What does the Model Tenancy Act, 2021 mean for companies and individuals in India?

Date of Approval – 02 June 2021 | Press Release
Legal Framework – To be enacted by respective State / Union TerritoryGovernment Authority – Ministry of Housing & Urban Affairs (MoHUA), Government of India
Web-linkCopy of the Act

The Central Government in India has approved the Model Tenancy Act, 2021 which is to be sent to the States and Union Territories in India to enact legislation or amend laws on rental properties.
What to Watch?
Like in the case with Real Estate (Regulation and Development Act), the State Governments in India may choose not to follow this model act and its guidelines. This will result in diluting the potential benefits available in the Model Tenancy Act, 2021. However, quick implementation is expected where ruling Central Government is also having government in the States and Union Territories (UT) in India.

Features of The Model Tenancy Act, 2021What is Model Law / Act?
Model laws are especially prevalent in countries where federal system of government is prevalent. For example, in the US and India, where all the states in the country have some control over their own activities, but where central government has the main responsibility for making important decisions and laws. These countries consist of certain partially self-governing states, each with its own legislation and set of laws.

In India, ‘model laws’ are drafted by Central Government of India and serve as guidance to State Governments in India. The model law is sent to State Governments for them to be enacted as law in the State.
What is the Model Tenancy Act, 2021?

This Tenancy Act is a ‘model act’ and is not binding on the State Governments in India as land and urban development come under the jurisdiction of State Governments.

It will become enforceable at law once State Governments enact this model act or amend the existing Tenancy Acts applicable in States and UTs in India. As the land is a State subject, hence, the State Governments in India will have the option to adopt or reject it. 

What are the objectives of the Model Tenancy Act?
– Potential to institutionalization of rental housing market in India.
– Speedy mechanism in resolving disputes.
– Modern and consistent legal framework with respect to tenancy laws across the country.
– Market based determination of lease/rental amount. 
– Availability of adequate rental housing stock to address the issue of homelessness.
What is the applicability of the Model Tenancy Act?
– Applicable on premises leased out for residential, commercial or educational use, but not for industrial use.
– Not applicable on hotels, lodging houses etc.
– Effective prospectively and will not affect existing contracts of lease.
What are the key highlights of the Model Tenancy Act?
– Written contract is mandatory
– Establishment of an independent authority in every State and UT forregistration of tenancy contracts 
– Separate tenancy court to resolve disputes
– Clarity on the rights and responsibilities of both Lessor and Lessee24-hour prior notice before entering the rented premises by the Lessor
– Maximum limit for security deposit – Limiting the tenant’s advance security deposit to a maximum of two months rent for residential purposes and to a maximum of six months for non-residential purposes.
– Clarity on vacation of the premises.

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