Union Cabinet approves Model Tenancy Act: District-wise rent courts, new security deposit rules

Union Cabinet on Wednesday approved the Model Tenancy Act, which stipulates that an owner has to collect a maximum of two months rent as security deposit from a tenant for residential premises and six months rent for commercial establishments.

The cabinet chaired by Prime Minister Narendra Modi approved the 'model law', which means it is up to states to decide whether to adopt it or not. States can either adopt this as a new law or amend their existing tenancy act.

The move is aimed at overhauling the legal framework with respect to rental housing across the country. The proposal is expected to give a fillip to private participation in rental housing as a business model for addressing housing shortage, said the Union Housing Ministry in a statement.

"The Union Cabinet 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 statement stated.

​The model Act envisages balancing interests and rights of both owners and tenants in an accountable and transparent manner, Union Housing and Urban Affairs Minister Hardeep Puri told media persons.

The Ministry brought the model Act as the existing rent control laws are restricting growth of rental housing and discouraging owners from renting out their vacant houses due to fear of not getting them back, said the Minister.

​As per Census 2011, more than 1 crore houses were lying vacant in urban areas across the country.

According to model law, after enforcement of this Act, no person shall let or take on rent any premises except by an agreement in writing. The Act will be applicable prospectively and will not affect existing tenancies. Rent and duration of the tenancy are to be fixed by mutual consent between owner and tenant through a written agreement, said the statement from the Ministry of Housing.

The model act seeks to cover urban and as well as rural areas and it mandates for written agreement for all new tenancies, which is to be submitted to Rent Authority.

Some of the features of the Act include a digital platform in the local vernacular language or the language of the State/UT for submitting tenancy agreement and other documents, time-bound and robust grievance redressal mechanism comprising of Rent Authority, Rent Court and Rent Tribunal to provide fast-track resolution of disputes, disposal of complaints/appeals by rent court and rent tribunal within 60 days.

The tenant will have to continue to pay the rent even during the pendency of a dispute with a landlord. Eviction of tenant is not allowed during currency of tenancy period except in accordance with provisions of the Act. The jurisdiction of civil courts is barred when dispute arises.