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Model Tenancy Act, 2021: A Step Made in the Direction of a Giant Leap

Arshita Girdhar*

 

Abstract

This article aims to trace the history and background of rental laws and the market in India and subsequently analyse the role that Model Tenancy Act, 2021 [“the Act”] plays in the current scenario that relates to the rental market. The background provided in the article would help in understanding the needs of both tenants and landlords and eventually evaluating the success of the Model Tenancy Act. The article, therefore, attempts to critically analyse the Act by considering the needs laid out by its population.


Introduction

Indian rental laws, including the Rent Control Acts introduced by various states such as Delhi’s Rent Control Act, 1958, Bombay Rent Act, 1947, Delhi and Ajmer Rent Control Act, 1957 and Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, have been perceived as tenant-favouring since they were first introduced in 1918, post the World War I. With provisions that establish a legal ceiling on rental prices and impose a tedious process for eviction, landlords’ discouragement for maintaining rental houses is not astonishing. Owing to this absence of enthusiasm among landlords, the percentage of people opting for rental housing has plunged from 54% in 1961 to 28% in 2011, thus increasing homelessness in the Indian population. These circumstances led to a compromise between tenants and landlords in the form of informalisation of rental housing. A written rental agreement is considered to be formal when it is registered under competent authority. Informalisation of rental housing is therefore achieved by eradicating the necessity of registered written rental agreements. The downside to informalisation was witnessed when landlords exploited their authority, available due to the lack of regulation imposed on them. Informal landlords can therefore evict their tenants without following a specified procedure. They also enjoy the freedom of deciding rental prices owing to the lack of an existing price ceiling. Following the current restless atmosphere of rental housing, the imminent need for a uniform and impartial Rental Act was emphasised on and therefore, Model Tenancy Act, 2021, received approval from Union Cabinet, post the submission of various drafts and collection of feedback. The act is therefore introduced to achieve three objectives- regulation of renting of premises for both residential and commercial purposes, establishing mechanisms that secure the rights of both landlords and tenants and delivering speedy adjudication for tenancy related disputes in order to improve the conditions present in the rental market. While the provisions introduced might facilitate in improving the current conditions of the rental market, an ideal rental market may still be a distant dream.


Key Features

The Union Cabinet had approved the Model Tenancy Act (‘the act’) to create a rental market that guards the interests of both landlords and tenants and provides speedy adjudication for the resolution of disputes under an established rental authority. Considering these requisites, the Model Tenancy Act brings some much-needed changes in the rental market through its various provisions. The newly introduced provision stated in section 23 of the act empowers the landlord in cases of overstay. The landlord has the right to charge their tenants double the amount of rent for the first two months of overstay and four times the amount of rent thereafter. This provision, therefore, helps in neutralizing the power imbalance between landlords and tenants. The Act also ensures that the tenant does not initiate any structural changes in the rental property without the explicit consent of their landlord and therefore attempts to restore the eroded trust of landlords in the nation’s rental acts to incentivize and increase rental supply eventually.


The Act also ensures that the tenants do not feel alienated by specifying that the security deposit demanded by landlords shall not exceed an amount equivalent to the rent of two months for residential premises, under section 11 (1) of the act, as opposed to the conventional twelve months followed in various metropolitan cities, including Mumbai and Chennai. The Act also mandates, under section 11 (2) that this amount is to be returned by the landlord on the day of handover after appropriate deductions. The provisions stated above act as relaxations for the tenants as the issue of security deposits has tormented them nationwide. The act also successfully formalizes the market by mandating written agreements under section 4 (1) and ensures transparency by increasing the availability of rental details on a digital platform under section 4 (3). The Act highlights the need for speedy trials by establishing a three-tier quasi-judicial dispute adjudication mechanism that includes Rent Authority, Rent Court, and Rent Tribunal, whose role has been explained in chapter VI and chapter VII of the act. The provisions also set a timeline for various issues resolved under these tribunals, hence attempting to satisfy all three objectives specified by the Cabinet[1].


Limitations

The Act, however, is subjected to numerous criticisms as well. The first issue presents itself in the form specified in the Act’s schedule that prescribes that the details of both landlord and tenant be shared with the Rent Authority mandatorily. These details are to be then published on the digital portal made by the Rent Authority. This provision, therefore, risks encroaching upon the citizen’s right to privacy by making such details accessible to the public at large. While the Right to Privacy being the fundamental right that should not be encroached upon, the population manages to find other drawbacks of the act that prove to be of greater concern.

It has been observed that the detail-oriented approach opted by the Act faces the brunt of the criticism. While the Act focuses on categorizing the activities that can be carried out by landlords and tenants, the citizens seem dissatisfied with this detail-oriented approach. As reiterated above, the rental market needed formalization owing to the tiresome and rigorous procedure that was initially in place. The landlords were initially supposed to approach the court and obtain a court order for the eviction of tenants in various states. This system disincentivised rental housing for landlords due to their limited rights. These landlords, therefore, turned towards informal markets to gain more authority and increased the vulnerability of their tenants in the process. The newly introduced changes fail to take this aspect into consideration; in fact, they exclude the entire informal rental market from the Act. They do so by defining a rental agreement as one that has been registered with the Rent Authority under Section 4. This implies that any rental agreement that has not been registered with the Rent Authority would not enjoy the rights promised in Model Tenancy Act and leaves the informal market unaccounted for. The Model Tenancy Act, therefore, fails to protect the rights of tenants in the informal rental market, and the tedious process of formalization further discourages landlords from transitioning to the formal rental market.


Akin to the mentioned shortfall, the Cabinet fails to consider affordability. With falling supply and rising demand, the rising prices demanded as rent is not surprising. The Act attempts to bridge this gap by providing incentives to landlords for rental usage and an eventual increase in supply. Given the dire need amongst the urban population currently, this plan of action seems to offer negligible relief to the population. Another significant issue relating to affordability is observed in demographics. The majority of the population that struggles with affordability belongs to Economically Weaker Sections (EWS). This section usually resides in unregulated slum areas and are therefore a part of the informal rental market. They are forced to turn towards informal renting due to the cheap prices demanded by landlords. The reason for these reduced prices can be observed in the worsened quality of housing offered. Since these conditions can not be questioned and the hassle of legal procedures has been avoided, the prices offered become feasible. EWS is a vulnerable section of the society that is regularly found suffering because of lack of shelter and income. The Cabinet, therefore, needs to consider affordability and adequate housing conditions for EWS in the Act that seem to be grossly neglected in current provisions.


The legislature’s neglect towards ground realities that exist in the form of discrimination in the rental market is also observed and criticised. Various sections of the society, including transgender people, unmarried women, same-sex couples, etc., struggle in finding rental housing, not due to issues of affordability but owing to the discrimination that they encounter frequently. The Act’s failure to acknowledge the discrimination that exists disappoints the citizens, and their trust in the constitution suffers. Keeping the above-stated criticisms aside, the population is also concerned about the model nature of the Act. States have always enjoyed the liberty of deciding Rent Laws and have therefore avoided a uniform set of laws applicable nationwide. These varying laws create confusion among the population and complicate rental agreements. The act fails to address this issue as it is suggestive in nature and therefore prevents the implementation of a uniform system for regulation and control of rent laws. Amidst this environment of restlessness and dissatisfaction, the relief that the Model Tenancy Act brings seems fickle, and the nation, therefore, requires a more organised and thought-out plan that considers various issues that plague the rental market[2].


The Way Forward

Given the range of shortfalls that renting faces, legislation cannot afford a selective approach for each issue. A suggested approach that can be opted by the government is to segregate and categorise these issues. Since rental markets are plagued with the issue of inequality, affordability and privacy the government can introduce acts that attempt to resolve these issues, while others can focus on the details of a rental agreement as was followed in the Model Tenancy Act. These acts that choose to deal with issues centred around fundamental rights may be mandated across the nation to establish a uniform framework across the country. This suggested act, however, needs to give enough liberty to states to decide on numerous details relating to the rental market. This approach would help create an environment of familiarity as it allows the discretion to include the conventions that have been previously instilled by various states. The informal rental market has also proved to be a topic of concern for the act.


While it seems difficult to completely transform the informal rental market to a formal one, certain incentives that can be considered regardless include a change of price ceiling. This would offer more liberty to landlords for renting their premises and the raised prices would act as an incentive. Another step that can be considered by the government is the simplification of the procedure required for the eviction of tenants. The current procedure is tiresome and causes delay and inconvenience to landlords. Simplification of this process would safeguard landlords from tenants who misuse their premises and would guarantee non-biased redressal. The newly introduced Model Tenancy Act is, therefore, a positive step towards understanding the population and its demands, but the legislation needs to take a giant leap in order to bridge all gaps that exist in the rental market and to create a utopian market for both landlords and tenants. This giant leap, however, would not be achieved by establishing minute details about the agreement and limiting the scope of roles played by both parties, but by taking a step back and analysing the macro image that gives a harsh reflection of our society and practicalities that exist in informal rental markets. The Model Tenancy Act does, however, act as evidence for a landmark evolution that has been witnessed in rental laws through its attempt to neutralize the power imbalance and therefore offers its population the optimism that these issues would also be considered and resolved in due time.

[1] The Model Tenancy Act, 2021; PRS Legislative Research, https://prsindia.org/billtrack/the-model-tenancy-act-2021. [2] The Model Tenancy Act, 2021; PRS Legislative Research, https://prsindia.org/billtrack/the-model-tenancy-act-2021.


 

[*] Arshita Girdhar is a law student from Jindal Global Law School, Sonepat, India and is interested in the intersection of constitutional law with the academic discourse and its current regime. The author may be reached out through arshita.girdhar@gmail.com.


Preferred Citation – Arshita Girdhar, “Model Tenancy Act, 2021: A Step Made in the Direction of a Giant Leap", Syin & Sern Law Review, Published on 28th August 2021.

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