Urban Development dept. informs on draft MTA, asks DCs to collect suggestions

Dimapur, Oct. 16 (EMN): The Ministry of Housing and Urban Affairs, government of India has formulated draft Model Tenancy Act (MTA) 2020 which provides a framework to the states and union territories (UTs) to either align their existing rental laws in line with MTA or adopt the same in its entirety.

The Model Tenancy Act will help in addressing the challenges in the rental housing sector by balancing the rights and interests of both the landlord and the tenant and create an accountable and transparent ecosystem for renting the premises in a disciplined and efficient manner. The Act will help various segments of society including migrants, formal and informal sector workers, professionals, students etc. in getting rental accommodation smoothly, an update from DIPR stated.

The MTA will also form the basis for amending existing laws or promulgating new state tenancy laws. The MTA, 2020 is an Act to establish rent authority to regulate renting of premises and to protect the interests of landlords and tenants and to provide speedy adjudication mechanism for resolution of disputes and matters connected therewith or incident thereto.

The Act along with background note has been uploaded in the websites of state government (nagaland.gov.in) and Urban Development department (ud.nagaland.gov.in).

Therefore, all deputy commissioners have been requested to collect feedback, comments or suggestions from hohos and public in their respective district and submit to the department on or before October 25.

Background on MTA

As per Census 2011, around 110 lakh houses were lying vacant in urban areas. One of the main reasons for non-availability of these houses for rental purposes is the existing rental laws of the states and UTs, which discourage renting. There is a segment of population especially migrants, who prefer rented accommodation as it offers affordability and flexibility with low entry and exit cost with an option to live near their ‘place of work’. The share of urban population has increased to 31.16% in 2011 as compared to 27.82% in 2001 and further urban population is projected to be 50% by 2050. A significant portion of this increase can be attributed to the migration to urban areas for various purposes such as education, employment, business, healthcare and better quality of life. People also migrate from one area of the city to another area.

Accordingly, in line with the vision of the prime minister of ‘Housing for All’ by 2022, MTA has been prepared with the objective of balancing the interests and rights of both the landlord and tenant; and to create an accountable and transparent ecosystem for renting the premises in a disciplined and efficient manner. It will enable creation of adequate rental housing stock for various income segments of society including migrants, formal and informal sector workers, professionals, students etc.; increase access to quality rented accommodation; and enable gradual formalisation of the rental housing market. It will help overhaul the legal framework with respect to rental housing across the country. It is expected to give a fillip to private participation in the rental housing sector thereby addressing the huge housing shortage.

Existing states rental laws have long drawn legal provisions, which result in lengthy litigation to resolve disputes. A ceiling on rent has further reduced the quality and quantity of rental housing stock, resulting in low rental yields, which dissuade homeowners from renting premises. This has made rental housing financially unattractive resulting in an informal sub-standard rental market lacking basic amenities. Further, the affordability to own a house is a challenge especially for low-income households. Therefore, it is imperative to promote rental housing to help in bridging this gap.

MTA will enable unlocking of vacant premises for rental purposes and create a vibrant, sustainable and inclusive rental market. MTA will promote growth of the rental market thereby attracting investment and promote entrepreneurial opportunities in the rental housing sector.

Features

After commencement of MTA, no premises to be rented except by an agreement in writing on mutually agreed terms.

• MTA to be applicable to residential and commercial tenancies.
• MTA to be applicable to the whole of the state and UT i.e. urban and rural areas.
• Rent to be fixed by mutual agreement between landlord (lessor) and tenant (lessee).
• MTA to be applicable prospectively and the existing tenancies shall continue to be governed by the respective extant rental laws of the states and UTs.
• MTA to provide for a fast-track quasi-judicial mechanism for adjudication of disputes.
• MTA to be applicable to all tenancies with no monetary threshold.

The terms of agreement shall be binding upon successors of landlord as well as tenant for the remaining period of the tenancy agreement. Sub-letting is not permitted without execution of supplementary agreement between landlord and tenant, it stated.

If the term of tenancy ends at the time when locality (where rented premises is situated) experiences any force majeure event, the landlord shall allow the tenant to continue possession of premises for one month from the cessation of such force majeure event on the same terms of prevailing tenancy agreement.

Security deposit for residential premises shall not exceed two months’ rent and in case of non-residential premises it shall be as per the terms of tenancy agreement subject to a maximum of six months’ rent. Security deposit shall be refunded by the landlord at the time of taking over vacant possession of the premises, after making due deductions, if any.

Recovery of possession of premises by the landlord on certain grounds

Landlord is entitled for double the monthly rent for the first two months and thereafter, four times of the monthly rent in case of default by tenant to vacate the premises after termination of tenancy.

It is expected that State tenancy laws based on the draft Model Tenancy Act will be beneficial for both landlords and tenants, thus providing a win-win situation. The provisions of MTA emphasis on supremacy of rent agreement, executed between the parties on mutually agreed terms, which will minimise the possibility of disputes and in case of any dispute, same shall be resolved quickly through the speedy dispute redressal mechanism prescribed in the proposed legislation.

Given the far reaching impact of the proposed legislation, stakeholders are hereby requested to send their comments or suggestions on the draft Model Tenancy Act by October 31.