New rental laws: Security deposit limit, entry rules and key changes explained

The new rental laws, which are based on the ‘Model Tenancy Act, 2021, have a lot of features that benefit tenants besides making it totally formal. For instance, every tenancy must have a digitally stamped and online-registered agreement filed within two months of signing the agreement.

While a residential security deposit cannot exceed two months’ rent, landlords must give a minimum of 24-hour written prior notice before entering or inspecting their rented property. Several major states, including Tamil Nadu and Uttar Pradesh, have revised their tenancy laws along the lines of the Act. Here is a guide on the new rental laws.

Security deposit

“The security deposit to be paid by the tenant in advance shall be such as may be agreed upon between the landlord and the tenant in the tenancy agreement, which shall not exceed two months’ rent, in case of residential premises and not exceed six months’ rent, in case of non-residential premises,” according to the Model Act.

The security deposit clause varies slightly with each state. “The security deposit shall be refunded to the tenant on the date of taking over vacant possession of the premises from the tenant, after making due deduction of any liability of the tenant,” the Act said.

Mandatory written agreement

“A written agreement should be jointly informed by the tenant and landlord to the ‘District Rent Authority’ within two months, and dispute resolution should be done within 60 days,” said Sarika Shetty, co-founder and CEO, RentenPe, which is creating a ‘Rent Credit Score (R-Score) and ‘Residence Card (R-Card) to formalise rentals.

“Notwithstanding anything contained in this Act or any other law for the time being in force, no person shall, after the commencement of this Act, let or take on rent any premises except by an agreement in writing, which shall be informed to the ‘Rent Authority’ by the landlord and tenant jointly, in the form specified in the ‘First Schedule’ within a period of two months from the date of tenancy agreement,” the Act said.

Inspection and eviction

“Every landlord or the property manager may enter the premises let out on rent after serving a notice, in writing or through electronic mode, to the tenant at least twenty four hours before the time of entry under the following circumstances, namely: (a) to carry out repairs or replacement or to do or to get work done in the premises; or (b) to carry out an inspection of the premises for the purpose of determining whether the premises are in a habitable state; or (c) for any other reasonable cause for entry specified in the tenancy agreement,” the Model Act said.

“Provided that no person shall enter the premises before sunrise and after sunset,” it said. “Provided further that nothing contained in this section shall prevent the landlord from entering into the premises let out on rent without prior notice to the tenant in case of emergent situations like war, flood, fire, cyclone, earthquake or any other natural calamity, which may affect those premises,” the Act said.

“To evict tenants, landlords must apply to the ‘Rent Authority’ provided there is a valid ground for eviction, such as failure to pay rent for two consecutive months, misuse of premises or structural changes done by the tenant without the written consent of the landlord,” Shetty said.

“Where a tenancy for a fixed term ends and has not been renewed or the tenant fails to vacate the premises at the end of such tenancy, then such tenant shall be liable to pay an enhanced rent to the landlord,” the Act said.

Repairs and maintenance

Unless otherwise agreed in the tenancy agreement, the landlord is responsible for structural repairs except those necessitated by damage caused by the tenant, whitewashing of walls, painting of doors and windows, changing and plumbing pipes when necessary, internal and external electrical wiring and related maintenance when necessary.

Similarly, the tenant is responsible for periodic repairs that include changing of tap washers and taps, drain cleaning, water closet repairs, wash basin repairs, bath-tub repairs, geyser repairs, circuit breaker repairs, switches and socket repairs, repairs and replacement of electrical equipment except major internal and external wiring changes, kitchen fixtures repairs, replacement of knobs and locks of doors, cupboard, windows, replacement of fly-nets, replacement of glass panels in windows, doors and maintenance of gardens and open spaces let out to or used by the tenant.

“Where the premises are uninhabitable without the repairs, and the landlord refuses to carry out the required repairs, after being called upon by the tenant in writing to do so, the tenant may abandon the premises after giving the landlord 15 days’ notice in writing,” the Act said.

“Where the premises let out on rent becomes uninhabitable for the tenant due to an event of force majeure or the tenant is unable to reside due to the occurrence of such event, the landlord shall not charge rent from the tenant until the said premises is restored by the landlord, subject to the provisions of this section, to be inhabitable,” it said.

Which states follow the ‘Model Act’?

When the ‘Model Tenancy Act’ was passed by the Union government in 2021, only four states (Andhra Pradesh, Tamil Nadu, Uttar Pradesh and Assam) had revised their tenancy laws along the lines of the Act. “Recently, Maharashtra and Karnataka also implemented their own set of rules based on the Model Tenancy Act,” Shetty said.

With Maharashtra and Karnataka making rental agreements mandatory, it is expected that there will be a rise in formal rental agreements given the high tenancy volumes of both states, she said.

“Compared to 3.06 lakh in 2022, 3.33 lakh rental agreements were registered in Mumbai across residential, commercial and retail in 2023. The first six months of 2024 saw a 13%increase in rental agreements, as per the data shared by the Maharashtra Inspector General of Registration (IGR). With the law on mandatory residential rental agreements, this number is likely to go up further across Mumbai MMR,” Shetty said.

Who stands to gain—tenants or landlords?

“The Act is balanced and protects the rights of both landlords and tenants and safeguards them legally from any uncertainty that might arise during the rental process,” Shetty said.

“In many Indian cities, landlords traditionally demanded security deposits equivalent to 6-12 months’ rent. The MTA’s deposit cap of two months’ rent for residential properties dramatically lowers this upfront cost, a major relief for tenants, especially in urban centres,” said Apurva Agarwal, founder, Universal Legal, a Mumbai-based law firm.

“This lower barrier to entry could make renting more accessible, particularly for young professionals or migrants who often struggle with large deposits,” he said.

“The new laws will make it harder for landlords to quote high security deposits, implement sudden rent hikes or randomly evict tenants without a valid ground,” Shetty said.

“Provisions such as increased compensation if the tenant fails to vacate the premises after the tenancy period expires or is terminated, safeguard the rights of landlords as well. Moreover, the prohibition on subletting without express consent of the landlord also protects the landlord from misuse of his/her premises,” she said.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.