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An Analysis of Model Tenancy Act 2021

The right to shelter is a fundamental right provided to the citizen under Article 21 of the Constitution. In the leading case of Chameli Singh v. State of Uttar Pradesh, the court while upholding that right to shelter is a fundamental right said:
Shelter for human being is not mere protection of his life and limb. It is a home where he has the opportunity to grow physically, mentally, intellectually and spiritually Right to shelter is a fundamental right guaranteed under Article 19(1)(e) read with Article 21 of the Constitution of India. In the past decade, India has seen a tremendous increase in urbanization which has caused people to move from rural to urban areas in search of better life prospects which led to the overcrowding in these cities which were not yet ready to cater to the housing needs of such large population and this led to the creation of roadside housing and slums.

Presently, the rental laws in India are governed by the Rent Control Acts of individual states. However, these acts have many loopholes which deter people from investing in the rental real estate business. Under the present Rent Control Acts, the amount of rent that the landlords can ask for has to be a percentage of the amount they had invested in its construction. This sets disparity between the market rent and the one fixed by the act. The act further makes it difficult for landlords to evict their tenants which in turn hampers the resale of a tenanted property.

The present rental laws discourage tenants too from moving into a rented house as they do not put any upper limit on security deposit that landlords can ask for. Furthermore, there is no provision mandating landlords to give the receipt of payment of rent to the tenants as a result of which tenants are under the perpetual threat of eviction on a false charge of non-payment of rent. These are some of the key reasons which act as a major disincentive for both landlords and tenants from investing in the rental housing business.

The Union Cabinet approved the Model Tenancy Act which tries to resolve the issue of shortage of housing in India by creating a sustainable and vibrant rental housing system. The draft for the same was brought in the year 2019. This act aims at giving a formal structure to the rental housing market in our country and thus dismantle the informal setup. The act would if incorporated by the states in their legislative systems, replace the obsolete and archaic rental laws which act as huge deterrent for unlocking houses in India.

Some Key Features Of The Act
This act clearly defines the obligations and powers of both tenants and landlords, thus minimizing the occurrence of petty issues between them. Under the present informal structure, houses are given on rent based on informal oral agreements which in several cases later becomes a bone of contention between the parties involved. This act mandates the creation of a district Rent Authority where the parties have to submit a written agreement for tenancy specifying the rent amount and the duration for which the property has been rented.

Another major grievance the act seeks to address is the abrupt increase in rent by landlords. One of the main reasons for the unconcealed hostility between landlords and tenants is that under the informal house rental system, rent is decided at the whims and fancies of the landlord. This act mandates a minimum of 3 months' notice to be given to the tenant before hiking the rent.

In a number of megacities, the present rental housing system enables the landlords to seek as hefty as 12 months' security deposit which leads to nothing but sheer exploitation of tenants. This plight of tenants is addressed by this act by putting a cap over such deposit, which cannot be for more than 2 months in case of residential premises and not for more than 6 months in case of commercial premises. The act further balances the power between landlord and tenant by restricting a landlord from cutting supply of any essential service. 
Furthermore, as per section 23 of the act, the tenant has to vacate the premise at the end of tenancy and in case of non-compliance, they shall be liable to pay an enhanced rent. The act also restricts the tenant from sub-letting the premise except for cases where they already had a supplementary agreement for the same.

Several houses stay locked because the owners fear the situation where there might arise some dispute with their tenant in which case, to evict them they will have to take recourse to the already overburdened civil courts. This act enables a 3-tier speedy justice mechanism. The parties to such dispute have to first approach the Rent Authority and in case they are not satisfied with the order they can approach the Rent Court followed by Rent Tribunal which will have a final say in the matter. The Rent Court or Rent Tribunal, as the case may be, needs to expeditiously dispose the within a time span of 60 days.

Challenges Ahead
The Model Tenancy Act deals exhaustively with all the landlord-tenant issues. However, since land is a state subject under List II of seventh schedule, this act is just a model act and the states have the option to either adopt the act as it is or amend their existing laws. A timely implementation of this act can be a challenge.

Previously, we have seen how delay and dilution done by the states in adoption of RERA Act, which was also an act brought by the central government on state subject, became a challenge in its proper and uniform implementation. Furthermore, this act has been made applicable prospectively, which means that it will have no bearing upon the existing tenancy agreements which can continue with the arbitrary practices such as asking for hefty security deposits or sudden rent increase.

If the above-mentioned issues are properly addressed then the act would become more inclusive and beneficial for the stakeholders.

As per the data of 2011 census, more than one crore houses in India are lying vacant. The Model Tenancy Act that aims at bringing transparency and accountability in the rental housing business is a much-welcomed step and has the potential to resolve the issue of housing shortage in India. The Model Tenancy Act has effectively addressed the problem of modern rental housing issues and tries to strike a balance between the rights and obligations of both tenant and landlord.

It minimizes the trust deficit between tenant-landlord thus encouraging people to invest in the rental real estate business. The act, if properly and timely implemented can help India achieve its aim of housing for all by 2022. Furthermore, it will also help boost our economy by encouraging people to invest in rental housing business.

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