The Model Tenancy Act, 2021 is all about setting up a Rent Authority to oversee renting homes and make sure both landlords and tenants are treated fairly. This will speed up the process of resolving disputes. The main goal is to make sure everyone in the country can find a good place to rent and put an end to homelessness. It will also make renting homes a more organized and regulated part of the housing market.

What was the Need for Model Tenancy Act?

• Current Rental Laws Stifle Rental Housing Growth: The current rental laws are stifling the growth of rental housing and making property owners hesitant to rent out their vacant homes due to the fear of losing their properties.
• Promoting Transparency and Fairness: One potential solution to address this issue is to introduce more transparency and fairness into the rental system. This can help strike a balance between the interests of both property owners and tenants.
• Alarming Number of Vacant Houses: According to the 2011 Census, there were more than 1 crore vacant houses in urban areas. This is a concerning number, considering the increasing urban population.
• Urbanization on the Rise: The trend of urbanization in India is on the rise. In 2011, nearly a third of the population lived in urban areas, and this proportion is expected to grow to more than half of the population by 2050, mainly due to migration.

Key Features of the Model Tenancy Act

Rent Control Authority:

• Every district must have a Rent Control Authority to oversee property rentals.
• This authority will ensure fairness for both landlords and tenants.
• It also offers a quick way to resolve rental disputes.

Security Deposit Rules:

• The law limits the maximum security deposit.
• For residential properties, it’s capped at two months’ rent, while for non-residential properties, it’s set at six months’ rent.
• This rule helps standardize security deposits, preventing variations by location.

Rent Increases:

• Rent can only be raised as agreed upon in the rental contract.
• If there’s no agreement, the landlord must give a written notice three months before changing the rent.

Moving Out of a Rental:

• The law outlines a procedure for tenants to move out.
• If the landlord meets all the terms in the rental agreement, the tenant must leave.
• Failure to do so can result in penalties, such as double rent for two months, increasing to four times thereafter.

Entering the Rental Property:

• Landlords or property managers can enter rented properties under certain conditions.
• They must give the tenant written notice at least 24 hours in advance.
• This ensures privacy and proper notice for tenants.

Written Rental Agreements:

• A written agreement between the property owner and tenant is mandatory.
• This safeguards both parties by clearly outlining the terms and conditions of the rental arrangement.

Significance

• The authority will provide a speedy mechanism in resolving disputes and other related matters.
• It will help overhaul the legal framework with respect to rental housing across the country.
• It will enable creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness.
• It will enable institutionalisation of rental housing by gradually shifting it towards the formal market.
• It is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage.

Challenges

States have the freedom to decide whether or not to adhere to the Act, particularly in matters related to land and urban development, which fall under their jurisdiction. Similar to the situation with the RERA (Real Estate Regulation and Development Act), there is concern that some states might opt not to comply with the recommended guidelines, potentially weakening the core principles of the Model Act.

Read Also: Supreme Court’s order on Regarding Real Estate Regulations Act (RERA)