Maharashtra to face challenges if it introduces Model Tenancy Act: Real estate experts

The MTA now allows setting up separate courts for handling landlord and tenancy disputes, including dispute over payment of rent. Representation pic/Atul Kamble

The Centre has recently cleared the Model Tenancy Act (MTA), but a lot of concerns have been raised by real estate experts, as the onus is now on the state government to use its concurrent power and have its own Tenancy Act. The MTA now allows setting up separate courts for handling landlord and tenancy disputes, including dispute over payment of rent. While few experts say Maharashtra won't pass this Act, as a large number of tenancy property exists in the state, some have already written to state housing minister, requesting him not to clear the same. Some experts feel that the Model Tenancy law, if introduced in Maharashtra, will face challenges.

According to advocate Akash Menon, "As the name suggests, the legislation is intended only to be a model statute, and states will have to enact and enforce their individual versions of this law. Unfortunately, the Act seems to have done little, other than offer lip service to the grievances of landlords and tenants. The Model Tenancy Act at the outset fails miserably in acknowledging the various faces of tenancy that are today prevalent in India. This failure emanates from the absence of a cogent and comprehensive definition of the term 'tenancy' in the Act. This in turn leads to an over-simplification of the landlord-tenant definition and the scope of that relationship, leaving a weak substratum to an ambitious legislation."

'May interfere with state laws'

He explained, "Another concern with the Model Act is the apparent disharmony it may create with existing state laws and established jurisprudence. Most states today have a complex web of laws that have over time evolved to address the myriad disputes that arise during the course of tenancy agreements. To cause an upheaval to an entrenched legal regime without offering a viable alternative is likely to be a doomed exercise in haste."

Vinod Sampat, senior advocate and Ramesh Prabhu, chartered accountant

Menon said one can only hope that the states deliberate in greater detail on the scope of the law and offer adequate substance to fill in the bare bones of the Model Act.

Advocate Godfrey Pimenta said, "Due to heavily tilted state enacted Rent Control Act favouring the tenants, the landlords of the properties are reluctant to let out their properties. As such many residential/commercial properties are lying vacant in urban areas. There are many properties in Mumbai, whose house rents are negligible and therefore many landlords do not undertake repairs. As a result every year during monsoon we have seen many building collapses involving loss of lives and destruction of properties. The saving grace in the new Act is that it lists the kinds of repairs which the landlord/tenant would be responsible for, however no structural changes can be made by the tenant without the prior written consent of the landlord".

He continued, "Many times the tenant sublets the premises and earns hefty rent. Now under the new Act the tenant can sublet the premises with the prior consent of the landlord. Needless to state that in such a case the landlord may demand an increase in rent amount."

Chartered Accountant Ramesh Prabhu, added, "MTA creates an accountable and transparent environment for renting the premises and even an institutional framework - regulatory and judicial bodies - and the authority being an official not below the rank of Deputy Collector. But, in my view, it is old wine in a new bottle, with changes like creating a rent control authority to make websites and digitally store rental agreements. It will certainly benefit the owners, because now they can officially take the rent as per market condition and will be happy to let out the property, knowing that the authority, rent court and tribunals will come to their help in case they want to repossess property."

'State won't adopt MTA'

Senior advocate Vinod Sampat, who is also the founder president of cooperative society resident's association, said, "I personally feel that the model law is not good for tenants. They say they are excluding pagdi tenancies because of the suggestions forwarded to them earlier. However, the text of the model law doesn't reflect what the minister suggests."

"The union government has tried to lay down a model law which it wants states to follow and enact. I strongly believe that our state government will not pass such legislation. I have spoken to some leaders from the ruling government and they have clearly said that they won't take any measure which is oppressive to the tenants. The state of Maharashtra will not adopt the MTA, as it is political suicide, since no one will dare to go against tenants, as it is a matter of vote bank survival for politicians," Sampat said.

Few challenges in MTA

(1) Being a state subject, every state will twist the way it wants

(2) It is completely on the states to adopt or not adopt MTA in their state

(3) Lodging houses and hotels are kept outside the scope of MTA. Therefore, application of the MTA to premises providing paying guest facilities is not clear

(4) Position regarding existing tenancies is left untouched.

(5) May result in an increase of litigation matters before judicial bodies are established and in due course of time the implementation could be a great challenge.

(6) MTAdoes not talk about the weak bargaining power of tenants and allows parties to agree on rent amounts, which may cause prejudice to weaker sections of the society.

(7) MTA does not talk about overriding effect of MTA on existing laws on tenancy, lease under the TPA, license under the Indian Easements Act, 1882 to uphold the objectives of the MTA

Rights of owner:

(1) Sub-letting cannot be done by the tenant without owner permission.

(2) Deduction from security deposit to cover liability of tenant.

(3) By adopting due procedures, the tenant can be evicted.

Tenants advantage

(1) No increase in rent. It will be as per agreement

(2) Can go to the rent authority for cuts of essential services or for any disputes.

Source - CA Ramesh Prabhu