Can tenants stop paying rent due to the Covid-19 situation?

Published: July 3, 2020 3:15 PM

In light of horrendous events of tenant eviction during the lockdown, the government had recently issued a circular in favour of the tenants’ interests allowing relaxations in payment of rents.

rent, rent agreement, Covid-19, lockdown, Can tenants stop paying rent due to Covid-19 situation, Transfer of Property Act If an agreement contains a “Force Majeure” proviso, wherein the instalment can be deferred, it will be represented by the arrangements of the area of the Contract Act.

We are seeing a phenomenal circumstance, which not just has upset all our financial and hierarchical standards hereto, yet additionally has profoundly influenced our connections – both relational and social. In practically all the large urban communities where there is generally more convergence of vagrant workforce, stewing anxiety and discontent is unmistakable regarding the issue of non-instalment of the lease by tenants and the proprietor.

Humanity is under stress trying to evade the perils of the pandemic prevailing worldwide. The times have dawned with dire crisis persisting in all spheres of life. A huge loss has been caused to our economy with thousands of individuals left unemployed unable to meet everyday expenses like monthly rentals. As an immediate consequence, tenants are being evicted by the landlords on the defaults made in payments. In light of horrendous events of tenant eviction during the lockdown, the government issued a recent circular in favour of the tenants’ interests allowing relaxations in payment of rents. In the legal parlance, the tenant and landlord have a contractual relationship bound by the rent agreement execute. The agreement is primarily based upon the terms and conditions agreed upon by the parties in speculation of the future happenings. Nevertheless, a pandemic was out of the imagination of every individual while entering into a rent agreement.

A comparative study of the doctrine of frustration under Section 56 of the Indian Contract Act and Section 108(e) of the Transfer of Property Act is critical here. This will assist us with appreciating the commitment of renter in cases wherein the power Majeure condition is missing in the rent deed. Under the Transfer of Property Act if by fire, tempest, or flood or violence of an army or a mob or other irresistible force any material part of the property be wholly destroyed, the lease shall, at the option of the lessee, be void. In that view, Section 56 of the Contract Act has no application to leases and instead of that, Section108 (e) will apply as far as frustration relating to leases is concerned.

In any case, for the current emergency, even the arrangements of Section108 (e) of the Transfer of Property Act are likewise inapplicable, on the grounds that the land was neither demolished nor turned out to be for all time unfit for the motivations behind the occupation.

In layman’s language, it can be said that it is out of line to anticipate that the occupant should satisfy his commitment in ‘remarkable conditions’, for example, the COVID-19 pandemic, where he could be as of now under extraordinary money related pressure. Law frequently inclines toward rationale. Under the law, the Doctrine of ‘Power Majeure’ specifies that the obligation of a gathering is suspended briefly or deferred for all time when a happening occasion outside the ability to control of the gatherings that renders execution of an agreement incomprehensible occurs.

As it were, a gathering whose obligation it is to release an obligation – pay his month to month lease in this example – is secured regardless of whether they neglect to do so once the occasion is considered by law to be surprising and outside their ability to control. Be that as it may, the “waiver of rentals” would rely upon the realities and conditions of each case. Insignificant non-use or failure to utilize the property can’t be treated as an occasion rendering the property “generously or for all time unfit”. These decisions help answer a few circumstances which an occupant or proprietor can confront contingent upon whether an agreement conveyed a satisfactory ‘Power Majeure’ proviso.

Nevertheless, the question is what will be the remedy if force majure clause has not been included in the agreement. This situation of a pandemic was an unforeseen situation and was not known earlier which drags us to the position. The insignificant presence of a ‘Power Majeure’ proviso in an understanding would not qualify an inhabitant for a waiver. That is with the exception of and until a situation of failure to utilize or get to the premises for reasons as pervasive during the COVID pandemic is specified authoritatively between parties. If the tenure understanding is quiet and doesn’t consider a ‘lockdown’ situation, a suspension of the lease during the lockdown time-frame can’t be looked for simply due to the lockdown or non-utilization of the premises.

If an agreement contains a “Force Majeure” proviso, wherein the instalment can be deferred, it will be represented by the arrangements of the area of the Contract Act. On the off chance that the provisions of the agreement do not accommodate “Power Majeure conditions” or if any of the Force Majeure conditions are past the agreement statements, segment 56 of the Indian Contract Act, 1872 can be conjured by and large. Further, in the occasion the renter looks for security under the arrangements, he can do as such, and just on account of the property being completely crushed rendering the premises for all time and generously unfit for use. Along these lines, nothing favours an inhabitant or resident aside from, and except if, the agreement spares their advantage.

Notwithstanding the way that the progressing pandemic may have brought about the extraordinary difficulty to the inhabitants and despite governments likewise mentioning proprietors to embrace a merciful view, in standard conditions, without anything to the opposite in the occupancy understanding, the ‘lockdown’ because of the novel coronavirus can’t be utilized by the tenant to pardon himself from the instalment of the lease under law. It depends absolutely on his/her legally binding game plan. A perfect situation would be for the tenant to arrange and talk about the waiver, deferrals with the proprietor staying away from complexities, prosecution.

(By Sonam Chandwani, Co-Founder and Managing Partner of KS Legal & Associates)

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