The Union Cabinet has approved the Model Tenancy Act on Wednesday (June 2) with an aim to revamp the legal framework in regard to rental housing across the country. With this Act, the private housing sector and the rental housing market will get a boost.
The government is pinning its hope that this will address the huge housing shortage. There are over one crore houses currently lying vacant which can now be made available to people.
What is the Model Tenancy Act?
The Model Tenancy Act 2019 aims to regulate the rental housing sector. The existing rent control laws in states and UTs favor the tenants. The Model Tenancy Act aims to provide an overall regulatory framework to the rental housing sector by institutionalizing rental housing and shifting towards a formal market.
To what sectors does this Act Apply?
The Act will be applicable to properties rented for residential, commercial or educational use.
The Industrial sector does not come under the Act though. Hotels, lodging houses, etc. will also not be covered under the Act.
Will this Act be enacted for existing tenancies?
No. The Model Tenancy Act is only applicable for prospective or future tenancies and does not cover existing tenancies.
What benefits does this Act provide?
The Act is intended to create adequate rental housing for all income groups thus eliminating the challenge of homelessness. It will also open up the vacant houses that have been lying unused till now for rental housing purposes.
As this is applicable for future transactions, there would be a written agreement, with terms and conditions to be determined jointly by the landlord and the tenant upon mutual agreement and thus help the landlord immensely.
A landlord can limit the tenant’s advance security deposit to a maximum of two month’s rent for residential purposes and six months if it is for non-residential purposes, as per the Act.
Furthermore, the Act states rent can either be increased according to a mutually discussed agreement, or the landowner will have to give a notice in writing to the tenant, three months before the revised rent comes into effect.
What next for the states and UTs?
The states and Union territories will have to adopt the changes by either enacting fresh legislation or amending their existing rental laws. Also, the states and UTs have to establish an independent authority for registration of tenancy agreements and even a separate court to take up tenancy-related disputes.