An Overview of Rental Agreement, Rights of Tenant & Landlord | The Model Tenancy Act, 2021

 

INTRODUCTION:

India is a home for over 1,626,037,127,260 people. A huge population lives in rented accommodation. A World Bank study found that the proportion of people who rent their homes is highest in each country's largest cities because owning a home is unaffordable due to high land and housing prices. 

According to the 2011 Census, 95% of rural households were privately owned. On the other hand, 28% of urban households rented their homes. The share of urban rental housing in 2011 was only 28%, a significant decrease from 1961 when it was 54%. Renting an apartment in today’s scenario is a bit challenging. It was obligatory to adopt various procedures and laws to ensure the welfare and safeguard the rights of the tenants and landlord.  

BACKGROUND: 

Even though rent control laws have been in existence since well before the Independence of India, the Jawaharlal Nehru National Urban Renewal Mission has raised controversy over the topic. According to JNNURM, these laws represent an urban bottleneck that needs to be rectified. In India, the first rent control legislation was adopted in Bombay in 1918, quickly followed by the legislation of a similar nature in Calcutta in 1920. There are three major phases to the rent control regulations in India. 

• The first generation of laws is made up of pre-independence laws. 
• The second generation of laws is made up of tenant rights-protecting post-independence legislation. 
• The laws passed after the Model Rent Control Legislation of 1992 (the "MRCL") went into effect heralded the third generation of laws on the topic. 

The Laws governing the Rights of tenants and landlords and the Control of Rents come under the rent control act. First, the central control act was passed in the year 1948. The act aimed to ensure neither the landlords nor the renters exploit the other's rights. The Rent Control Act varies from state to state. Although they are similar to one another, they do transmit a few subtle differences.  

WHAT IS A RENTAL AGREEMENT?  WHY IS IT NECESSARY?

With the use of a rental agreement, a landlord can grant a tenant temporary access to the use of their property. Both parties must agree to the rental agreement's main provisions, which are drafted by either party with the other party's cooperation. A rental agreement may be inferred, verbal, or written. The Agreement may not be modified except by a written amendment signed by both parties hereto. 

A rental agreement typically has a monthly period since the parties must renew it each month after it expires. The tenant grants the landlord the agreed-upon rent as consideration for the tenancy. Any property that is rented to a renter for more than 11 months must be registered under the Registration Act of 1908. Therefore, a property that is only used temporarily or for less than 11 months does not need to be registered.

Both parties' rights are guarded by a rental agreement, averting further disagreements. There may arise disagreements between the parties during the period of the rental agreement. 

Such disagreements may be established by the agreement. In addition to protecting tenants from illegitimate claims from landlords, it offers protection to the landlord for his property. Moreover, the tenant is granted ownership of the property under the rental agreement for a predetermined time. It is usually advisable to sign a written agreement because oral agreements are never enforceable under law. It serves as legal evidence, which is another crucial aspect. 

PROCESS AND EXECUTION OF A VALID RENTAL AGREEMENT: 

In India, a rent agreement must be registered in order, including property owners, renters looking for housing, and others. Here are the procedures for registering a rental contract in India.

• Noting that leases lasting more than a year must be registered, leases that are shorter than a year (i.e., less than 11 months) should make sure to be notarized by a public notary and to pay stamp duty to be taken seriously.
• The rental agreement must be by the format.
• By going to the local sub-office, registrars can register the lease. It is crucial to remember that the registration procedure must be finished at least four months before the deed's expiration date. As a result, it is important to record the date and time the deed was created.
• A written rental agreement must include- the Identification of the landlord, property, and tenant. Rental payment terms and conditions. Term of the tenancy's duration, which is typically one month. Rental agreement terms and conditions. Liability regulations apply to property damage and repairs. Regulations for contract renewal and termination.
• The police verification of the renter is an essential component of any rental agreement. This involves checking the tenant's background to prevent any form of illegal behaviour from taking place on the property. It guarantees not only the safety and security of the building but also that of the surrounding area.

TYPES OF AGREEMENT:

1. Rent Registration Agreement: This is a signed rental agreement that has been registered with the government's registrar's office after being scanned by both parties. This procedure is carried out and completed by the Sub Registrar's office for the relevant area. The paper must be executed in the presence of both the landlord and the renter. The agreement subsequently becomes available for viewing during any legal proceedings as a public document.
2. Lease Agreement: Landlords prefer to lease out the property when they want to avoid volatility in steady income. The tenant is granted the right to use the property in question for the specified period under the terms of the lease agreement, which is a contract between the landlord and the tenant (generally more than 12 months). If the tenancy period is more than 90 days, a lease agreement is typically necessary. 
   Unless expressly mentioned in the mutually agreed-upon lease agreement, the lessee is prohibited from evicting the property.
3. Notarized Agreement: A public notary public has testified to this contract. The notary's sole duty is to confirm the legitimacy of the Licensor and Licensee who are signing the contract. Later, she or he stamps the document with the words "Signed Before Me." The notary's stamp, seal, and signature appear on the rental agreement's final page when it has been notarized.
    

WHAT ARE THE RIGHTS AND DUTIES OF LANDLORDS?

After a well-established contract, the next step is to understand the rights and duties of both the tenants and the landlord. In this relationship, both the landlord and tenant must be vigilant about their rights and duties. There are laws for different states as land is subject matter to state but there are a few common rights and duties for landlords the following rights are: 

• Right of eviction: the landlord is the owner of the property he has a right to evict an unpleasant tenant. the landlord must submit such an eviction application to the pension authority. Authorities may issue eviction orders for specific reasons as per the model tenancy act 2021.
• Right to temporary property possession: To perform repairs and maintenance on the property, the landlord is well within his or her rights to have the renter evicted. If the landlord determines the necessary repairs, building, renovations, additions, etc.
• Disclosure of latent material defects: The landlord must inform the tenant of any latent material flaws in the property.
• Right to raise the rent: When it comes to increasing the rent, the law gives the landlord the upper hand. Owners of real estate, whether residential or commercial, are permitted to charge rent at going market rates as well as raise it on occasion. By bringing the rental market under the jurisdiction of the formal housing sector, the proposed Model Tenancy Act has been crucial in achieving this balance.

In the case of Iqbal Singh v. Harbans Kaur 2015(2) WLC (Raj.) 395, Despite any agreements that conflict with it, Section 6 of the Act also authorizes adjustment of the rent, although it must be done at the set rate specified in Section 6(1). The agreement made before the Act of 2001 went into effect would not be null and void if it stipulates a lesser or higher rate for rent revision, but it would be ineffective to the amount of the revision rate if it is not 5% every year.

• The Right to have the property fixed: To be aware of any ongoing repairs. The renters themselves can handle simple repairs. However, the landlord must be contacted in writing for any reimbursements or advance approvals, etc. According to the Rent Control Act, the landlord and renter must split the cost of repairs.
• Obligation to deliver possession: Because a lease is an agreement to transfer the right to possess real estate, the landlord must give the tenant possession of the property so that he can use it.

RIGHTS AND DUTIES OF A TENANT:

• Rental agreement: In most cases, the tenant will enter into a written and legally binding contract with the landlord giving the owner the right to receive a copy of the contract while retaining the original.
• Safe and liveable housing: Tenants must hand over clean, safe, and well-maintained apartments. If the lessee makes any repairs or restorations during the rental period, they are expected to be reimbursed by the owner.
• Payment: The renter must receive confirmation or receipts of any deposits, rent, or maintenance fees paid (if any). Most apartment owners do not charge members maintenance fees.
• Privacy: The landlord cannot enter the rental property without permission. He must give the lessee 24 hours' notice and visit him at a reasonable time. 
• Access to amenities: Tenants have unlimited access to company facilities such as parks, gyms, pools, and common areas, provided proper usage guidelines are followed. 
• Lawful conduct: A landlord has no right to cut off water, gas, or electricity lines to collect unpaid rent or taxes from a tenant. In addition, you must not impose unlawful restrictions or rules on your tenants.
• Eviction Notice: A landlord cannot terminate a tenant before the end of the tenancy period unless the member has paid the rent.
• Duty of the Tenant: it is an obligation to disclose any information that could materially affect the value of the property.

ABOUT THE MODEL TENANCY ACT 2021 AND ITS PROVISIONS:

The Model Tenancy Act 2021:

• The Model Tenancy act 2021 comes with the vital object of creating lively, sustainable, and inclusive rental housing facilities. It aims at protecting the interests of landlords as well as the tenants redressing the issues and matters and bringing out a rent authority to regulate renting of properties.
• The authorities provide a speedy resolution of disputes. The aim is to support the entry of private rental housing as a business model to solve the enormous housing shortage.
• The Model Tenancy act does not apply to all states as land and urban development remain state subjects. It was observed that the existing rent maintenance laws limit rental housing growth and discourage owners from renting vacation homes for fear of eviction. One possible way to free up vacant homes is to bring transparency and accountability into the existing rental system, balancing the interests of both property owners and tenants rationally. 
• As per the Ministry of Housing and Urban Affairs (MoHUA), The Model Tenancy Act has been remedied by states like, i.e., Andhra Pradesh, Tamil Nadu, Uttar Pradesh, and Assam. 
• The Model Law requires landlords and tenants to sign a written contract setting out the rent, lease term, and other relevant terms. Deposits are limited to two months' rent for residential buildings and six months' rent for non-residential buildings.
• The prerequisites for tenant eviction under the Model Law are:
  • Refusal to pay the agreed rent;
  •  He is more than two months behind on rent;
  •  Occupy any part or all of the premises without written consent;
  •  Misuse of facilities despite written notice;
• The Model Law provides for his three-step quasi-judicial dispute resolution mechanism as follows:
  • Rental Institutions. 
  • Rental Courts. 
  • Rent court; Civil courts have no jurisdiction over matters relating to the provisions of the Model Law. Rental authorities and rental courts may be set up by district collectors with the approval of the state government. 
  • A Rent Tribunal may be established by a State or Union Territory Government after consultation with a High Court of competent jurisdiction.

KEY PROVISIONS OF THE ACT:

• Lease agreement: The Model Law stipulates that renting a building requires a written contract to be signed between the landlord and the tenant. The contract should include the following:
  • the rent to be paid;
  • the rental period; 
  • the terms and duration of the rent change; 
  • the security deposit to be paid in advance; Pension authorities require him to be notified of the contract within two months from the contract date. This applies to all premises used for residential, commercial, and educational purposes.
• Deposit: it is important to understand that a security deposit must not exceed:
  • In the case of residential accommodation, he shall pay two months' rent; and
  • In the case of non-residential accommodation, six months' rent. The security deposit is returned to the tenant by the landlord after deducting due deductions if the tenant is free to move into the apartment.
• Rental period: The lessee may apply to the landlord to renew or extend the lease agreement. The lessee is obligated to pay the increased rent if:
  • The rental period has expired and has not been renewed, or 
  • The lessee does not move out when the rental period ends. If the Tenant does not vacate the premises at the end of the lease or the end of the lease by order, 
• The Tenant is obligated to pay:
  • double the monthly rent for his first two months,
  • thereafter four times the monthly rent until the building is occupied.
• Eviction: To evict a tenant, the landlord must submit such an eviction application to the pension authority. Authorities may issue eviction orders for specific reasons, such as:
  • Refusal to pay the agreed rent;
  • He is more than two months behind on rent; 
  • Divide ownership of part or all of the Property without the written consent of the Landlord; 
  • Misuse of facilities. even after receiving a written request to stop such misuse.
  • Structural the changes by the Renter without written consent.
• Subletting: Under the Model Law, subleasing is prohibited unless permitted by additional agreement. The lender and the borrower must jointly notify the pension authority of the sublease within two months from the date of signing the contract.
• Tenant safety net: The Lessor may not withhold any essential goods or services at the Lessee-occupied premises. A landlord cannot enter a home rented to a tenant without her 24-hour prior notice of such a visit, and the visit must be for a reasonable reason. Landlords are not allowed to enter their rental homes before sunrise and after sunset.
• Mutual responsibility: If urgent repair or maintenance work is required, the tenant or landlord can do this without obligation and deduct the cost from the rent or security deposit. There is an extensive list that distinguishes between these two maintenance responsibilities of hers.

JUDICIAL PROCESS: 

The model act brings into being a three-tier quasi-judicial mechanism for addressing and resolving disputes of the aggrieved parties. District Collector with the approval of the state government appointed Rent courts and Rent authorities. The Rent authority is headed by the deputy collector and, the rent court on the other hand is headed by y Additional Collector or Additional District Magistrate. The rent tribunals perform the function of adjudicating appeals against the orders of Rent courts.

RELEVANT CASE LAWS:  

1. The Municipal committee Kaithal vs Pyare Lal Rikhi Ram AIR 1974: The bench disagreed with the trial Court's finding that Yash Pal signed the rent deed dated January 17, 1962, acting as Piarey Lal's counsel. The learned Judge also ruled that the plaintiff should lose because, as required by Section 106 of the Transfer of Property Act, they did not give the defendants prior notice before filing the complaint.
    
2. Sri K.M Manjunath vs Sri Erappa g dead through LRS AIR 2022: 
   • The landlord filed a case of eviction, the tenant took contention under section 106 of the Transfer of property act 1882, the termination of tenancy was not valid and the trial court further dismissed the case. A revision petition was filed by the landlord in the Karnataka high court. 
   • The high court noted that merely accepting the landlord after the term of the lease had ended would not constitute a waiver of the agreement's termination.
   • The defendant further filled a special provision in the supreme court, The supreme court agreed with the high court 
   • The Supreme Court granted the petitioner-request lessee for a term of six months to depart the shop's premises and to turn over any item that was permitted to the respondent. The court ordered that an affidavit to pay rent arrears at a rate of INR 1400 per month would be a condition of the extension. As a result, the Special Leave Petition was dismissed by the Supreme Court as having no merit, upholding the High Court's ruling.
3. In the case of INDIAN OIL CORPORATION LTD. vs. SUDERA REALTY PRIVATE LIMITED:
   
    
4.  the apex court held that the liability of the tenant, to pay damages based on the rate at which the landlord could have let out the premises, may not be the same as the profit the tenant might have received with ordinary diligence. 

CONCLUSION: 

A lease agreement is formed when the right to utilize or possess a piece of property is transferred. The individual to whom the lease is made is referred to as the tenant, and the person who leases the property is referred to as the landlord. Numerous obligations are associated with the titles of landlord and tenant on the parts of both parties. Since land is a matter of state and states will have the choice to adopt or reject it, the Tenancy Law is a "model legislation." To rent the property in a controlled and effective manner, is intended to balance the rights and interests of both the owner and the tenant while also establishing an accountable and transparent ecosystem.

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