The Union Cabinet on Wednesday approved the Model Tenancy Act, aiming to bring about wide-ranging reforms, including setting up of separate rent authorities, courts and tribunals in every district to protect the interest of both the owner and tenant.
Under the Act, for residential premises, tenants will have to submit a security deposit of maximum two months' rent, while in case of commercial property, six months rent will have to be deposited.
States and union territories can adopt the Model Tenancy Act (MTA) by enacting fresh legislation or they can amend their existing rental laws suitably.
The government said that it is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage in the country.
The Act mandates for written agreement for all new tenancies, which will have to be submitted to the concerned district 'Rent Authority'.
The government said that the MTA will be applicable prospectively and will not affect existing tenancies. Rent and duration of tenancy will be fixed by mutual consent between owner and tenant through a written agreement.
According to the Act, if tenant fails to vacate the premises let out on rent in accordance with the tenancy agreement, he or she will be liable to pay the landlord twice the monthly rent for the first two months and then four times till the latter continues to occupy the said premises.
"If the landlord fails to make any refund, he shall be liable to pay simple interest to the tenant at such rate as may be prescribed from time to time on the amount which he has omitted or failed to refund," it stated.
If there is any dispute emerges between the owner and tenant, they will have to first approach 'Rent Authority'. If any party is not satisfied with the Rent Authority's order, 'Rent Court' can be approached and then 'Rent Tribunal'.
Union Housing and Urban Affairs Minister Hardeep Singh Puri said that the move will help overhaul the legal framework with respect to rental housing across the country. During a press conference, Puri said that according to the Census 2011, more than 1 crore houses were lying vacant in urban areas across the country.
Making the 1 crore vacant houses available on rent will complement the vision of ‘Housing for All by 2022', the minister said.
Asked about the reason behind large number of houses lying vacant, an official in the ministry said that most owners do not want to give their property on rent, fearing that tenants will not vacate it, and they will illegally occupy the property.
"With the Model Tenancy Act, there would now be a sense of security among owners as roles of both the owner and tenant have been defined in the Act," the official told PTI.
The Act says that no landlord or property manager can withhold any essential supply to the premises occupied by the tenant.
According to the ministry, tenants will not be evicted during the continuance of tenancy agreement unless otherwise agreed to in writing by both the parties.
Under the Model Tenancy Act, unless otherwise agreed in the tenancy agreement, the landlord will be responsible for activities like structural repairs except those necessitated by damage caused by the tenant, whitewashing of walls and painting of doors and windows, changing and plumbing pipes when necessary and internal and external electrical wiring and related maintenance when necessary.
On his part, the tenant will be responsible for drain cleaning, switches and socket repairs, kitchen fixtures repairs, replacement of glass panels in windows, doors and maintenance of gardens and open spaces, among others.
"Where the landlord proposes to make any improvement in or construct any additional structure on any premises, which has been let out to a tenant and the tenant refuses to allow the landlord to make such improvement or construct such additional structure, the landlord may make an application in this behalf to the Rent Court," the Act stated.
Tenant will not carry out any structural change or erect any permanent structure in the premises let out on rent without the written consent of the landlord, it also stated.
The Act stated that the state government and union territories, in consultation with the jurisdictional high court, can appoint district judge or additional district judge as 'Rent Tribunal' in each district.
Additional district collector or additional district magistrate or an officer of equivalent rank will be appointed to the 'Rent Court'.
"The district collector or district magistrate shall, with the previous approval of the state government/union territory administration, appoint an officer, not below the rank of deputy collector, to be the Rent Authority within his jurisdiction," the Act said.
In a statement, the government said,"The Union Cabinet, chaired by Prime Minister Shri Narendra Modi, has approved the Model Tenancy Act for circulation to all states/union territories for adaptation by way of enacting fresh legislation or amending existing rental laws suitably."
"The Model Tenancy Act aims at creating a vibrant, sustainable and inclusive rental housing market in the country. It will enable creation of adequate rental housing stock for all the income groups thereby addressing the issue of homelessness," it stated.
The Act will facilitate unlocking of vacant houses for rental housing purposes, it said.