“It is not wealth I seek, it is not fame that I want, I crave for a home expressing the eternal yearning of all living beings for habitat.”
– Rabindranath Tagore
On 2-6-2021, the Union Cabinet approved and circulated the Model Tenancy Act, 2021 (for short “the Model Act”) to all States and Union Territories with an intent to usher a new chapter in the landlord and tenant relationship and lend impetus to the business of rental housing in India. Decades of indifference shown to the Indian landlord contesting lengthy civil suits in courts is one of the main reasons leading to a widespread situation of vacant residential and commercial premises1. Several States enacted rent acts to supersede their half a century old Rent Acts, but many of them remain unenforced and never saw the light of the day.2 Various experts and commissions3 prominent being the Administrative Reforms Commission and the National Commission on Urbanisation observed that the Rent Acts in their present form have not served the long-term interests of the tenant. Time and again the need for reform in the Rent Acts to encourage investment in housing was emphasised. Thus, a new tenancy legislation was long overdue. This article analyses whether the Model Act, a proposed statutory framework, addresses the grievance of the landlords and tenants and justifies the euphoria surrounding it.
Historical perspective
The Rent Acts are social welfare legislations and fulfil the dual purpose of protecting the tenants from frivolous evictions and exorbitant rents. The first Rent Act in the United Kingdom was “The Increase of Rent and Mortgage Interest (War Restrictions) Act, 1915” and was enacted to address scarcity of accommodations caused by the First World War.4 It prevented landlords from profiteering and exploiting tenants when housing demand exceeded supply. In British India, the first Rent Act was enacted for Bombay in 19185and thereafter separately in Calcutta6 and Rangoon in 19207. Meanwhile, the Transfer of Property Act, 18828 operated in the remaining part of British India. Thereafter, after almost two decades, Rent Acts were enacted in different parts of the country to address the scarcity of accommodations and soaring rents caused by the Second World War.9 The measure was deemed necessary in order to give protection to the tenants who would have otherwise been thrown out on the slightest pretext or even without any pretext and would have been rendered homeless causing them untold misery.10 After India attained independence, newly formed States continued the protection extended to tenants, as newer issues had emerged, even though the great wars had ended. Industrialisation, commercialisation and inflow of population to the urban areas, gave ample opportunity to landlords to exploit tenants and led to the enactment of the Rent Acts which were primarily tenant driven.11Rack renting and large-scale eviction of tenants under the guise of the ordinary law, exacerbated those conditions making the economic life of the community unstable and insecure.12
The Rent Acts passed by various State Legislatures drastically curtail the landlords’ power to enhance rent and evict the tenant.13 After the tenancy is determined, tenants attain the status of “statutory tenants” and enjoy protection from eviction till a decree for eviction is passed under the limited grounds specified in the Rent Act. More so, power of the courts to direct eviction is strictly confined to the grounds enumerated under the Rent Act. The Rent Court is not competent to pass a decree for possession either in invitum or with the consent of the parties on a ground which is dehors the Act or ultra vires the Rent Act i.e. the existence of one of the statutory grounds is a sine qua non to the exercise of jurisdiction by the Rent Court. Even parties cannot by their consent confer such jurisdiction on the Rent Court to do something which, according to the legislative mandate, it could not do.14
Salient features
As the Model Act will be a guiding beacon to States and may lead to enactment of new Rent Acts, it is apposite to examine its salient features—
Object: At the outset, the Act has three avowed objectives15, first, to establish a rent authority16 to regulate renting of premises, second, to protect the interests of landlords and tenants and third, to provide speedy adjudication mechanism for resolution of disputes and connected matters.
Dispute redressal framework: The Act proposes a three-tier mechanism for redressal of disputes; Rent Authority at the bottom, Rent Court at the middle and Rent Tribunal at the top.The Rent Authority has the jurisdiction to deal with disputes regarding revision of rent, disputes as to whom rent is payable17, disputes regarding repair and maintenance of property18, punishing a property manager19 and disputes regarding withholding of essential supply or service.20 The Rent Court21 in turn would hear appeals against orders passed by the Rent Authority22. The Rent Tribunal23 which is at the top of the hierarchy would hear appeals against the orders passed by the Rent Court. The jurisdiction of the civil court to entertain any suit or proceeding relating to the Model Act has been excluded24, however, a dispute relating to title of the premises remains with the civil court.25 Thus, the original and first appellate jurisdiction now vests with the administrative services, which is a welcome step as burden of tenancy disputes on the judiciary would decrease.26
Written tenancies: As opposed to the Rent Acts, the Model Act bars oral tenancies and imposes a prohibition on the landlord and tenant from letting out or taking on rent any premises except by an agreement in writing and submitting information to the rent authority.27The information provided is to be conclusive proof of the facts relating to tenancy and in the absence of any information both the landlord and tenant shall not be entitled to any relief under the provisions of the Act.28
Subletting: There is a prohibition on subletting or transferring the tenant’s rights in the premises except by entering into a supplementary agreement and submitting information to the Rent Authority.29
Limited period tenancies: Tenancies entered into after the commencement of the Model Act would be limited period tenancies, being valid for the period agreed to between the landlord and the tenant.30After the period of tenancy ends, a landlord is entitled to possession of premises ipso facto without having to prove any ground as was required under the rent acts. Thus, the ingrained fear amongst landlords that they would lose control over the property stands removed. However, during the period of tenancy, if the landlord wants to evict a tenant, the broad grounds for eviction have been enumerated under Section 21(2) and are:
- non-payment of rent;
- sub-letting without landlord’s consent;
- misuse of premises31;
- repair, reconstruction or ancillary purposes which cannot be done unless tenant vacates the premises;
- repairs, construction or ancillary purposes for change of its use as a consequence of land use by the competent authority;
- landlord having contracted to sell the property after having received a written notice to vacate the premises from the tenant or having taken any other step; and
- tenant having carried out structural change or erected any permanent structure without the landlord’s consent.
It is noteworthy that bona fide need of the landlord or his family members as a ground for eviction in the Rent Acts is not available under the Model Act. The same is available only to the legal heirs of the landlord after his death.32 In case a tenant overstays after the tenancy period expires, he would be liable to pay enhanced rent to the landlord at the rate of twice the monthly rent for the first two months and thereafter at the rate of four times the monthly rent till the occupation continues.33 If however, the tenancy expires during “force majeure” the same will continue uptill one month after its cessation.34
Time-frame: The Model Act mandates timely disposal of cases and provides that the Rent Authority, Rent Court and Rent Tribunal have to decide cases filed before them within a time period of sixty days, failing which reasons have to be recorded in writing for non-compliance.35
Special categories of landlords: Special provisions in some Rent Acts dealing with specified categories of landlords like widows, disabled persons, members of armed forces, government employees, etc. are absent in the Model Act presumably because it incorporates the concept of limited tenancies and timely disposal of cases.
Heritability: The Model Act leaves no room for ambiguity and specifically provides that tenancy would be heritable and in case of death, the successors of the landlord and tenant would be bound by the rights and obligations for remainder of the tenancy.36
Rent: Payment of rent and its revision would be as per the terms of the tenancy agreement.37In case the landlord carries out any improvement, addition or structural alteration in the premises which does not include necessary repairs, the landlord can increase the rent by an amount agreed to by the parties. The concept of “standard rent” or “fair rent” in the Rent Acts is absent from the Model Act. As a result, the parties are bound by the agreed rent during the period of tenancy and the landlord can apply for revision of rent to the Rent Authority only where there is a dispute with respect to revision of rent falling within Section 9 of the Model Act.38
Security deposit: The wide prevailing practice of landlords exploiting tenants and compelling them to deposit exorbitant amount of security deposits commonly known as “pagri” has also been put to an end by the Model Act by putting a cap on the security deposit being not more than two months’ rent in case of residential premises and six months’ rent in the case of non-residential premises.39
Repair and maintenance: Frequent squabbles between landlords and tenants regarding responsibilities of repair and maintenance of the premises, in the absence of any agreement, have also been given a quietus by dividing the responsibilities under Part A and Part B of Schedule lI to the Model Act40. If the landlord or the tenant do not carry out their respective responsibilities, the other party can do it and the expenses can be deducted or claimed in the manner provided for in Section 15.41
Property Manager: The Model Act also grants statutory recognition to “property managers” and regulates their conduct.42A property manager is entrusted with certain duties under Section 19 of the Model Act, failure of which will entail his removal or imposition of costs to compensate any loss incurred by the landlord or tenant.
Thus, the Model Act addresses almost all issues of contention between the landlord and tenant and will surely yield positive results once it is implemented. However, as the Model Act applies only to new tenancies, it is also necessary to understand the fate of existing tenancies as they constitute a substantial portion of arrears in courts.
Existing tenancies
Before analysing the Model Act with respect to existing tenancies, it will be worthwhile to analyse the Draft Act, 2015 which after undergoing substantial amendments has led to the Model Act in its present form, as the Draft Act contained provisions for existing tenancies. Under the Draft Act, information about existing agreements was to be given to the Rent Authority and in case there was no agreement, a written agreement was to be entered into and thereafter information given. The rent payable in the case of existing tenancies after a period of 12 months was to be the rent as agreed between the landlord and tenant. In case they were unable to reach a mutually agreeable rent after a period of 12 months, the landlord had the option to terminate the tenancy. Failure to agree to the rent payable after 12 months, was one of the grounds for eviction of the tenant under the Draft Act. Plaintiffs who were contesting proceedings under the Rent Acts also had the liberty to withdraw the proceedings with liberty to file fresh application in the respect of the same subject-matter under the Draft Act within a specified timeframe. Thus, existing tenancies would have come within the ambit of the Draft Act within 12 months and in case no agreement was reached between the parties, the landlord could evict the tenant. This, would have brought huge relief for the landlords and saved them from lengthy contests in courts.43However, as the Model Act has not been made applicable to existing tenancies, all the aforesaid provisions have been omitted.
Turning to the Model Act, it regulates tenancies after the commencement of the Act, but at the same time, by Section 47(1) repeals the existing Rent Acts in the State and Union Territories. Section 47(2) which is a saving clause of limited nature, provides that cases and proceedings pending under these Acts would continue to be dealt with as if the present Act had not been enacted. Thus, pending proceedings initiated by the landlord or tenant regarding eviction or fixation of “standard rent” or “fair rent” would continue as a result of the deeming fiction created by the savings clause.
However, a pertinent issue arises as to what would be the fate of the landlords and tenants who have not initiated any proceedings under the rent acts i.e. whether the protection of the Rent Acts would continue to be available to them and fresh proceedings would still have to be initiated under the Rent Acts despite its repeal.44
It is submitted that it is well settled that a statute after its repeal, is completely obliterated. Repeal destroys all inchoate rights and all cause of actions that may have arisen under the repealed statute.45 If however, the right created by a statute is of an enduring character and has vested in the person, that right cannot be taken away because the statute by which it has expired.46
In Ambalal Sarabhai Enterprises Ltd. v. Amrit Lal & Co.47 the respondent landlord had filed an eviction petition under the Delhi Rent Control Act, 195848 in respect of a premises having a monthly rent of Rs 8625. When the petition was pending, Section 3(c) of the Delhi Rent Control Act, 195849 was brought in, which made the Act inapplicable to premises having monthly rent of more than Rs 3500. The question arose, whether the amendment affected pending eviction proceedings. The Supreme Court observed firstly, that the right of a tenant under the Rent Act at the best could be said to be a protective right which cannot be construed to be a vested right. In view of the enactment of the Rent Act, the rights and remedies available to a landlord under the general law remains suspended but the moment this protection is withdrawn the landlords normal vested right reappears which could be enforced by him. Secondly, the landlord has no vested right under Section 14 of the Act but has an “acquired” or “accrued” right if the petition is pending. The Court laid down that in cases where Section 6 of the General Clauses Act, 189750 is applicable the courts have to scrutinise whether a person under a repealed statute had any vested right. In case he had, then proceedings would be saved. However, in cases where Section 6 is not applicable, it is not a vested right, but all those under various sub-clauses from (a) to (e) of Section 6 which are “acquired” and “accrued”. In such cases pending proceedings are to be continued as if the statute has not been repealed. Ason filing a petition for eviction of the tenant the privilege accrued with the landlord and is thus not affected by repeal of the Act in view of Section 6(c) and the pending proceeding is saved under Section 6(c) of the Act.
In Parripati Chandrasekhararao v. Alapati Jalaiah51 an application was filed by the tenant on 13-2-1983 for fixing fair rent of a premises whose monthly rent was Rs 1300. Subsequently, w.e.f. 26-10-1983 premises having monthly rent of more than Rs 1000 were exempted from the provisions of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 196052. The Supreme Court concurred with the decision taken by the Rent Controller in dismissing the tenant’s application and observed that the protection afforded by the Rent Act does not create any vested right in favour of the tenant beyond the period of protection and when the protection does not exist, the normal relations of the landlord and tenant come into operation.
In Vishwant Kumar v. Madan Lal Sharma53again it was observed that the right of a statutory tenant to pay rent not exceeding standard rent or the right to get standard rent fixed is a protective right and not a vested right and does not survive after the repeal of the Rent Act.
In a different factual scenario, in State of Haryana v. Hindustan Construction Co. Ltd.54 sales tax assessment of the respondent Company was completed for an assessment year and refund was ordered under the Haryana General Sales Tax Act, 1973. Subsequently, the Act was repealed by the Haryana Value Added Tax Act, 200355. After the Act of 1973 was repealed, a show-cause notice was issued to the respondent Company regarding the refund ordered earlier, in exercise of suo motu revisional powers under Section 40 of the Act of 1973 and thereafter, by an order the respondent was held liable for recovery. The Supreme Court concurred with the High Court and observed that the assessment under the 1973 Act having been completed and refund ordered, the exercise of suo motu revisional powers under Section 40 of the same after repeal was clearly unsustainable in view of the contrary intention expressed under Section 61 of the 2003 Act56, saving only pending proceedings. It was also held that Section 4 of the Punjab General Clauses Act, 1858 will have no application in view of the contrary intendment expressed in Section 61 of the repealing Act.
Thus, in view of the aforesaid decisions, fresh proceedings under the Rent Act cannot be preferred by the landlord or the tenant after its repeal and pending proceedings alone would continue, as a result of the deeming fiction created by the saving clause contained in the Model Act. However, as stated supra, the landlords or tenants can seek remedy under the general law i.e. the Transfer of Property Act, 1882as their rights and duties under the general law get revived. Landlords can also enter into fresh agreements to avail the provisions of the Model Act if the tenants agree to it.57
Conclusion
The Law Commission in its 129th Report submitted in the year 1988 had pointed out that the largest litigation in urban courts relates to rent and possession of urban dwellings and if the same is handled in a scientific manner, the burden on the court system in urban areas would be considerably eased.58 In a catena of judgments including Prabhakaran Nair v. State of T.N.59 the Supreme Court observed that the laws of landlord and tenant must be made rational, humane, certain and capable of being quickly implemented and that the courts should be relieved of the heavy burdens of rent litigations.
Considering the prevailing social scenario, the Model Act is a step in the right direction as far as new tenancies are concerned. By guaranteeing recovery of possession and timely resolution of disputes it brings landlords and tenants on a level playing field and would certainly succeed in giving a huge impetus to the business of rental housing in the country. By entrusting the Rent Authority and Rent Court with original and appellate jurisdiction, the Model Act will reduce the burden on the courts.
However, with respect to existing tenancies it is a mixed bag. Historically, Rent Acts were enacted at a time when there was acute scarcity of accommodations with the object of preventing landlords from exploiting tenants.60 More than half a century later, the situation stands reversed and landlords are on the receiving end. It is common knowledge, that due to long delays in the justice-delivery system, tenants demand a premium for vacating residential and non-residential accommodations in spite of having shifted to a suitable alternative accommodation. Landlords too, utilise muscle power to recover possession to avoid undertaking a lengthy judicial journey. If States adopt the Model Act verbatim, economically weaker tenants have a reason to rejoice, but landlords of existing tenancies who have been waiting for decades for a new tenancy legislation, would be disappointed. Arrears of tenancy disputes would also continue to burden the Indian judiciary. However, as the relation of landlord and tenant falls under the State List of the Constitution61, States can amend the Model Act depending on their socio-economic conditions.
For now, the Model Act is a sheet anchor and a step in the right direction.
[1]Advocate & Insolvency Professional practising at the Madhya Pradesh High Court. Author can be reached at abhishekgulatee@gmail.com.
1As per 2011 Census, more than 1 crore houses are lying vacant in urban areas across India.
2 For instance, the M.P. Parisar Kirayedari Adhiniyam, 2010; The Delhi Rent Act, 1995.
3The Report of the National Commission on Urbanisation, 1988 attributed the main factors inhibiting investment in rental housing and in the maintenance of rental stock to the various rent control laws; the National Urban Housing and Habitat Policy, 2007 stipulated preparation of a Model Rent Act by the Government of India to promote rental housing on the principle that rent of a housing unit should be fixed by mutual agreement between the landlord and tenant for a stipulated lease period prior to which, the tenant will not be allowed to be evicted and after the expiry of the said lease period, the tenant will not be permitted to continue in the said housing unit.
4Kemp P., Private Renting in Transition, 2004 p. 21.
5The Bombay Rent (War Restrictions) Act, 1918.
6The Calcutta Rent Control Act, 1920.
7The Rangoon Rent Act, 1920.
8 The Transfer of Property Act, 1882.
9For instance, The New Delhi House Rent Control Order, 1939; The Central Provinces and Berar Regulation of Letting of Accommodation Act, 1946.
10Ramcharan Ramdin Ahir v. Resident Deputy Collector, 1970 SCC OnLine Bom 35 para 7.
11Liaq Ahmed v. Habeeb-ur-Rehman, (2000) 5 SCC 708, para 3.
12Nagindas Ramdas v. Dalpatram Ichharam, (1974) 1 SCC 242, 248.
13D.C. Bhatia v. Union of India, (1995) 1 SCC 104 at page 112.
14Nagindas Ramdas v. Dalpatram Ichharam, (1974) 1 SCC 242, 249.
15See the long title of the Model Act.
16An officer not below the rank of a Deputy Collector, appointed under S. 30.
17S. 14(3) of the Model Act.
18S. 15 of the Model Act.
19S. 19 of the Model Act.
20S. 20 of the Model Act.
21An Additional Collector or equivalent ranking officer appointed under S. 33.
22S. 32 of the Model Act.
23 A District or Additional District Judge appointed under S. 34.
24 S. 40(1) of the Model Act.
25S. 40(2) of the Model Act.
26Before the Model Act, a Draft Model Tenancy Act was prepared in 2015 (for short “the Draft Act”) in which the Rent Court was to consist of one or more members of the State Higher Judicial Services and the Rent Tribunal was to be a multimember Tribunal consisting of retired High Court Judges. The same is partly in line with the recommendation contained in the Report of the National Commission on Urbanisation, 1988 to the effect that tenancy-related litigation should be brought out of the purview of civil courts.
27Ss. 4(1), (3) and (4) of the Model Act.
28 S. 4(6) of the Model Act.
29S. 7 of the Model Act.
30S. 5 of the Model Act.
31 S. 21(2)(d) broadly defines misuse as encroachment, use of premises which causes public nuisance, property damage, detrimental to landlord’s interest or for immoral or illegal purpose.
32S. 22 of the Model Act.
33 S. 23 of the Model Act; Under the Rent Acts, after the termination of tenancy, a tenant becomes a ‘statutory tenant’ till the time an eviction decree is not passed against him. The same position continues under the Model Act.
34S. 5(3) of the Model Act.
35Ss. 31, 35(2) and 37(2) of the Model Act.
36S. 6 of the Model Act.
37Ss. 8 and 9 of the Model Act.
38S. 10 of the Model Act.
39See S. 11 of the Model Act.
40Part A lists repairs to be done by the landlord and Part B lists repairs to be done by the tenant.
41 Inter alia, a landlord can deduct the expenses from the security deposit and a tenant can deduct the expenses from the rent for the succeeding months.
42S. 2(f); “property manager’ includes “rental agents”. A rental agent means any person who negotiates or acts on behalf of the parties and includes dealers, brokers or middlemen within its definition defined under S. 2(g).
43In the State of Madhya Pradesh too, the unenforced Rent Act, the M.P. Parisar Kirayedari Adhiniyam, 2010 contains provisions for existing tenancies. Under the Adhiniyam, all existing month to month tenancies would become limited period tenancies within a period of 3 years from the date of commencement of that Act and thereafter, the tenant would have to revert possession immediately.
44 One of the salient features to the Model Act is said to be its prospective operation and that it would not affect existing tenancies, however as discussed further in this article, the savings clause would be limited in its operation to pending proceedings only.
45Keshavan Mahadeva Menon v.State of Bombay, 1951 SCR 228.
46M.S. Shivananda v.Karnataka SRTC, (1980) 1 SCC 149, para 12.
48Delhi Rent Control Act, 1958.
49 Delhi Rent Control Act, 1958.
52 Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960.
55 Haryana Value Added Tax Act, 2003.
56 Section 61, Haryana Value Added Tax Act, 2003.
57S. 4(6) of the Model Act.
58129th Report of Law Commission of India on Urban Litigation – Mediation as Alternative to Adjudication (August 1988). https://lawcommissionofindia.nic.in/101-169/Report129.pdf.
60Mohinder Kumar v. State of Haryana, (1985) 4 SCC 221, para 11.
61Entry 18 of State List, Schedule VII to the Constitution of India.