REAL Estate

Govt Policies: Background Note on Model Tenancy Act (MTA) 2021

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By Dr Sanjay CHaturvedi

As per Ministry of Housing, New Delhi :

As per Census 2011 around 110 lakh houses were lying vacant in urban areas.
One of the main reasons for non-availability of these houses for rental purpose is
the existing rental laws of the States/UTs, which discourage renting. There is a
segment of population especially migrants, who prefer rented accommodation as
it offers affordability and flexibility with low entry and exit cost with option to live
near their ‘place of work’. The share of urban population has increased to
31.16% in 2011 as compared to 27.82% in 2001 and further urban population
projected to be >50% by 2050. A significant portion of this increase can be
attributed to the migration to urban areas for various purposes such as
education, employment, business, healthcare and better quality of life. People
also migrate from one area of the city to another area.
Accordingly, in line with the vision of Hon’ble Prime Minister of ‘Housing for All’
by 2022, MTA has been prepared with the objective of balancing the interests
and rights of both the landlord and tenant; and to create an accountable and
transparent ecosystem for renting the premises in a disciplined and efficient
manner. It will enable creation of adequate rental housing stock for various
income segments of society including migrants, formal and informal sector
workers, professionals, students etc.; increase access to quality rented
accommodation; and enable gradual formalisation of rental housing market. It will
help overhaul the legal framework with respect to rental housing across the
country. It is expected to give a fillip to private participation in rental housing
sector thereby addressing the huge housing shortage.
Existing States rental laws have long drawn legal provisions which result in
lengthy litigation to resolve disputes. A ceiling on rent has further reduced the
quality and quantity of rental housing stock, resulting in low rental yields, which
dissuade homeowners from renting premises. This has made rental housing
financially unattractive resulting into informal sub-standard rental market lacking
basic amenities. Further, the affordability to own a house is a challenge
especially for low-income households. Therefore, it is imperative to promote
rental housing to help in bridging this gap.
MTA will enable unlocking of vacant premises for rental purpose and create a
vibrant, sustainable and inclusive rental market. MTA will promote growth of
rental market thereby attracting investment and promote entrepreneurial
opportunities in the rental housing sector.
Salient features of Model Tenancy Act:
(i) After commencement of MTA, no premises to be rented except by an
agreement in writing on mutually agreed terms;
(ii) MTA to be applicable to residential and commercial tenancies;
(iii) MTA to be applicable to whole of the State/UT i.e. urban and rural areas;
(iv) Rent to be fixed by mutual agreement between landlord (lessor) and tenant
(v) MTA to be applicable prospectively and the existing tenancies shall continue
to be governed by the respective extant rental laws of the States/UTs;
(vi) MTA to provide for a fast-track quasi-judicial mechanism for adjudication of
(vii) MTA to be applicable to all tenancies with no monetary threshold;
(viii) The terms of agreement shall be binding upon successors of landlord as well
as tenant for the remaining period of the tenancy agreement.
(ix) Sub-letting is not permitted without execution of supplementary agreement
between landlord and tenant.
(x) If the term of tenancy ends at the time when locality (where rented premises
is situated) experiences any force majeure event, the landlord shall allow the
tenant to continue possession of premises for one month from the cessation
of such force majeure event on the same terms of prevailing tenancy
(xi) Security deposit for residential premises shall not exceed two months’ rent
and in case of non-residential premises it shall be as per the terms of tenancy
agreement subject to a maximum of six-months’ rent. Security deposit shall
be refunded by the landlord at the time of taking over vacant possession of
the premises, after making due deductions, if any.
(xii) Recovery of possession of premises by the Landlord on certain grounds.
(xiii) Landlord is entitled for double the monthly rent for the first two months and
thereafter, four times of the monthly rent in case of default by tenant to
vacate the premises after termination of tenancy.
It is expected that State tenancy laws based on draft Model Tenancy Act will be
beneficial for both landlords and tenant, thus providing a win-win situation. The
provisions of MTA emphasis on supremacy of rent agreement, executed between the
parties on mutually agreed terms, which will minimize the possibility of disputes and in
case of any dispute, same shall be resolved quickly through the speedy dispute
redressal mechanism prescribed in the proposed legislation.
Given the far reaching impact of the proposed legislation, public/stakeholders are
hereby requested to send their comments/suggestions on the draft Model Tenancy Act,
attached herewith by 31st October 2020.

About Dr. Sanjay Chaturvedi

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