“Service is the Rent we pay for the Privilege of Living on this Earth.”
A security deposit is an amount that a tenant pays to the landlord at the start of the tenancy. The sum that a tenant gives the landlord as a security deposit is paid at the beginning of the tenancy. It is paid in addition to the monthly rent and often equals the payment for two to three months, though in some large cities it may reach the level of a year’s rent.
When renting a home, a tenant must offer the landlord a security deposit, which the landlord will refund when the lease has ended. This security deposit used to cause a significant amount of concern for tenants because some landlords in cities like Mumbai and Bengaluru used to ask for deposits that may bring the total to an entire year. However, since the Draft Model Tenancy Act has regulated it to benefit renters, the practice of charging large security deposits may now be restricted. The Act has just been given official approval by the union cabinet and will shortly be sent to all states and union territories for the adoption of the new law.
What does the Model Tenancy Act say about security deposits?
On June 2, 2021, the Union Cabinet gave its approval to the Model Tenancy Act. The law is designed to encourage landlords to rent out their properties without worrying that the renters won’t leave later and keep using them unlawfully. According to Census 2011, which was quoted by Union Minister Hardeep Singh Puri, more than one crore homes were empty nationwide.
Some of the focus points in the act are:
- With regard to residential and commercial properties in urban and rural areas, the act seeks to establish a model that strikes a compromise between the rights and interests of both the tenant and the landlord.
- The law requires both the owner and the tenant to sign a rental agreement outlining all the terms and conditions they have mutually agreed upon.
- In the case of residential property, the tenant is required to provide a security deposit equal to two months’ worth of rent, and in the case of commercial property, an amount equal to six months’ worth of rent.
- The owner is in charge of arranging for the whitewashing of walls, painting of doors and windows, and fixing any
Limits on security deposits under Model Tenancy law
a) In the case of residential properties, not more than two months’ rent; and
b) In the event of non-residential premises, not more than six months’ rent.
Common problems faced by tenants, with respect to security deposits
Importance of security deposit for a landlord
Security deposits are essential to landlords.
According to the landlord, the security deposit is essential for ensuring that tenants fulfil their requirements under the tenancy agreement. According to the agreement, the landlord has the right to recover any unpaid rent arrears or other expenses from the security deposit.
Responsibility of owners and tenants
- In accordance with the laws, unless otherwise specified in the agreement, the landlord is responsible for performing any necessary structural repairs, whitewashing, outdoor electrical wiring, and related maintenance.
- Drain cleaning, switch and socket repairs, kitchen fixture repairs, replacement of glass panels in windows and doors, and care of gardens and open areas, among other things, are the tenants’ responsibilities.
- Landlord must give 24 hours’ notice before entering the rental property. The recommended visitation hours are from 7 am to 8 pm.
Limits on security deposits
- Property owners are required to request a security deposit from tenants that are no more than two months’ worth of rent.
- Tenants are required to pay a security deposit for up to six months when renting commercial property.
Dos and Don’ts in Lease Agreements for Security Deposits
- The amount of the security deposit given by the tenant to the landlord and the timing of its recovery should be stated in the rental agreement.
- Contracts must be signed by both parties and legally registered. There shouldn’t be any unstated terms in the contract.
- Once the contract is over, landlords are required to return the security deposit. The landlord must offer reasons for any deductions if any are made.
Malad and Gupta vs Ganeriwala
Malad and Gupta took a 5 yr lease on a house for a monthly rent of Rs. 1,50,000/- and promised a security deposit of Rs. 15 Lacs. They paid initially Rs. 9 Lacs and moved in and paid regularly rent of Rs. 1,50,000/- and gave a cheque of 6 Lacs which bounced. When Ganeriwala sent eviction notices and filed 138 NI case – they went to different courts and finally case ended up in SC which ruled that
(a) Ganeriwala could not file 138 NI case
(b) Ganeriwala could not ask for eviction other than following the terms and conditions of the agreement (100% repayment of deposit and 6 months notice) for eviction because non-payment of the remaining deposit amount did not construe force majeure of the existing agreement.
RAJNISH INFRASTRUCTURE PVT LTD V. STATE BANK OF INDIA
The instant appeal has been preferred by the Rajnish Infrastructure Private Limited, (hereinafter referred to as RIPL) intervener/intending purchaser against the order passed by learned DRT-1, Kolkata on 16.01.2017 in S.A. No. 09 of 2017 (Dassanagar Precision Engineering Private Limited Vs. State Bank of India) whereby application being I.A. No. 1000 of 2015 filed by the appellant was dismissed.
M/S PUSHPA DIAMS V. V H MUHAMED BASHER
Shaji P. Chaly, J. This appeal is preferred by a third party to W. P. (C) No. 13868 of 2022, after securing leave from this Court, as per the order dated 03.08.2022, challenging the judgment of the learned Single Judge dated 15.06.2022 by which the learned Single Judge extended the time period and the maximum time period prescribed under the Security Interest (Enforcement) Rules 2002 hereinafter called ‘Rules 2002’, constituted under the provisions of the SARFAESI Act 2002 hereinafter called ‘Act 2002’. Respondents 1 and 2 herein are the writ petitioners and the respondent is the Chief Manager of the State Bank of India. The predominant issue raised in the writ appeal is in regard to certain adverse situations arising consequent to the Judgment of the learned Single Judge interfering with the mandatory requirement of Rule 9 of the ‘Rules 2002’. Thus to say the learned Single Judge enlarged the mandatory time period prescribed under rule 9 (4) of the rules 2002 and permitted the auction purchaser to pay the balance purchase price. It is the prime contention of the appellants that, in order to get over the objections being raised, the appellants who are the owners of the properties in question were not made parties to the writ petition.
The Model Tenancy Act (MTA) is currently not in operation. As a consequence, if you plan to rent a house or PG in Mumbai, you might still be required to put down a greater security deposit. However, before you sign the contract, make sure you read carefully the rental agreement. The bearing can guarantee a simple rental process since it is also participating in the rental market.
It is your responsibility as the renter to guarantee that the rental agreement is in order.
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