Model Tenancy Act 2021: The Non-Law of the States

Divya Malcolm, Founder/proprietor, Malcolm & Malcolm, Advocates What does the passing of Model Tenancy Act entail? The Union Cabinet’s approval means nothing. Needless to add, no bill fructifies into a statue without the imprimatur of the Lok

BY Realty Plus
Published - Friday, 11 Jun, 2021

Model Tenancy Act 2021: The Non-Law of the States

Divya Malcolm, Founder/proprietor, Malcolm & Malcolm, Advocates What does the passing of Model Tenancy Act entail? The Union Cabinet’s approval means nothing. Needless to add, no bill fructifies into a statue without the imprimatur of the Lok Sabha. Clearly tenancy laws are not within the legislative competency of the Union. If someone has chosen to play the big bother, others need not play along. Interestingly, the phone keeps ringing off the hook – anxious tenants; greedy landlords. Are the fears misplaced? And the greed, a balloon of hubris? The Model Act talks of:

Compulsory registration of tenancy agreements;
Grounds of eviction;
Rent controller (a registry of sorts), dedicated dispute resolution mechanism system;
Demarcating the responsibility of tenants and landlords so far as the building repairs and maintenance is concerned.

What are the distinct features of the Act? The Model Act, can be adopted only prospectively. None of the features of the Model Act appear to be drastically innovative. The Rent Control legislation of most states provide for a dedicated resolution mechanism. The Model Act throws up greater questions. Maharashtra learnt to get around its Rent Control legislation with a wonderful invention called “leave and license agreement”. All big ticket rental arrangements are on leave and license basis. Certainly these agreements are not intended to be covered by the Model Act. What beats me is though leave and license agreements are not governed by the Rent Control legislation, arbitration is not tenable for resolution of disputes. That can be an entirely separate issue of deliberations and discussions. Whether the Model Tenancy Act is a panacea for housing problems?; highly unlikely. Does the Act helps in solving urban housing challenges? To think that the Model Tenancy Act is a solution to the urban housing woes is a fallacy. If that would have been the true intent then commercial premises should not have been included; and industrial excluded. Even then, the over 1 crore Indians who are unwilling to let out their homes may not change their minds overnight. Gujarat amended its Rent Control Legislation so as to exclude homes built after 2001. Did it change the dynamic of housing? A 3% return on investment may be the real stumbling block. Most of us take housing loans for a roof over our heads and not to profit from a non-existent rental market. What can be the solution to urban housing issue? The better way to achieve ‘housing for all’ would be to focus on the Pradhan Mantri Awas Yojana and similar schemes. Incentives under development control regulations are another means towards the same end. Reservation of flats in favour of government Maharashtra Housing & Area Development Authority in each new development will accomplish the twin objective of housing for all and a more egalitarian society. However, there is a rental market which was fairly aggressive until Covid-19-; that of commercial premises. Whilst everyone was busy renegotiating office and mall leases; the biggest REITs were busy amassing more and more commercial space. The prospectus of one such REITs mentioned the Maharashtra Rent Control Act as a risk factor in its business. Nothing stops REITs from dabbling in the residential arena. Perhaps they shall be our future monopolistic landlords. Harking back to Joseph Schumpeter’s theory: capitalism ultimately makes way for socialism. And the Model Act of 2050 shall mirror the Rent Control legislations.