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Security deposit cap, penalty for overstaying tenants in draft rent law

July 11, 2019 06:09 AM


Security deposit cap, penalty for overstaying tenants in draft rent law

New Delhi:

The Centre has proposed a model tenancy law to regulate renting of premises and seeking to balance the interests of both tenants and landlords by proposing to limit advance security deposits to two months’ rent and suggesting heavy penalties for tenants who overstay.

The draft Model Tenancy Act, which states will be free to adopt, says overstaying tenants would end up paying double the rent for two months and four times after that period. The housing and urban affairs ministry put the draft law in public for stakeholder consultation and will later seek the Cabinet’s approval.

Interestingly, to avoid stirring a debate, the draft proposes that the laws to be notified by states won’t have retrospective effect. This means thousands of landowners in Delhi and Mumbai, getting meagre rents for properties in prime business and commercial areas are not being considered for relief.

Draft law proposes renting regulators in states

They would have to continue their legal battles. Though the housing ministry had first come out with a similar model Act, it faced stiff opposition from traders in Delhi and Mumbai since it proposed to bring existing contracts under its purview.

Officials said the main aim of the fresh draft is to make lakhs of properties, lying locked as owners prefer to keep them empty rather than risk likely litigation, available for rent. “The provision of retrospective effective would result in litigations. We want to put a system in place that encourages people to rent out their properties,” said an official.

Finance minister Nirmala Sitharaman had announced a model law for states in the Budget. According to the last government survey, about 1.1 crore premises are lying vacant in urban areas as landlords fear tenants may usurp their properties once they rent them out.

The draft model Act proposes setting up of authorities in states to regulate renting of premises and to balance interests of both owners and tenants. The states will also establish adjudicating mechanism for speedy dispute redressal by setting up Rent Courts and Rent Tribunals to hear appeals.

Both tenants and landlords would have to inform the authority concerned after signing an agreement, which specifies the monthly rent, tenure of tenancy and the responsibility of each side for carrying out minor and major repair on the premises. In case of disputes, both parties can approach the rent authority concerned.

It also proposes that the rent court can be moved if a tenant does not pay rent for two months without forceful eviction. If the tenant pays dues within one month after the matter has gone to the authority, he would be allowed to stay. But the tenant won’t get this relief if there is more than one default in a year.

The draft Act specifies that if the land owner does not accept rent physically or through postal order, this can be deposited with the rent authority. Similarly, if the land owner refuses to carry out repairs, the tenant can deduct the amount from the periodic rent

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