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Strained Landlord-Tenant Relationship in the times of Covid-19

The World Health Organization officially declared Covid-19/ coronavirus as a pandemic on the 11thof March 2020. As this battle against the outbreak of the virus continues unabated, a plethora of suits have been filed by the tenants across the country demanding a waiver / suspension of rent owing to the stoppage of various business activities because of the economic distress that has engulfed due to isolation necessitated by the spread of the novel coronavirus, diminishing their financial capacity to make rental payments as per the timeline stipulated in their respective agreements.

In the light of the financial crisis penetrated due to Covid-19, courts are very much aware of the fact that the pandemic is a severe exogenous shock which has caused disruptions beyond human apprehensions but the main question which they have to ascertain is whether the lockdown would actually entitle the tenants to claim waiver or exemption from the payment of rent or suspension of rent.

The courts are of the perception that although there is no standard rule for addressing these cases but however a few broad parameters have to be borne in mind while deciding the disputes. It is crucial to analyze whether the present day situation posed by Covid-19 would qualify as Force Majeure.

The term ‘force majeure’ has been defined in the Black’s Law Dictionary as ‘an event or effect that can be neither anticipated nor controlled.’ Some examples of force majeure events can be any kind of natural disasters like flood, earthquakes, quarantine, war etc.

The courts are also of the view that questions relating to waiver or suspension of rental payments would operate differently for each category of agreements. Various factors have to be taken into cognizance for eg. Whether there is a contract, whether a force majeure clause has been incorporated which extends to permitting suspension of rent, the precise language of the clause and if there is no contract executed between the parties or if there is an absence of a force majeure clause then the issues have to be determined according to the applicable law.

It can be deduced that amidst the looming uncertainty resulting from the unfavorable circumstances, it would be advisable for the parties to come forward and renegotiate the terms of their agreements and endeavor to resolve their disputes amicably. Paying heed to the fact that since all the businesses and other commercial activities have come to a grinding halt , the economy today stands paralyzed due to which generating revenue in any sector has become a strenuous task.

Also, pertaining to the various transactions / agreements entered into between the parties, fulfilling the obligations thereunder is becoming impossible, further leading to non-compliance with the terms. The landlords as well as the tenants have been left in a lurch today, as the tenants are seeking waiver/ suspension of rent while the landlords also cannot be put in peril by compelling them to allow remission /suspension of rent, as they too have to pay maintenance charges and property tax.

Though the country heaved a sigh of relief with the unclogging of the economy but it cannot be denied that even after the lockdown is entirely lifted, it will take some time to restore economic momentum.

In dire situations like these, when litigations emerge before the courts, it is left up to their discretion as to the manner they wish to adopt in order to adjudicate the matter, whether by placing reliance upon the force majeure clause and not travelling beyond the four corners of the agreement entered into between the parties , or if there is no contract at all or no specific clause then deciding the same by the applicable law or either by empathizing with any particular party, taking into account the financial dilemma faced by him due to the current global phenomenon and thereby granting him some relief for the time being.

However in sensitive matters like these, some reasonableness is expected to be exercised by the judicial system while passing judgments/orders, accompanied with laying down adequate factors for favoring/ disfavoring any party after having considered the facts and circumstances of each case.

Award Winning Article Is Written By: Ms.Nirali Deepak Parekh
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Authentication No: NV31900237906-15-1120

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