Cabinet Approves Model Tenancy Act For Circulation To States: How It May Impact You

Key Takeaways

• Tenants in residential properties would be required to submit a security deposit of up to two months' rent, while tenants in commercial properties would be required to deposit six months' rent.
• According to real estate experts, the Act can boost rental housing supply by enticing more investors, and greater rental housing stock will help students, working professionals, and migratory populations locate urban homes, particularly in COVID-19-like situations.
• Only the rent court, not the civil court, shall have jurisdiction to hear and determine applications relating to landowner-tenant conflicts and related topics.
• In July 2019, the Housing and Urban Affairs ministry released a draught model tenancy law.
• It is hoped that the Act will make it easier to unlock vacant houses for rental accommodation.
• The National Conference of Commissioners on Uniform State Laws produced a Uniform Residential Landlord and Tenant Act that will be enacted in all states.
• The quality of European house price and other economic information varies.
• Non-Europeans are frequently surprised to learn that large swaths of this prosperous, developed continent are not covered by reliable housing statistics.

Introduction

The Model Tenancy Act was passed by the Union Cabinet on Wednesday, with the goal of bringing about broad reforms, such as the establishment of distinct rent authority, courts, and tribunals in each district to defend the interests of both the landlord and the tenant.

Tenants in residential properties would be required to submit a security deposit of up to two months' rent, while tenants in commercial properties would be required to deposit six months' rent. States and Union Territories can either introduce new legislation or change their existing rental rules to comply with the Model Tenancy Act (MTA).

According to the administration, private participation in rental housing as a business model for resolving the country's massive housing crisis would be boosted. All new tenancies must have a written agreement, which must be presented to the involved district's 'Rent Authority.'

The MTA will apply prospectively, according to the government, and will not affect existing tenancies. The rent and the length of the tenancy shall be set by mutual agreement in a written agreement between the owner and the tenant.

It also intends to establish an independent institution for the registration of tenancy agreements in each state and union territory. Only the rent court, not the civil court, shall have jurisdiction to hear and determine applications relating to landowner-tenant conflicts and related topics. It mandates that the Rent Court and Rent Tribunals resolve complaints and appeals within 60 days.

Residential And Business Properties

● The Act will cover properties that are rented for residential, commercial, or educational purposes, but not for industrial purposes. It also excludes hotels, lodging houses, inns, and similar establishments. This model law will be adopted prospectively, and current tenancies will not be affected. It aspires to include both urban and rural areas.

How Would States Go About Putting It Into Action?

● States and Union Territories will pass or alter existing rental legislation in accordance with the Model Tenancy Act, according to the memorandum of understanding reached between the states and union territories under PMAY-U.

Why Was This Considered Necessary?

● In July 2019, the Housing and Urban Affairs ministry released a draught model tenancy law.

● There was no good method to address tenant-landlord problems without a well-rounded rental policy and proper implementation of the rental contract. It is difficult for landlords to evict tenants who abuse the property. To avoid such issues, property owners frequently choose to keep their homes vacant rather than renting them out. Rental yield is unappealing.

● Even in India's larger cities, the rental yield on residential property is extremely low. It ranges from 1.5 percent to 3 percent of the capital value. People have been discouraged from purchasing second or third residences that may be rented out as a result of this.

● Because of the complications of finding reliable renters, negotiating rental agreements, and taking care of property maintenance, NRIs have traditionally found it difficult to rent out homes. They frequently prefer to leave their homes empty in case they return to India. For fear of squatters and dealing with the formalities of eviction, NRIs avoid leasing their residential properties.

Details Of The Act

● According to the Act, if a tenant fails to vacate rented premises in accordance with the tenancy agreement, the tenant will be obliged to pay the landlord twice the monthly rent for the first two months, then four times till the latter continues to occupy the premises.

● If the landlord fails to make any return, he shall be liable to pay simple interest to the tenant on the sum which he has omitted or failed to repay at such rate as may be prescribed from time to time.

● If a dispute arises between the owner and the renter, they must first contact the 'Rent Authority.' If a party is dissatisfied with the Rent Authority's decision, the 'Rent Court' and ultimately the 'Rent Tribunal' can be contacted.

● The measure, according to Union Homes and Urban Affairs Minister Hardeep Singh Puri, will assist reform the legal structure for rental housing across the country. Puri stated at a news conference that the Census of 2011 revealed that more than 1 crore houses in urban areas across the country were empty.

● Making 1 crore unoccupied dwellings available for rent will complement the minister's objective of "Housing for All by 2022." A ministry official explained why most owners do not want to rent their property because they are afraid that renters will not leave and will occupy it unlawfully.

● With the Model Tenancy Act, there would be a sense of security among owners, as the Act defines the roles of both the owner and the renter. According to the Act, no landlord or property management can refuse to provide any basic supply to the tenant's occupied premises.

● Unless both parties agree in writing, tenants will not be evicted during the term of their tenancy agreement, according to the ministry. Unless otherwise agreed in the tenancy agreement, the landlord is responsible for activities such as structural repairs, except those necessitated by damage caused by the tenant, whitewashing of walls and painting of doors and windows, changing and maintaining plumbing pipes, and internal and external electrical wiring and related maintenance.

● The tenant will be responsible for drain cleaning, switch and socket repairs, kitchen fixture repairs, window and door glass panel replacement, and garden and open space care, among other things.

● "Where the landlord intends to make any improvement in or create any new structure on any property, which has been let out to a tenant, and the tenant refuses to allow the landlord to make such improvement or construct such additional structure," the Act read.

● It also stated that without the express agreement of the landlord, the tenant will not make any structural changes or establish any permanent construction in the premises rented out.

● According to the Act, the State Government and Union Territories can designate a District Judge or Additional District Judge as a 'Rent Tribunal' in each district after consulting with the jurisdictional High Court.

● The 'Rent Court' will be made up of an Additional District Collector, Additional District Magistrate, or an officer of comparable rank.

● "With the prior agreement of the State Government and Union Territories administration, the district collector or district magistrate shall select an officer, not below the rank of deputy collector, to be the Rent Authority within his jurisdiction," the Act stated.

● "The Union Cabinet, chaired by Prime Minister Shri Narendra Modi, has approved the Model Tenancy Act for circulation to all State and Union Territories for adaptation by way of adopting new legislation or appropriately revising existing rental rules," the ministry said in a statement.

● "The Model Tenancy Act intends to make the rental housing market in the United States more vibrant, sustainable, and inclusive. It will allow for the development of sufficient rental housing stock for all income categories, so resolving the issue of homelessness "it was said

● It is hoped that the Act will make it easier to unlock vacant houses for rental accommodation.

Laws In The United States Of America

Landlord-tenant laws exist in every state, however, not all regulations pertaining to renters are included in every law. The National Conference of Commissioners on Uniform State Laws produced a Uniform Residential Landlord and Tenant Act that will be enacted in all states.

The relationship, rights, norms, and duties of the parties to a residential renting agreement are governed by landlord-tenant legislation. Each of the 50 states has its own set of landlord-tenant laws, with many of them being relatively similar. There are, however, substantial variances in the laws from one state to the next. What is necessary for a rental listing, how to execute a tenant screening effectively, terms necessary in a rental application, and other laws may vary.

● Freely agreements of rents - Except in four jurisdictions where rent control legislation exists, rents are normally freely negotiated. These rent control ordinances are also known as rent stabilisation or maximum rent rules and are included in local statutes.

● Deposits - There are no statutory restrictions on security deposits in 24 of the 51 states. The security deposit in the remaining 27 states is limited to one month's rent to 312 months' rent. After the renter moves out, all states require the security deposit to be repaid. Unpaid invoices and repairs can be deducted as long as they are itemised. The deposit must be placed in a bank account that is distinct from the landlord's account in most states.

● A lease and a rental agreement are the two most common types of tenancy arrangements. The renter must vacate the rental unit after the contract expires or the required notice period has passed unless otherwise indicated in the contract. Refusing to extend the contract requires no rationale.

● Rental agreements typically provide for a short-term lease (commonly 30 days) that is automatically renewed at the conclusion of the period unless the tenant or landlord gives written notice, in which case the renter must comply. For month-to-month rentals, the written notice is normally one rental period or one month. The landlord can also amend the conditions of the contract, such as the rent amount.

● A signed lease, on the other hand, grants a tenant the right to occupy a rental property for a set period of time — usually 6 months or a year, but it can be longer — as long as the renter pays the rent and follows the lease's other terms. Unless the tenant agrees, the landlord cannot change the rent or other terms of the tenancy during the lease. When a lease expires, unlike a rental agreement, it usually does not automatically renew, and the renter must vacate. A renewal clause and the amount of notice necessary are frequently included in the contract.

● After a lease expires, a tenant who stays on with the landlord's permission becomes a month-to-month tenant, subject to the contract's rental terms.

● In terms of how termination notifications and eviction documents must be written and served, the eviction procedure varies by state, but the core concepts remain the same. After serving one of these three notices, a landlord may file a summary non-payment court action to evict a tenant:

a. Notices to Pay Rent or Quit: used when a renter has not paid their rent. They offer the tenant a few days to pay or move out (three to five in most jurisdictions)
b. Cure or Quit notifications are issued after a breach of a lease or rental agreement provision or condition, such as a "no pets" clause. Typically, the tenant is given a certain period of time to fix, or "cure," the violation.
c. Unconditional Quit Notices require a tenant to evacuate the premises immediately without the opportunity to pay the rent or fix a lease or rental agreement breach. In most states, unconditional quit notices are only permitted if the tenant has repeatedly violated a significant lease or rental agreement clause; been late with the rent on multiple occasions (in some states, the law specifies the number of days before the rent is considered late); seriously damaged the premises; or engaged in serious illegal activity on the premises, such as prostitution.

● In the United States, eviction should be approached with prudence. A court-ordered warrant can only be carried out by a sheriff, marshal, or constable.

Laws In The United Kingdom

The quality of European house price and other economic information varies. Non-Europeans are frequently surprised to learn that large swaths of this prosperous, developed continent are not covered by reliable housing statistics. House price time-series in Northern European countries are often good. Central Europe is a diverse region.

The data on housing prices in Germany are abysmal. The data in France is excellent, the data in the Netherlands is excellent, and the data in Belgium and Austria is adequate. Spain has made huge progress, while Portugal is lagging behind. Southern Europe has a history of having poor statistics data. Housing statistics are particularly scarce in Italy, Greece, and Turkey (though Italy does have some private, for-sale data producers).

● When the contract is signed, rents can be freely renegotiated. If a renter believes his rent is too high compared to what other renters are paying for similar premises, he can appeal to a rent assessment committee, which will determine market rent. However, under UK law, a tenant is not protected from a landlord's retaliatory eviction.

● Tenants must be advised of rent increases using a particular form, and if they do not agree, they can appeal to the rent assessment committee. The issue is that UK law provides no protection to the tenant against retaliatory removal by the landlord, who can evict him with two months' notice and no reason.

● Although there is no specific legal restriction on the deposit, if it is for more than two months' rent, it may be considered a surcharge (which would be illegal). It is typical to put down a one-month deposit.

● Contracts can be for any length of time agreed upon by the parties - two weeks, a month, six months, ten years, or anything else. There is an implied stipulation that the renter will not sublet without the landlord's permission, which will not be refused arbitrarily.
● Unless the contract states that the home is being let on an "assured" lease, all new tenancies for less than £25,000 per annum have been "assured shorthold tenancies" since February 28, 1997. (Tenancies with a salary of more than £25,000 per annum are completely free to contract.)

● Unless the tenant has infringed one of the basic grounds for possession, the assured shorthold tenancy provides security for an initial six months, even if the contract is for six months or less. After that, the landlord just needs to give the renter two months' "notice requiring possession" to evict them. It is not necessary to provide a basis for needing possession.

● When a tenant refuses to leave, the landlord cannot simply walk in; instead, he must apply to the court for a possession order, which is simple and quick. The court does not have the authority to refuse

● If the lease is for a longer period of time, the landlord cannot seek possession before the end of that period. After the conclusion of the term, two months' notice is required once more.

● The tenancy becomes a periodic month-to-month tenancy at the end of any fixed term. To evict the renter, the landlord must give two months' notice, and no explanation is required.

● If the landlord and tenant cannot agree on a set term, a monthly assured shorthold tenancy is created, with the tenant's protection for the first six months plus two months. The tenant has extra rights under an "assured tenancy." New assured tenancies, on the other hand, are extremely unusual.

● The landlord must have a strong reason to evict the tenant in a guaranteed tenancy. An assured tenancy, on the other hand, can only be established if it is indicated in the contract or if the landlord gives written notice that it is an assured tenancy.

Conclusion

The MTA does not apply to lodge houses or hotels. As a result, the MTA's application to establishments that provide paying guest services is unclear.

MTA allows for prospective applications only, with no recourse for tenancies that were already in place prior to MTA's implementation. As a result, the status of current tenancies is unaffected. MTA is available to state adoption and does not imply that its requirements must be followed by all states. The MTA makes no mention of tenants' lack of negotiating power and lets parties agree on a rent price, which may lead to prejudice towards the poorer sectors of society.

MTA is a positive step in the renting process for any property. The establishment of adjudicating agencies will relieve the strain on subordinate courts around the country in tenancy cases. However, it will be fascinating to watch how many states actually implement the MTA because it is merely a model and states are not required to accept it.