Key Features of the Model Tenancy Act, 2021

The Union Cabinet has approved The Model Tenancy Act, 2021 on 2nd June 2021 for adoption by states and Union Territories. The Act addresses matters such as balancing the interests of the landlord and tenant, creating sufficient and affordable rental premises, enabling formalisation of the rental housing market, unlocking vacant premises for rental purposes, and encouraging private participation in the rental sector.

The law states the following conditions concerning tenancy, eviction and subletting:-

1. Rental Agreement– As per the law, the tenant and the landlord must sign a written agreement while renting any premises. The agreement must specify rent payable, the period for the tenancy and other related terms.
2. Security Deposit– For residential premises, the security deposit is capped to two months’ rent. Whereas for non-residential premises, it is capped to six months’ rent.
3. Eviction- The rent authority may order the tenant to evict the premises on specific grounds such as refusal to pay the agreed rent, failure to pay rent for more than two months, misuse of premises even after written notice, structural change or parting of possession of part/whole of the premises without any written consent of the landlord.
4. Sub-letting– the Model Act prohibits sub-letting unless allowed through a supplementary agreement. Within two months of execution of such agreement, the landlord and the tenant are jointly required to inform about sub-letting to the rent authority.

Apart from the above terms and conditions, the Model Act establishes a three-tier quasi-judicial mechanism for adjudication of disputes. It will consist of a Rent Authority headed by the Deputy Collector, a Rent Court headed by Additional Collector or Additional District Magistrate, and Rent Tribunal headed by District Judge or Additional District Judge. The Civil Court will not have jurisdiction over the matters pertaining to the provisions under the Model Act.

The Model Act also specifies the timelines for adjudication of cases by all three authorities concerning eviction and payment of rent. 

Housing is a state subject under the Seventh Schedule of the Indian Constitution. Hence, the Model Act is a suggestive framework for states to follow for regulating rental housing and agreements. However, the Model Act’s effectiveness will depend upon its adoption by the states.

For any clarifications/feedback on the topic, please contact the writer at namita.shah@cleartax.in