MUMBAI: Last week, a Mumbai-based landlady decided to write to her two commercial tenants and waive their rent for the months of March and April. On a much larger scale, Lodha Group announced a full waiver for its retail partners who rent spaces in its properties until the government lifts the lockdown.
Not all landlords, though, have taken action to mitigate the suffering of small businesses as a result of the pandemic.
But commercial tenants contend they could invoke a provision in their rental contracts that would absolve them from paying rent. The provision, referred to as a "force majeure" event or an "act of God" usually refers to an unnatural event such as a tsunami, an earthquake, a war, a riot or such other event that prevents the parties from continuing their contractual provisions.
‘Parties must work out rental issue’
Such contractual duties could include occupation of premises, delivery of goods, payment for services and other such acts for which the contract has been entered.
“The occurrence should be such an event which completely frustrates and makes impossible the performance of the contract,” said lawyer Naheed Carrimjee, who has been guiding clients on this matter over the past week. “For example, keeping your office open or delivering non-essential goods in India today has become an unlawful and impossible act.”
“Remedies available to landlords and tenants arising from the shutdown would primarily depend on the contract between the parties or the legal relationship of the parties—whether they are landlord -tenant, licensor-licensee or lessor-lessee,” said lawyer Sudip Mullick, partner, Khaitan & Co. “However, on a practical note, parties should work together to find a solution that is win-win for both. Inflexibility would delay walking back to normal business.”
Senior advocate Vikram Nankani said ,coronavirusis not an immunity from contractual obligations. “In other words, payment of rent may be deferred to a later date but the liability is not extinguished.”
Not surprisingly, a number of commercial establishments have started writing to their landlords asking for a waiver. WeWork India, a co-working firm, has sought a cut in rents across the country. A spokesperson refused to comment.
Last month,Shoppers Stop, the department store chain, told its landlords it would not pay licence fees and other charges till premises reopen. It wrote to the landlord, Y J Realty and Aviation, part of the D B Group, that it would not pay its licence fee for three months for the 60,000 square feet it occupies at Dynamix Mall in Juhu.
An international coffee chain which has 61 branches in Mumbai—and pays rents from Rs 5 lakh to 10 lakh each—has written to its landlords as well, said sources. In Santacruz, it occupies a space in a building owned by a Hindi film actor and has informed him it will not pay rent, sources added.
Lodha Group announced full waiver for its retail partners last week. “Retail partners, who are renting spaces in Lodha’s retail properties, are exempted from paying rent since March 15 until the government permits reopening of retail operations. Maintenance charges will be reduced as per actual expenses during this period,” said a spokesperson.
At Bandra-Kurla Complex, home to the city’s most expensive office spaces rented for Rs 225 to Rs 250 a sq ft a month, landlords say they expect to hear from tenants . A BKC building, on an average, fetches Rs 10-15 crore a month as rent. “We will have to negotiate the lease rentals for the lockdown period. Several options can be offered, including deferred payment,” said a builder. One said many expats who leased his flats for Rs 5-6 lakh a month, left India before the lockdown. “They haven’t written to me about negotiating the rent.”
April 04, 2020
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