Monday, February 22, 2016

Draft Model Tenancy Act 2015 proposes to receive 3 months rents as Advance

Sources: Dinamalar ePaper

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Making life easier for landlords


July 17, 2015

The Draft Model Tenancy Act 2015 is all set to encourage the rental market, as it promises to safeguard the interests of both landlords and tenants

Now that the NDA government has finally started pushing for the Draft Model Tenancy Act 2015, the rental market has reason to cheer. If the Act comes through, there will be significant changes made to the almost archaic Rent Control Act 1948, after almost 70 years.

The Act was initiated by the previous UPA government four years ago, but the work on the draft has remained incomplete. At present, tenants go through a harrowing experience of either giving in to arbitrary rent hikes or facing eviction. Since land is a subject that comes under the State List, the Act need not be mandatorily implemented in all States. However, the Act can prove beneficial in the long run for both landlords and the tenants, and bring in much-needed transparency to tenancy laws, and it would be good for all States to adopt it.

Why is it needed?

The Draft Model Tenancy Act, 2015, is an improvement on its obsolete predecessor, the Rent Control Act, 1948. It will make things much easier for landlords who were short-changed by the previous law. Property owners have been sceptical about renting out their houses as they fear that their tenants may refuse to vacate on time.

The Rent Control Act was applicable only to tenancy of more than 12 months, it put a cap on rent, and it made it extremely difficult to evict a tenant who did not pay the revised rents, despite having lived on the same premises for years.

The new draft on the other hand will ensure that landlords are able to charge market rates for their residential or commercial properties, get the rents revised periodically, and also get their premises vacated easily without getting into long-drawn legal proceedings.

With these changes, a large number of properties lying vacant can be used to not only generate additional income for home-owners, but also solve the housing problem in the country.

Who benefits?

Apart from being beneficial to landlords, the Draft Model Tenancy Act works well for the tenants as well. As per the draft, a rent ceiling will be fixed in consultation with the State government to avoid arbitrary hikes. Besides this, landlords will not be able to evict tenants as per their whims and fancies, as there will be a written agreement. Also, the security deposit charged from the tenant will be capped at three times the monthly rent, which is currently charged more or less on an ad hoc basis.

Another plus point for tenants is that they can claim a reduction in rent if the quality of services available to them deteriorates in any way. In short, it is a win-win situation for both landlords and tenants if they play by the rule book.

The impact?

The expected change — an increased willingness on the part of property owners to rent out their properties — might not happen overnight. House-owners will first like to test the waters. However, with a long-term view, house-owners have everything to gain by renting out their property without having to worry about tenants vacating on time. A lot will depend on the execution of the rules mentioned in Act to help landlords raise rents and get trouble-making tenants evicted.

The writer is CEO - Residential Services, JLL India

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This Act could draw the curtains on landlord-tenant tussles

RAJESHWARI ADAPPA | Tue, 21 Jul 2015-06:40 AM, DNA

The Draft Model Tenancy Act, 2015, if accepted, could unlock the doors of huge number of properties that are lying vacant currently, thus providing a solution for India's housing problem. But it is easier said than done.

The Draft proposes several reforms to the earlier Rent Control Act, 1948, which was seen as outdated and partial to tenants.

The new Draft seeks to balance the needs of both tenants and landlords. For instance, as per the provisions of the Rent Control Act, rents of properties were capped and landlords could not raise rents despite the jump in property rates. Thus, many tenants ended up paying a paltry rent of about Rs 100 despite living in prime locations.

The Draft proposes reforms that will enable landlords to charge market rates and make it easier for landlords to evict tenants who default on rent without getting into long drawn out legal proceedings.

This move is expected to give a fillip to the rental housing market. "Earlier, property owners avoided giving their property on rent out of the fear that tenant will never vacate their property. With the proposed changes, house owners can relax and a huge number of properties lying vacant can be used to not only generate additional income for them, but also solve the housing problem of millions,'' says Ashwinder Raj Singh, CEO - Residential Services, JLL India.

"There was a need to unlock the greater potential of the housing sector,'' says Ashwinder. Speaking on the impact on property prices, he feels that the move will not bring down property prices. "The landlord can now give the property on rent. He will earn an income on his investment, so there will be an incentive to invest in property,'' he adds.

The Draft also has provisions to protect the interests of the tenants. Currently, the security deposit paid by tenants is an ad-hoc amount. As per the draft, the security deposit cannot exceed three times the monthly rent. Besides, tenants can claim a reduction in rent if the quality of services deteriorates. "It's a win-win situation for both house owners and tenants if they play by the rule book,'' says Ashwinder.

While the Draft permits landlords to raise the rent, the tenants need not fear arbitrary hikes. This is because the Draft has proposed a ceiling on the rent that is to be fixed in consultation with the state government. Besides, landlords cannot evict tenants as per their whims and fancies, but have to follow the terms of a written agreement.

Also, tenants below a certain threshold are protected in that the terms of the Draft are not applicable to these select categories. "Senior citizens who are actual residents, widows and single women, persons released or retired from the armed forces, are among the special categories of persons,'' points out Ashutosh Limaye, national director – research, JLL India.

Among the many reforms included in the Draft is the proposal for an independent authority for registration of all tenancy agreements and a separate court for rent related disputes and litigation cases. The rent agreements need to be registered with the Rent Authority. Further, the Draft has proposed that all disputes will be heard at the Rent Courts set up by the states. The Civil Courts will no longer hear rent related cases.

As land is a state subject, it is up to each state government to decide if they wish to adopt the proposals of the Draft Model Tenancy Act. However, given the resistance of the tenants to any changes in the rent laws and due to vote bank politics, it is unlikely that the proposed Draft will replace the old Rent Control Act in a hurry.

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Owner can’t evict a tenant for five years if tenant pays rent regularly, unless owner needs to use property himself

Devesh Chandra Srivastava

Published: Sun, Apr 08 2012 08 51 PM IST

To avoid litigations arising out of landlord-tenant disputes, the Supreme Court last year passed a judgement that a landlord cannot evict a tenant for at least five years, if the tenant has paid the rent regularly according to the agreement between the two parties. However, the owner can evict a tenant if he wants to use the premise himself.

What is tenancy?

A tenancy is the possession or occupancy of lands, buildings or other property by title, through a lease or on payment of rent.

When can eviction happen?

There has to be a valid reason if you plan to evict the tenant and not use the house for yourself. Eviction can be enforced if the tenant is found of any wrongdoing as prescribed by the Rent Control Act and Indian law, such as terrorism and any crime against the nation.

The present practice

Usually, the tenant signs a rent agreement with the landlord to occupy the property for a period of 11 months, with an option for periodic renewal. Since the Rent Control Act (which is largely in favour of the tenants) only applies on for lease agreements of at least 12 months, establishing an 11-month agreement helps landlords to take a pre-emptive measure for eviction. It is because of this practice that the apex court has passed the order.

The rights of legal heirs of tenants

Legal heirs of the tenant are also tenants and get all the protection available to the tenant under the Rent Control Act of various states. However, it is the choice of the legal heir if he wants to renew the contract with the landlord and continue to stay.

What should owners do?

If you are the owner, you can prevent your tenants from overstaying by including a clause in the rent agreement on increasing the rent to four or five times the existing rent, if the tenant does not leave when the contract ends. This would put a check on those tenants who play foul. Also, in case the tenant is not vacating the premise even after the notice, you can approach the court. Courts favour the owner if it is found that the tenant is involved in any wrongdoing or the owner requires the property for his personal use. You can also ask the court for police help for evicting the tenant.

What should tenants do?

Usually tenants can’t do much about the eviction if the owner wants the property for personal use.

However, if the owner is trying to evict without any lawful reason, you can file a police case against him. The Supreme Court judgement may help you prove your tenancy rights.

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