Rental Disputes During The Pandemic

Author- Rutveek Jawalekar, Government Law College Mumbai.

COVID-19: TO PAY OR NOT TO PAY THE RENT?

There is no doubt that the Corona virus pandemic has caused havoc throughout the world. There is hardly any sector which has not felt the brunt of the lockdown which is imposed to curb the spread of Covid-19.

One of the worst hit sectors is the real estate sector. The migrant labourers and students which live in the Tier-1 and Tier-2 cities are returning back to their native places. The reasons may be many like lack of job opportunities, loss of employment inability to earn livelihood etc. Most of people are also vacating their premises as they are unable to pay the rent or are suffering losses be it tenants, rented offices etc.

This article is about the Tenant- Landlord conflict arising during the lockdown.

· The Ministry of Home Affairs (MHA)

The Ministry of Home Affairs on vide the notification- No.40-3/2020-DM-I (A) dated 29th March 2020 in point no. IV notified that “where the workers, including migrants, are living in rented accommodation, the landlords of those properties shall not demand payment of rent for a period of one month.”

The notification also mentions that if the landlords force the labourers and students to vacate the premises, they would be liable under the Disaster Management Act.

· THE APEX COURT’S VIEW

A petition in the Supreme Court was filed to ensure the compliance of the MHA order directing landlords to neither ask students and labourers to vacate the premises nor to seek rent for a month during the Covid-19 lockdown.

The petition was dismissed as the Court held that the Court cannot implement the orders of the government.

· THE DELHI HIGH COURT

The Delhi High Court in the case of Ramanand and others vs Dr. Girish Soni and others clarified the legal position on whether the tenants would be able to seek suspension of the rent or waiver from payment of rent.

In the said case, the petitioners were the tenants of commercial premises in Khan Market, Delhi. In the lower Court the owner of the premises had succeeded in receiving the decree for eviction. So the tenants appealed against the order of the lower court in the Delhi High Court.

The Delhi High Court stayed the eviction order of the lower court subject to certain terms and condition which required the the tenants to pay an advanced sum of Rs. 3.5 lakhs per month as rent.

· TAKEAWAYS FROM THE ORDER

The Delhi High Court clearly states that the terms of the Contract are superior. Whether the tenant is entitled to seek a waiver for rent would depend on the contract. The High Court also stated that the relief could only be availed if there is a mention of the force majeure (unforeseeable circumstances) events clause in the contract.

It is important to note that most of the Force Majeure clauses only help in termination of contracts and not in securing a waiver. It is certainly possible that this 21st May 2020 judgement may not be the final word and may depend on case-to-case basis.

In short, if there is a clause for rent waiver, only in those cases a rent waiver is possible. The tenants cannot suspend rent fpr temporary non use due to the lockdown. The Court also said that tenants can delay rent but have to pay rent eventually.

· POSSIBLE SOLUTIONS

· Looking at the present scenario, the solution to such disputes seems to lie with the tenant and landlord, the executive and fairly not with the judiciary.

· The need of the hour for both the parties is to sit together and look at the problem realistically and come to an amicable solution.

· The landlords must also think that Work From Home is the new normal for most of the companies which is directly going to hit the renting/lease business.

· If the tenant vacates the premises, to get a new tenant at the same rate is going to be tough in the days to come.

· There may also be a possibility that after a tenant vacates the premises, the premise may remain vacant for a long time.

· It is therefore advisable that both the parties come forward together and negotiate a new agreement for some period of time which will benefit both the parties.

· There is no point for both the parties in approaching the court for a solution and then going for out-of-court settlement.

It is a well known and successful fact that negotiation and mediation help in solving majority of the disputes. Also, a human touch in the negotiations can prevent a situation from getting bitter. Whatever the negotiations end with, both the parties should remember to keep the resolutions in writing for further reference.