THE MODEL TENANCY ACT, 2021

Central Government on 2nd June 2021, gave acceptance to THE MODEL
TENANCY ACT, 2021(ACT), to regulate renting of premises and to protect the interests of landlords and tenants, and provide speedy adjudication
the mechanism for the resolution of disputes between them across the country.

Scope & Applicability of the ACT

State Government/Union Territory Administration can make rules for
carrying out the provisions of this ACT which shall not be inconsistent
with the provisions of this ACT. ACT is applicable only prospectively and it will have no retrospective effect on the existing tenancies.

ACT is applicable to all kind of tenancies which include residential or
commercial properties in both urban and rural areas with an exception
for:
o Hotel, lodging house, Dharamshala, and Industries.
o Premises owned or promoted by the Central Government or State Government or Union territory Administration or local authority or
a government undertaking or enterprise or a statutory body or
Cantonment Board;
o premises owned by a company, University, or organization gave on
rent to its employees as part of the service contract;
o premises owned by religious or charitable institutions as may be
specified in the notification; premises owned by Waqf, trust, or category of buildings specifically exempted in the public interest by notification.

Salient Features of the ACT

Tenancy Agreement:
o Rental, Advance, Duration, Increment of Tenancy shall be strict as
per the Terms and Conditions of the Tenancy Agreement.
o Registration of the Tenancy Agreement in prescribed template jointly to Rent Authority within 2 months or else by any party individually within 1 month after expiry of this 2 months. Failure to which this ACT shall not be applicable to the parties. After registration of the tenancy agreement, each of the Landlord and Tenant will be provided with a Unique Identification Number.

Security Deposit:
o Cap on Security Deposit to be paid by the Tenant:
▪ 2 Months of Rent for Residential Premises and 6 months of Rent for Non-Residential Premises. The security deposit shall be refunded to the tenant on the date of taking over vacant possession of the premises from the tenant, after making due deduction of any liability of the tenant.
▪ No Ceiling on the upper limit of the rent. Rent Control Act will
be repealed.

Sub-Letting:
o Tenant can sub-let the premises by entering supplementary
agreement with the Landlord
Property Manager:
o Property Manager given more power to represent the Landlord in
managing the property, negotiation, and collection of rent and
enforcing of a tenancy agreement.
o Guidelines on the responsibility to maintain the premises.
o Essential services of the tenant cannot be blocked by the Landlord or Property Manager for whatsoever reason it may be.

Dispute Resolution:
o Formation of Rent Authority, Rent Court, and Rent Tribunal to
resolve the dispute within 60 days from the date of receipt of the
application or appeal.
o Proceedings and Orders passed by Rent Court and Rent Tribunal
will as per the civil court however it will be guided by the principles
of natural justice and shall have all power to regulate their own
procedure.
o Civil courts barred from entertaining any suit or proceeding which
relates to the provisions of this Act
o Rent Court will be resolving dispute related to the tenancy agreement
and will not pass order related to title or ownership of premises

Execution of Orders:
o Heavy penalty (2 times of the rent for the 1st two months and 4 times
of the rent after two months till the time of vacating) to be paid by
the Tenant for not vacating the premises on the expiration of the
tenancy agreement or termination of tenancy by an order or notice
under the provisions of this ACT.
o Rent Court may take the help from the local body or police for the
execution of the final orders.

Conclusion:

• ACT will help Resolving Tenancy Disputes in a shorter and time-bound
• manner bringing more investment and confidence in the Leasing Industry by avoiding lengthy court battles.
• Everyone has to wait till the ACT is notified by their respective State/Union territory although it’s not mandatory to implement the ACT in their territories.
• Recognition of Property Managers in the ACT will reduce challenges of Landlords.
• No clarity in the ACT on Lease Agreements executed under the Transfer of Property Act, 1882 Or the Leave and Licence agreement executed under the Indian Easements Act, 1882.

• Not Mandatory provisions for the Registration of Tenancy Agreement with the Rent Authority
• No clarity for the registration of the Tenancy Agreement after the lapse of the statutory time period.
• No clarity on how to submit the documents to the Rent Authority.
• Tenancy Agreements are generally private and confidential between the parties, but after this ACT, the Tenancy Agreement will become a Public Document and details of which will be accessible to all.
• Cap on Security Deposit will give financial relief to the tenants and on the other hand bring financial stress to the Landlords.
• Repeal of Rent Control Act may result in financial exploitation of Tenants by way of higher rent and its increment.
• There is uncertainty if there will be any charges for the registration of the Tenancy Agreement or its renewal.
• Guidelines on maintenance will help parties to negotiate effectively on sharing their responsibilities. If the terms and conditions of maintenance are not covered clearly in the Tenancy Agreement, then the guidelines of the ACT shall prevail.
• The establishment of Rent Authority, Rent Court, and Rent Tribunal will bring additional burden to the state exchequer
• Strict compliance and execution of the orders passed by the ACT will have to be done otherwise ACT will lose its relevance