id. at § 24.
[27] Id. at § 15(4).
[28] Id. at schedule 2.
[29] Id. at § 30.
[30] Id. at § 31.
[31] Id. at § 33.
[32] Id. at § 35.
[33] Id. at § 34.
[34] Id. at § 37.
[35] MOHUA, Background Note on Model Tenancy Act (MTA), (2021), Ministry of Housing and Urban Affairs, Government of India, http://mohua.gov.in/upload/uploadfiles/files/1%20Background%20Note%20on%20MTA%20(English).pdf, at 1.
[36] Id.
[37] PRS, The Model Tenancy Act, 2021, PRS Legislative Research (2021), https://prsindia.org/billtrack/the-model-tenancy-act-2021#_edn19.
[38] Justice KS Puttaswamy v. Union of India, (2017) 10 SCC 1.
[39] supra note 37.
[40] Id.
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