Model Tenancy Act For UPSC
Source : PIB
GS II : Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential; citizens charters, transparency & accountability and institutional and other measures

Why in News ?

Union Cabinet approved the Model Tenancy Act for circulation to all States / Union Territories for adaptation by way of enacting fresh legislation or amending existing rental laws suitably.

Background

• Government had first released the draft of the Model Tenancy Act in 2019.
• The Act aims to bridge the trust deficit between tenants and landlords by clearly delineating their obligations.

Key Facts

• It will help overhaul the legal framework with respect to rental housing across the country, which would help spur its overall growth.
• 1.1 crore vacant houses available on rent will compliment PM’s vision of ‘Housing for All’ by 2022′.
• Creating a vibrant, sustainable and inclusive rental housing market in the country.
• Model Tenancy Act won’t cover hotels, lodging houses, inns, etc.
• This model law will not affect existing tenancies.
• How the Act Helps ?
  • Enable creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness.
  • It will balance the rights of both landlords and tenants.
  • Model Tenancy Act will enable institutionalisation of rental housing by gradually shifting it towards the formal market.
  • It will facilitate unlocking of vacant houses for rental housing purposes.
  • It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage.
  • Create an accountable and transparent manner.
  • It will ensure a speedy dispute resolving mechanism under the act.
    • Establishing a separate Rent Court and Rent Tribunal in every state/UTs to hear appeals for matters connected to rental housing.
    • Disposal of complaints and appeals by the Rent Court and Rent Tribunals within 60 days.
  • Take people from informal to specific contract arrangements between landlord and tenant.
• The major challenge is that the Act is not binding on the states as land and urban development remain as state subjects.
  • But as per the memorandum of understanding signed between the states and union territories under PMAY-U, the states and union territories would legislate or amend the existing rental laws on the lines of the Model Tenancy Act.

Key Features of Model Tenancy Act UPSC Perspective

• The very act will balance the interest and rights of both the owner and tenant. 
• Dispute between landlord and tenant a rent authority, or a rent court would be available for speedy resolution.
• Tenant will have to submit a security deposit in two ways
  • Two months for residential premises
  • Six-month rent for commercial property
• The tenant cannot able to rent out the property as a whole or part. 
• Rent Agreement
  • The tenant fails to vacate the premises on the expiration of the period of tenancy or termination of tenancy the landlord is entitled to do the following
    • Double the monthly rent for two months
    • Four times after that
• About increasing the rent 
  • Landowner would give a notice in writing three months before revising rent.
  • The landlord cannot hike the rent in the middle of the tenure.
• Restriction for Landowner
  • Landowner cannot enter the rented premises without 24-hour prior notice to carry out repairs or replacement.
  • Landowner cannot cut power and water supply in case of a dispute with the tenant.
  • Responsible to repair basic damages and basic up-gradation like whitewashing walls and painting doors and windows.

What is the impact on Real Estate ?

• Model Tenancy Act will fuel the rental housing supply by attracting more investors
• More rental housing stock will help students, working professionals and migrant populations to find urban accommodation.
• Aimed at bridging the trust deficit between tenants and landlords by clearly delineating their obligations that will open up more players in the field confidence to landlords.
• Attract corporate players to provide serviced apartments for their employees.

What are the challenges ahead ?

• Fear is that states may choose not to follow guidelines, diluting the essence of the Model Act.
  • Exact rules will likely change within each state since land is a state subject.
• The cap on the security deposit may not find favour with many landlords.

Latest Upate about the act

• Over a year since the Union Housing and Urban Affairs Ministry circulated the Model Tenancy Act (MTA), four States had revised their tenancy laws to be in line with the MTA.
• As per information available with MoHUA, the States of Andhra Pradesh, Tamil Nadu, Uttar Pradesh and Assam have revised Tenancy Acts on the lines of MTA (sic). 
• MTA was put up for public consultation, during which around 500 comments or suggestions were received from various stakeholders.

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