Analysis of the Model Tenancy Act 2019

Having a roof over a person’s head and having a place to live is a fundamental right of every person. Providing a better standard of living, along with a shelter over every citizen’s head is the duty of every state and that it is liable for implementing laws for the same. It is also the right of every citizen to not only demand a roof over their head but a proper place which is sufficient to live in and which gives them a living standard which not just fulfill the bare minimum requirement for a living but the requirement of living a happy life. The Right to Shelter has been guaranteed under Article 21 and Article 19 (1)(e) of the Constitution of India, under various cases by the Supreme Court, in the case of Chameli Singh vs. State of UP.^[1], where the court held that-

“Shelter for a human being is not mere protection of his life and limb. It is home where he has opportunities to grow physically, mentally, intellectually, and spiritually. The right to shelter includes adequate living space, safe and decent structure, clean and decent surroundings, sufficient light, pure air and water, electricity, sanitation, and other civic amenities. The right to life guaranteed in any civilized society implies the right to food, water, a decent environment, education, medical care, and shelter. Right to shelter is a fundamental right guaranteed under Article 19(1) (e) read with Article 21 of the Constitution of India”

[Emphasis Supplied]

In various other cases like U.P. Avas Evam Vikas Parishad vs. Friends Cooperative Housing Society Ltd.^[2], State of Karnataka vs. Narasimhamurthy^[3], and the Ahmedabad Municipal Corpn. vs. Nawab Khan Gulab Khan^[4], the same idea about providing shelter was upheld. Therefore, making available housing is a basic need of life^[5].

It is also due to the rapid shift of the Indian society from villages to the cities, for having a greater source of earning and having a vast job market in the city. The rural population as well as the urban population keeps moving from one state to another in order to provide a better living standard to their families. This has resulted in overcrowding in the cities. The cities are not capable of housing such a large population, which results in the creation of temporary or permanent slums and roadside housing. It also results in the landowner exploiting the weaker party in the contract of tenancy.

This terse article delves into the recently drafted Model Tenancy Act, 2019 by the Ministry of Housing and Urban Affairs for the consideration of the states and suggestive holistic changes in the state legislations to take care of all stakeholders. It specifically discusses the need for the Act and the benefits it perpetuates for the landlords and tenants.

Disadvantages of the Current Laws and Need for implementation of Model Tenancy Act 2019

The current situation in India is that the center has very little to no control over the housing and renting laws of the states. Each state has its own laws pertaining to this sector and the states that do not have such laws follow the Transfer of Property Act, 1882 provisions. As the renting of houses is a subject matter listed under List II of the Indian Constitution which gives the sole power to the states to make laws regarding this matter^[6]. But this does not make the Model Tenancy Act, 2019 (hereinafter referred to as “MTA”) by the center completely redundant. India follows the federal model of governance and therefore the center has a greater say or a guiding power that drives state laws.

Renting and housing would be best served if the states spiritedly incorporate the MTA provisions in their respective state legislation on rent and housing as it will not only garner dividends for the tenants or landlords but also for the states as MTA focuses on clarity over confusion and balance of rights and obligations of both landlord and/or tenant. The MTA aims at resolving various problems that currently prevail in the renting sector that makes it impossible for the lower-income group of people to get a place on rent at an affordable cost in order to live peacefully.

The problems with the current arbitrary state laws are manifold, to highlight the common problems in all of them, we can group them under particular heads. Such as no remedy being available to a landlord when the tenant does not vacate the premises after the termination of the contractual time period of the lease. Currently, there are no strict laws in place that deter the tenants from doing so and there is always a lingering fear within the landlords of losing control over their premises. Then the tenants are also at a loss when it comes to giving a security deposit to the landlords before shifting into the house. The security deposit is also not controlled by any law that provides for a maximum upper limit. As a result, various tenants end up paying more than the required money to the landlord. This arbitrary practice is one of the biggest reasons why staying in a rented household does not attract people from the lower to the middle class of society. Hence it also leads to the formation of illegal housing facilities such as slums.

There are also times when the tenants are harassed unnecessarily by the landlord with a false suit regarding rent payment. The landlords are able to make such false claims as no law mandates them to give a receipt of payment back to the tenant after they have paid the rent. So, the requirement of having evidence after every such transaction involving money needs to be there in the form of provision in the laws. There is another huge problem from the side of the landlords that their property for the payment of rent is priced at the cost that the owner incurred during the time of the construction of the house and not what the present market rate is of the house. This creates a huge divide between the money the landlord could rent their houses at than they originally are required to rent at. In order to provide better housing facilities to people, avoid overcrowding and creation of slums, and also to provide a mechanism that ensures the benefit is provided to the owner of the house or land as well, there is a need to implement the MTA, 2019.

Scope and Advantages of MTA

MTA has been successful in understanding the modern concerns of the renting sector and has holistically incorporated provisions that benefit both landlords and tenants as well as eradicate the fear of landlords. The scope of the act includes any premises, other than a hotel, lodging house, Dharamshala or inn, etc.^[7]

Under Section 3 of the Act, Model Tenancy Act shall not apply to-

Any premise(s) owned or promoted by the Central/ State/ UT Government or Local Authority or a Government undertaking or enterprise or a Statutory body or Cantonment board;
Premises owned by a company, university or organization given on rent to its employees as part of the service contract;
Any premises owned by religious or charitable institutions as may be specified by notification;
Any premise(s) owned by any trust registered under the Public Trust Act of the State;
Any premise(s) owned by Wakfs registered under the Wakf Act, 1995;
Any other building and/or category of the building(s) specifically exempted in the public interest through notification.

But it allows the owner of such places and who entered into an agreement for any of category from (a) to (f) to be regulated by the Act and the owner may inform of same to the Rent Authority.

Model Tenancy Act – Advantages to Landlords

A recurring theme in the draft act is the need for a written agreement to rent the premises and the majority of the relationship and rights and obligations stemming from the agreement itself that they have entered into willingly. MTA draft allows the landlord to calculate the rent for their property at an amount which is closer to the real-time market rate of the property and also revise it or fix it if the same is agreed by the tenant in the agreement.^[8] It gives greater autonomy to the landlords in matters related to the eviction of a tenant whose lease term has come to an end but who is still not ready to vacate the premises. The landlords no longer need to fear losing their property from a tenant who has breached the lease agreement. Also, in such circumstances, the landlord is also accorded with the right to ask for compensation from the tenant^[9].

It is mandatory for the tenant to take consent in writing of landlord if s/he plans to sublet the property and along with that tenant need to, within the time period of one month of such commencement or termination of sub-tenancy, provide all the requisite and relevant details of sub-tenancy including the details of security, termination period, date of commencement, etc. this has to be performed.^[10] If due to the action of the tenant, a liability upon the tenant arises, then the landlord has been given a right to make deductions from the security deposit paid by the tenant.^[11] The landlord is permitted to deduct, for the scheduled or agreed repairs which are the obligation of the tenant and as provided by the Schedule II in the Act, from tenant’s security deposit with the landlord or from the periodic rent in case repair expenses exceed the security deposit.^[12] There is also a complaint mechanism in place, for whenever a tenant cut-offs or withholds essentials supplies or services, then the Landlords can file an application to the Rent Authority and which shall conduct inquiry and complete the inquiry within one month. After inquiry, suitable action can be taken by the Rent Authority.^[13]

Earlier, in a scenario where the tenant overstays the term mentioned in the rent agreement, the landlord did not have the right to claim compensation for the breach. But now, if a tenant overstays, the landlord shall be entitled to a compensation of double of the monthly rent for two months and four times the monthly rent thereafter.^[14] Landlords have greater power in terms of any new improvement or construction they want to undertake regarding their property that is on rent, with the permission of the Rent Court.^[15]

Model Tenancy Act – Advantages to Tenants

The MTA mentions that in case a tenant dies, the successor of that tenant will have the same rights and obligations as mentioned in the tenancy agreement for the remaining duration of rent agreement and tenancy.^[16] Immunity from increased rent is also granted to the tenant in case of fixed tenancy which means that there may not be any increase in the rent unless the mechanism of increase or amount of increase is explicitly laid in the Tenancy Agreement.^[17] Several of the basic principles that are very important are also mentioned in the MTA. Security deposit taken from the tenant has to be refunded to the tenant when the tenant vacates the premises and landowner takes over it, but such a refund is adjustable of the liability that tenant owes to the landlord.^[18] To safeguard the tenant from fraudulent cases of rent payment, now it is mandatory of the landlord to give the tenant a rent receipt as the acknowledgment for receiving the rent money.^[19]

When the rent and other charges become due and the landlord refuses to receive the payment of rent for certain reasons consecutively for 2 months, the tenant is allowed to deposit that rent money to the Rent Authority in place of the landlord. This again saves the tenant from false eviction and litigation.^[20] Just like the landlord can deduct a certain amount from the security deposit, the same way if the landlord refuses to act on their obligations towards the tenant and the property such as scheduled or agreed on repairs, etc., then the tenant can deduct that amount from the periodic rent payment.^[21]

In cases, where during the tenancy period, the property has become unliveable due to the fault of the landlord as a result of landlord refusal to carry out the repair as agreed and called upon by tenant in writing, then the tenant is allowed to move out of the property either after giving a notice of fifteen (15) days or with the permission of the Rent Authority.^[22] Tenants are entitled to get a refund of such an advance rent or other payment made to the landlord prior to the landlord seeking the recovery of possession. This right of recovery of possession of landlord is by virtue of Section 2 (21) of the Model Tenancy Act, 2019.^[23]

Conclusion

As a result, the draft of the MTA is already a promising enough piece of law which is under review from the states and the union territories. The law has the power to change all the current power dynamics within the renting sector and accord equal amounts of rights to both the tenants as well as the landlords. Creating a safe practice of renting is the most crucial aspect of the act that is very inviting to the new landowners who were earlier hesitant in giving their property for rent.

Economically this act is also very appealing for the people who are willing to invest in this business of renting premises and probably further the agenda of the government of providing adequate housing to all, by 2022 in case of attractive returns and a large investment. The certain classes of people who are affected by the deficit of housing properties due to excessive rents or just unjust demands by the powerful party in the contract. All the reasons for avoiding renting a place or living fearfully in a rented place are very well taken care of by the model act. This will also solve the problem of vacant homes in India by using them for providing other housing.

Model Tenancy Act holds the power of changing the characteristics and dynamics of the renting sector in India for the benefit of the country. Hence, it would not be rich to say that if the Indian housing and renting sector has to flourish in consonance with the needs of the economy, scarcity of living space and the impulse to attract investment and to take care of the segment of the population at the pyramid of the society, states need to implement the spirit of the MTA, 2019 so as to comprehensively deal with the challenges plaguing this sector and also to reduce differences and disputes’ compounding the backlog.

References

Chameli Singh vs. the State of U.P., (1996) 2 SCC 549
U.P. Avas Evam Vikas Parishad v. Friends Cooperative Housing Society Ltd., 1995 Supp (3) SCC 456
State of Karnataka v. Narasimhamurthy, (1995) 5 SCC 524
Ahmedabad Municipal Corpn. v. Nawab Khan Gulab Khan (1997) 11 SCC 121
Vinod Kothari Consultants, An analysis of Model Tenancy Act, 2019, Housing Finance Blog (July 26, 2019)
Id.
Model Tenancy Act, sec 2 (e)
Vinod Kothari Consultants, An analysis of Model Tenancy Act, 2019, Housing Finance Blog (July 26, 2019)
Id.
Model Tenancy Act 2019, sec 7
Model Tenancy Act 2019, sec 11(2)
Model Tenancy Act 2019, sec 15(3)
Model Tenancy Act 2019, sec 20
Model Tenancy Act 2019, sec 22
Model Tenancy Act 2019, sec 25
Model Tenancy Act 2019, sec 6
Model Tenancy Act 2019, sec 9(4)
Model Tenancy Act 2019, sec 11(2)
Model Tenancy Act 2019, sec 13(2)
Model Tenancy Act 2019, sec 14
Model Tenancy Act 2019, sec 15(4)
Model Tenancy Act 2019, sec 20
Model Tenancy Act 2019, sec 23