Union Cabinet approves Model Tenancy Act; key features of legislation aimed to regulate rental market

New Delhi, June 05, 2021: The Union Cabinet on Wednesday approved the Model Tenancy Act for circulation to states and Union Territories. Chaired by Prime Minister Narendra Modi, the new tenancy act aims to create systems that addresses issues and disputes and encourages home owners to put their properties on the rental market.

Keeping in mind, the Central Government’s goal of ‘Housing for All by 2022’, the cabinet has cleared the act for adaptation to create an inclusive rental housing market according to the reports published in firstpost.com.

The act will facilitate the unlocking of vacant houses for the purpose of renting.

The cabinet, in a statement, said that the act will be in “circulation to all states/union territories for adaptation by way of enacting fresh legislation or amending the existing rental laws suitably”.

What is Model Tenancy Act?

As per a release, the legislation is an act for the establishment of a rent authority which will regulate renting of premises and will protect the interests of tenants and landlords. The authority will provide a speedy mechanism in resolving disputes and other related matters.

The draft of the Model Tenancy Act was first released by the government in 2019. It aims to bridge the lack of trust between landlord and tenants by clearly describing their obligations.

Salient features of the Model Tenancy Act:

• The act describes the rights of both tenant and landlord in detail and also has ways of dealing with issues which leads to dispute between two parties
• The act advocates the establishment of a rent authority that can help to protect the interests of tenants and landlords and to control renting of premises
• As per the new act, landlords will now be able to take a security deposit (rent paid in advance) of maximum two months and six months in case of residential and non-residential premises, respectively. The security deposit amount differs in every city.
• Before entering the rented premises, the property manager or landlord has to serve a notice, in writing or through electronic mode, to the tenant at least 24 hours in advance under the given circumstances: a) to carry out inspection; b) to carry out replacement or repairs or to get any work done or to do any work; c) for any other reasonable cause mentioned in the tenancy agreement
• According to the act, if a tenant fails to vacate the rented place on the expiration or termination of tenancy period even after the landlord fulfills every condition mentioned in the agreement, then the landlord can double the monthly rent for two months and four times after that.