The Union government on Wednesday cleared the Model Tenancy Act, which offers legal protection to both owners and tenants. According to realtors, the new Act erases many legacy issues associated with renting residential properties and goes a long way in formalising the sector. But how significant a difference will it make to those renting houses and to the landlords? Anuj Puri, Chairman, Anarock Property Consultants shares his observations.
What are the biggest changes or highlights?
The government has listed guidelines that enforce rental contracts and protect the rights of both landlords and tenants. Some notable features include:
How much will the security deposits be?
Security deposit has been capped to a maximum of two months’ rent in case of residential property, and six months in case of non-residential property. It shall be refunded by the landlord at the time of taking over vacant possession of the premises after making all due deductions, if any.
When will the Act kick in?
The Act shall come into force on such date as the State Government or Union territory Administration may, by notification in the Official Gazette, promulgates it. Different provisions of this Act can be promulgated on different dates.
Can those who have rented houses ask for agreements to be reworked?
The tenant may request the landlord for renewal or extension of the tenancy, within the period agreed to in the tenancy agreement, and if agreeable to the landlord, may enter into a new tenancy agreement with the landlord on mutually agreed terms and conditions.
And do the states/union territories have to notify for the Act to apply?
Yes, the Act will come into force on such date as the State Government/Union Territory Administration promulgates it by notification in the Official Gazette.
Responsibility of owners and tenants according to the act
What about those renting commercial properties? What are the benefits they stand to gain?
Post the pandemic, several commercial tenants who couldn’t pay their rents tried to invoke the ‘force majeure’ clause. But it was not laid out exhaustively under the law, and as such its applicability as seen largely depended on the language of the rental agreement and the interpretation by courts henceforth.
However, the new Act clearly defines the force majeure clause. According to it, ‘force majeure’ means a situation of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature affecting the habitation of the tenant in the premises let out on rent. This will go on to benefit the tenants.