What is the New Model Tenancy Act?
Union Finance minister Ms. Nirmala Sitharaman, in her budget speech this year had proposed to revamp the archaic tenancy law. In her proposal, she intended to help both the landlords and the tenants and create a better renting ecosystem. It includes setting up of Rent Authority, Rent Court and Rent Tribunal which will monitor and ensure adherence to tenancy laws by both the parties and settle disputes within 60 days. However, housing is a state subject and the enforcement of this law would be incumbent on states.
Highlights of The Proposal
In a big relief to tenants the new proposed law caps the security deposit, which is a one-time refundable amount landlord ask as a cover for potential damage to their property during the tenancy period, to up to 2 months of rent for residential properties. Usually, in most of the cities, landlords demand anywhere between 5 months to 11 months of rent as a security deposit. This becomes a big deterrent in renting as young people who have either just started working or moved to a new city for studies find it extremely difficult to arrange for such a large sum at one go.
Mid-Year Rent Increment
According to the proposal, landlords can’t increase the rent mid-year without intimating tenant at least three months in advance. The three months time give tenants sufficient time to look out for other accommodation if they decide to discontinue. Mid-year rent increment and harassment are more common in PGs, Hostels, or where the apartment is maintained by middlemen or brokers.
The obligation of normal wear and tear has always been on the landlord and this act re-enforces this. Which means routine maintenance like whitewashing and repair would fall upon the landlord and they can’t deduct a part of the security deposit for normal wear and tear issues.
This was the prime reason why I started rentbaba.com, and I’ve written a detailed article on Quora- “Strangers in My House” . There have been multiple instances when landlords or their agents barged in the rented house without any notice to the tenants. The act proposes that the landlord will have to give written notice to the tenant along with the reason for the visit at least 24 hours in advance.
I believe the above issues were the main pain points for tenants across cities in India and the finance minister has tried to address just those. However, it’s not completely lopsided towards tenants and there is something for the landlords too. Among others, it provides very strict guidelines for the vacancy of the premise after the completion of the tenancy and the due compensation otherwise.
The proposal is currently open for consultations and once it comes into effect and implemented by the states, the rental housing market should see an increased trust between the two parties. The setting up of Rent Court and Rent Tribunal would ensure disputes are settled in quick time.
I will keep updating this post once I get more information about the development in this area. Meanwhile, if you have any query please shoot them in the comments section.