Model Tenancy Law

Rental housing is regulated by states as land, land improvement, and control of rents falls
under the State List of the Constitution. Post independence, states regulated rental housing
through rent control laws. These laws specified a ceiling on the rental amount, and put
conditions for eviction of the tenant, to prevent landlords from charging exorbitant rents and
ensure that people found safe and stable housing. The 2015 draft Rental Housing Policy
noted that these laws led to low rental yields, and disincentivised landlords from investing in
rental properties. These also skewed arrangements towards tenants, made it difficulty to evict
them, led to more litigation, and consequently eroded the trust of landlords in the regulatory
system. This led to the rental demand being serviced through other rental arrangements such
as leave and license agreements.

Key Features
Conditions for tenancy, eviction, and sub-letting

 Tenancy agreement: The Model Act states that to rent any premises, a written
agreement must be signed between the landlord and the tenant. The agreement must
specify: (i) the rent payable, (ii) the time period for the tenancy, (iii) terms and period
for revision of rent, (iv) the security deposit to be paid in advance, (v) reasonable
causes for entry of landlord into the premises, and (vi) responsibilities to maintain
premises. The Rent Authority must be intimated about the agreement within two
months from the date of agreement. This will apply to all premises used for
residential, commercial, and educational purposes.

 Security deposit: The security deposit may not exceed: (i) two months’ rent for
residential premises, and (ii) six-months’ rent for non-residential premises. The
security deposit will be refunded by the landlord to the tenant at the time of taking
over vacant possession of the premises, after making due deductions.

 Tenancy period: The tenant may request the landlord for renewal or extension of the
tenancy period. The tenant will be liable to pay enhanced rent if: (i) a tenancy period
has ended and not been renewed, or (ii) the tenant fails to vacate the premises at the
end of such tenancy. If the tenant fails to vacate the premises at the end of tenancy, or
 on termination of tenancy by an order, he will be liable to pay: (i) twice the monthly
rent for the first two months and, (ii) four times the monthly rent subsequently till he
occupies the premises.

 Eviction: To evict a tenant, the landlord must apply to the Rent Authority seeking
such eviction. The Authority may make an order for eviction on certain grounds
including: (i) refusal to pay the agreed rent; (ii) failure to pay rent for more than two
months; (iii) parting of possession of part or whole of premises without written
consent of landlord; (iv) misuse of premises even after receiving written notices to
desist from such misuse; and (v) structural change by tenant without written consent.

 Sub-letting: Under the Model Act, sub-letting is prohibited unless allowed through a
supplementary agreement. The landlord and tenant must jointly inform the Rent
Authority about the sub-tenancy within two months from the date of execution of
such agreement.
No time limit prescribed

 Essential Services: In case a landlord or property manager is found withholding

essential supplies or services in premises occupied by the tenant, the Rent Authority
may issue orders for resumption of services and impose penalty. The Model Act
defines a property manager as any legal entity authorised by the landlord to manage
premises with duties including rent collection, periodic inspection and maintenance.
While the Rent Authority must complete inquiries on the case within one month,
under the Model Act, there is no timeline specified within which the case must be
resolved by the Rent Authority.

 Revision of rent: The Rent Authority may determine revised rent after receiving an
application by the landlord or tenant. However, the Model Act does not specify a
timeline within which the Rent Authority must resolve a dispute on revision of rent.

 Contraventions by property manager: The landlord or tenant may approach the

Rent Authority in case the property manager violates duties specified or specific
instructions by the landlord. The Rent Authority may choose to remove the property
manager or impose a fine to compensate for losses incurred. However, the Model Act
 does not specify a timeline within which the Rent Authority must adjudicate and
resolve cases around violations by a property manager.

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Rights of Landlord and Tenant Under Maharashtra Rent Control Act 1999
Following are the duties and responsibilities of landlords and tenants under MRCA 1999:-

 Rent: It is the right of a landlord to decide the property's rent. As per the Act, a
landlord can increase the rent at the rate of four per cent per annum from the date
of commencement of the Act. Also, for improvements and modifications, the rent
can be increased at a rate of 15 per cent if tenants give in writing. Further, rent can
be increased by 25 per cent per annum for structural repairs, however, if repairs are
carried out under the Maharashtra Housing and Area Development Authority
(MHADA) Act. Remember, the rent can also be increased if the taxes have been
raised during the same period. If a landlord charges higher rent than the standard
rate, they will face a penalty. The penalty can be imprisonment for up to 3 months
or Rs 1000, or both.
 Eviction: According to Section 16 of the Act, a landlord can take possession of the
property if the tenant builds any permanent structure without permission. If a
tenant or any person related to the tenant (servant, agent) is found guilty of
nuisance or annoyance to the adjoining house, the possession can be recovered. A
tenant cannot use the property for any illegal purpose; a landlord will retrieve the
property. Tenant verification in Maharashtra
 Supply of essential services: As per section 29, a landlord cannot cut vital
services like electricity, water supply, light on staircase, usage of the elevator or
sanitary services. If a landlord does these services, a tenant can approach the court
under section 29(4). If proved right, the court will directly restore the benefits; if
the landlord fails to comply with the court orders, they will have to pay a fine. The
fine may extend to Rs 100 per day; if the penalty is also not paid, then the court
will punish them with imprisonment of up to 3 months or Rs 1000 fine, or both.
  Registration of Rent Agreement:Landlords and tenants must register the rent
agreement. The Act says, an agreement should be in writing and registered as per
the Registration Act 1908. To get the rent agreement registered is the responsibility
of the landlord. If it is not done, a penalty is levied on the same. A landlord can
face imprisonment of up to three months, a fine of Rs 5000, or both.
 Usage of property: A residential property cannot be used for a commercial
purpose. Even a tenant cannot do so. If found guilty, imprisonment for up to 6
months or Rs 10,000 fine, or both is faced by a defaulter.
 Rent Receipt: It is necessary to provide rent receipts to tenants every month. If
not, then a fine of Rs 100 per day is charged.
 Transfer of tenancy: It is legal for a tenant to accept money for giving up tenants'
rights, according to Section 56 of the Act. Also, a landlord can get money for the
grant or renewal of a lease or for giving consent to transfer the lease.
 Employee-employer tenancy: The says that an employer can give a premise on
rent to an employee. The tenancy should be done in writing for the premises of any
part of it. The tenancy is only for time the employee is in service. An employee
will have to vacate the premises within 30 before services end.
 Service of the apartment: It is the responsibility of the landlord to keep the
premises in good condition. In case a landlord does not repair the property, a 15
days notice is served by a tenant. Also, a tenant can deduct the repair amount from
the rent amount. Remember, the deductible amount cannot be more than one-
fourth of the rent to be paid in a year. If a landlord wants to renovate the property,
they should ensure that the new structure has the same number of units as the old
structure. If the property is demolished, the construction work should be completed
within 15 months from when the tenant vacates the premises.
 Inspection of property: A landlord can inspect the property anytime; however,
prior notice should be given.
 Maharashtra Rent Control Act Pagdi System: The pagdi system was legalized
under Maharashtra Rent Control Act. Pagdi is a fine paid to the landlord in case of
redevelopment. Also, assurance is provided under this system that their rent will be
nominal despite inflation.

Suggested Read: Online Property Registration Details

Penalties Under Maharashtra Rent Control Act 1999

In case of any discrepancy a landlord or tenant will have to pay the following penalties:-

Found guilty of Charges

Imprisonment for up to 3 months or Rs 5000

Landlord charging excess rent
fine, or both

Not providing essential services like Rs 100 per day, if not paid then imprisonment for
water supply, electricity supply up to 3 months or Rs 1000 fine, or both

Imprisonment for up to 3 months or Rs 5000 fine,

Rent agreement not registered
or both

Residential property used for Imprisonment for up to 6 months or Rs 10,000

commercial services fine, or both

Not providing rent receipts to tenants A fine of Rs 100 per day

What is Pagdi system in Mumbai?

The Pagdi system is a pre-independence rental law that gives the tenant certain ownership
rights over the rented property, including the right to sub-let the property or even sells it
while giving a share to the original owner. The tenant here is also the co-owner of the
property and pays a nominal rent, compared to the general ‘ask’ rates in the market. Besides,
the tenant also enjoys additional rights of sub-letting and selling the property.

According to the Pagdi rental model, B would pay a lumpsum principal amount to A, also
referred to as Pagdi. In exchange, A would ensure that B enjoys around 60-70 percent lower
monthly rentals and has the property's co-ownership, however, with specific terms and
conditions.

As the co-owner, the tenant has the right to sub-lease or sell the property after an agreed time
period. However, in the case of sub-letting, the preceding tenant and the owner share the
rental income, usually at a 35:65 ratio. Whereas in the property sale, the owner takes around
30-50 percent of the proceeds, and the remaining belong to the tenant. This provision not
only ensures profits to the owner but also reduces tax implications.

In many cases, tenants who have lived in rented properties for generations may not have the
financial resources to buy a property outright. The Pagdi system provides them with an
opportunity to own a property by paying a one-time lump sum amount, which is generally
lower than the market value of the property.

Another advantage of the Pagdi system is that it provides stability to tenants. Once the Pagdi
amount is paid, the tenant becomes the owner of the property and has the right to live in it.
The landlord cannot evict the tenant or repossess the property, as long as the tenant continues
to pay the monthly rent. This provides security to the tenant and allows them to plan for their
future.
While there are efforts to modernize or abolish the archaic Pagdi system documentation
altogether, the system was made legal as per the Maharashtra Rent Control Act of 1999 and
came into effect in the year 2000 and follows the new law for pagdi system in Mumbai. As
most Pagdi buildings are dilapidated and may collapse, the Brihanmumbai Municipal
Corporation (BMC) in 2019 announced discounted additional Floor Space Index (FSI) for
developers willing to redevelop Pagdi structures. Further, the Development Control and
Promotion Regulations (DCPR) incentivised the FSI and made developers eligible for 60-70
percent of FSI incentive for redeveloping 2-5 or more Pagdi properties

Although such structures are not under RERA’s ambit, tenants can still seek protection under
the Act if the builder registers the project in its entirety and not in phases

If the original owners choose to sell the building with its land to a new real estate developer,
you as a tenant will be given a substantial percentage of the current sale amount to vacate the
premises.