The virus-induced nationwide lockdown has not only lead to large-scale ramifications for businesses across the globe, but has also adversely affected contractual relationships.
By Sonam Chandwani, Managing Partner at KS Legal & Associates
The transmission of a virus with flu-like symptoms has pushed world economies to an unprecedented standstill. To combat an impending economic depression and prevent a spate of homelessness, the government announced several rent relief measures looking out for tenant’s interests. However, the virus-induced nationwide lockdown has not only lead to large-scale ramifications for businesses across the globe, but has also adversely affected contractual relationships.
An important question that has arisen during these unprecedented times is whether this lockdown would entitle tenants to claim waiver, postponement, part-payment or suspension of rent. This article is concentrated on assessing the applicability of the latter i.e. the doctrine of suspension of rent and how Indian Courts have dealt with the subject, as this is the relief that most renters seek in the current circumstances.
In the absence of any clarity by the Government on rental obligations under commercial lease agreements, businesses are left struggling with zero sales coupled with salary and rental obligations. Amid the pandemic, the much forgotten ‘Force Majeure’ provision in contracts and leases has gained traction and attention. The commercial tenants could invoke the ‘force majeure’ to absolve them from rental payments during “an event beyond the parties’ control”.
However, force majeure events are not exhaustively laid out under the law and applicability of this provision depends on the language of the rental agreement and interpretation of the courts. Therefore, the parties must review and, as mutually agreeable, revise the terms of the agreement in order to meet a consensus and provide breathing room to both parties.
Suspension of Rent
Recently, the High Court of Delhi in Ramanand & Ors. v. Dr. Girish Soni & Anr., set out the parameters to be considered while dealing with requests for waiver or suspension of rent, however clarified that the question of waiver, suspension or any remission in rental payments would differ from case to case. In doing so, the courts will be required to solve a convoluted interplay between the provisions of the rental agreement with applicable tenancy and property laws.
This recent judgment shall go a long way in providing relief to the tenants as long as they fit in the ambit of the conditions laid down by the court. This decision of the High Court makes it clear that it is not an inherent right of a tenant to seek waiver or suspension of rent from the landlord. Although this decision is first in line of the many judgments that will possibly be rendered by courts in this regard, it certainly does set the benchmark for consideration of requests for waiver or suspension of rent.
Various countries like Singapore and UK have requested the landlords to not evict their tenants in the event of non-payment of rent for a short period of time. Moreover, Indian States like Delhi, Maharashtra and Uttar Pradesh have requested landlords to give extensions to the tenants for the payment of rent and to amicably settle their disputes. The rationale behind these notifications was to provide some breather to tenants unable to pay rents during a crisis.
The recent judgment lays emphasis on the need to review and renegotiate rental contracts, and lease agreements to be entitled for the protection as well as show other grounds such as their financial and social status etc. Thus, the mere possibility of suspension of rent through a judicial decree is indeed to be considered as a silver lining for the tenants. While some postponement or relaxation in the schedule of payment can be granted owing to the lockdown, most tenancy agreements don’t have the provision of ‘force majeure’ and cannot invoke the doctrine of suspension and so unless announcements are backed by ordinances, the uncertainty of its enforceability remains.
The customary strained landlord-tenant relationships are further distressed with the lack of clarity in central and state government announcements bringing fore questions of eligibility and applicability of relief measures. Until the air clears, Indians will continue to rely on legislations that hugely favours tenants in rental disputes, leaving landlords grappling to survive the crisis without any respite. In the interim, as parties await clarification from the government, it is advisable to facilitate a shared objective of contractual performance through collaboration and provide a win-win solution to all until normalcy returns.