The Troubled Relationship between the Tenant and the Landlord during the COVID-19 Pandemic and its Repercussions

The Troubled Relationship between the Tenant and the Landlord during the COVID-19 Pandemic and its Repercussions

Author: Jyothi Pathak, Gautam Buddha University, Greater Noida

Abstract

In this article we will see how the relationship of tenant and landlord gets disturb due to reverberation of covid 19 .Indeed, what this article ultimately seeks to achieve is evaluating way to find solution to solve the dispute between landlord and tenants The transmission of a virus with flu-like symptoms has pushed world economies to an unprecedented standstill. Stock market crashes, mass unemployment, and disruptions hinting a recession – are only the tip of the iceberg and its underlying repercussions are likely to unfold with time. 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 (pun-intended), 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.

The COVID-19 pandemic is the  worldwide pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). , which originally emerged from China . The government has lay down certain restriction like lockdown and social distancing for containing spread of disease.As a result of  governmental restriction and preventative social measures commercial landlord and tenant are now facing complete or partial shut of business operation .It not only affected economic and organisational norm but also deeply affected  our relationship both interpersonal and social. Many tenants are facing financial crisis due to Coronavirus and are not able to pay rent. When the tenant default on rent, the landlords suffer and might not be able to meet their own financial obligation such as making the mortgage payments on the rental property, electricity and water charges, insurance, maintenance, property tax, etc.The relationship of  any tenant-landlord/ lessee- lessor relationship is pure and simple a contractual relationship based on the free will of the parties ( where the monthly rental happens to be below a specified amount and such a relationship being governed by the various provisions of the Rent Control/ Regulation Acts enacted by various States are situation of exception). This relationship is governed by the contract between the landlord and the tenant  which when brought down into writing, forms the Rent Agreement/Lease Deed (Agreement). This Agreement/ Deed is largely governed by the various provisions of the Indian Contract Act, 1872, inter alia and particularly with respect to offer, acceptance, consideration, term, breach and frustration of contract.

Government Guidelines on the present scenario

The Delhi government released an order asking all landlords not to ask rent for one month from workers, including migrants, who have been affected by the lockdown caused by a coronavirus. Any landlord identified to be in violation of the order is charged under the Disaster Management Act 2005.

  • The order issued on April 22 specifies that action should also be taken if landlords compelled students to pay the rent immediately or threatened to evict them. The government also urged workers including migrant workers and students who are coerced to pay house rent by their landlord can call
  • The chief secretary has ordered all district magistrates to conduct awareness campaigns on the problem especially in areas with a higher density of workers, migrant workers and students to advise affected persons to file complaints in the police control room by calling 100 against the erring landlords.The chief secretary asked police deputy commissioners to send weekly reports on these complaints lodged by tenants
  • On 23 March 2020, the Government announced a freeze of rent increases and protections against tenancy terminations. This has been applied as law through the COVID-19 Response (Urgent Management Measures) Legislation Act, which came into effect on 26 March 2020. This means that landlords can’t increase rent for their rental properties. This will apply for an initial period of six months, from 26 March 2020 until 25 September 2020.
  • The restrictions on ending a tenancy apply from 26 March 2020 to 25 June 2020. From 26 June 2020, landlords can give notice to terminate a tenancy under the normal Residential Tenancies Act provisions. Normal notice periods from the day it is given will apply.
  • Landlords and tenants should adhere to physical distancing, personal hygiene and surface cleaning guidance and should keep records for contact tracing purposes. They have to follow Government health advice on  COVID-19.
  • As an advisor, the Delhi Government announced and requested the landlords to forgive rent for the next 3 months and the Hon’ble CM  Kejriwal Arvind also went to state that the government will pay rent if the tenant fails to do so.
  • In Uttar Pradesh, the Government also issued a magisterial order to imprison or fine landlords who fail to postpone rent collection by a month. Furthermore, the Maharashtra Housing Department advises the landlords to defer rent for at least three months and not to evict tenants for non payment of rent or arrears.
  • The RBI also announced a 3 months EMI holiday on various loan types

Landlords with deep pockets such as the Lodha Group announced a full waiver for over 200 commercial tenants until normalcy returns. However, not all landlords can afford rental waivers or deferrals,  because many Dhem, especially senior citizens, largely depend on rental incomes for their survival.

Legal Aid on Tenancy Agreement

Doctrine of frustration: According to Section 56 of the Indian Contract Act, 1872, lays down principles as hereunder: (1)An agreement to do an act impossible in itself is void; (2)A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

In the case of ‘Doctrine of Frustration’, the tenancy is frustrated when without the fault of parties, obligations under the agreement, as originally intended, becomes impossible to fulfill as a result of unforeseeable circumstances.

Tenancy, as a general rule, will terminate automatically when a frustrating event occurs, i.e., one which is unforeseeable and unexpected; beyond the control of the parties; or that renders the performance impossible or radically different from that which the parties originally intended since the inception of the contract.

Force majeure, also commonly known as  an “Act of God” clause, is a French term that literally means “superior force”.  These may include: natural disasters, acts of God, epidemics or pandemics and war. Force majeure clauses are often included in commercial contracts to avoid certain circumstances arising that prevent the fulfilment of contractual obligations

In Ramanand & Ors. v. Dr. Girish Soni & Anr, the delhi high court rejected an application for waiver or suspension of rent on account of the lockdown.

The Court gave a detailed explanation of the Force majeure clause on contractual obligations. The Court held that the relationship between a landlord and tenant, a lessor and lessee and a licensor and licensee is governed by the terms of their respective contracts and the question of a waiver, suspension or any remission in rental payments would depend on the terms and conditions stipulated in each contract.

The Court held that those contracts having force majeure clause, waiver of monthly rent would be governed by Section 32 of the Indian Contract Act,1872 The Supreme Court in Energy Watchdog v. CERC & Orsheld that a force majeure clause in a contract could also be a contingency under Section 32 of the Contract Act, which may allow the tenant to claim that the contract has become void and surrender the premises. However, the Court held that if the tenant wishes to retain the premises and there is no clause giving any respite to the tenant, the rent or the monthly charges would necessarily be payable.

Conclusion

 Due to raised impact of COVID-19 pandemic  there is a clarion call made to landlords by tenants to forgive rent for a month or two ,especially for poor migrant families, who do not have other option for livelihood.Typical rent control laws have historically favoured tenants, driven by a popular conception of landlords as petty capitalists exploiting poor, vulnerable tenants. This is only partly true. Research has shown that landlords, especially in the rental housing market in poor parts of our cities, are as poor and vulnerable as their tenants. Many tenants are facing financial crisis due to Coronavirus and are not able to pay rent. When the tenant defaults on rent, the landlords suffer and might not be able to meet their own financial obligation such as making the mortgage payments on the rental property, electricity and water charges, insurance, maintenance, property tax, etc. There is no legal obligation for landlords to excuse rent or not evict tenants in the current pandemic, and this is also a situation that they themselves cannot afford. This predicament is further compounded by the informality in the rental housing market — we do not even know how many people are giving out their houses on rent, for how much, how long, or under what terms and conditions.  We still need to consider that landlords may not be able to afford a rent-free month; they need the rent for their own survival too. For this, a mobilization of housing welfare and disaster funds is required to make up for this loss of rent. Funds could also be crowd-sourced, acquired from corporate social interests, and grants from international and national donor organizations. The advantage of having registered tenancies would then be evident, because the government would be able to channel funds directly into the accounts of landlords and tenants.

Suggestion

The author seek to establish certain suggestions in respect to solve the conflict between tenant and landlord

  • During this pandemic it is necessary that landlords not to seek for possession during this challenging time and unprecedented situations without a very good reason to do so and further should ease measures like health and safety during lockdown
  • Tenants should continue to pay rent and abide by all other terms of their tenancy agreement to the best of their ability.
  • The government should shift their focus to Disaster  Management Act as it’s a very roundabout way to rent control acts that actually aim to regulate rental housing.
  • Rent control laws in States, as well as the Central government’s Model Tenancy Act, 2019, could be useful as it includes tenancies, also of those which are informal in nature, get registered under the Act.  MTA playing a key role in emphasising the registration of rent agreements through to-be-established rent authorities in every State. This is doable, and all States should pursue it.
  • The rent Acts, as well as the Model Tenancy Act, need a force majeure clause for emergencies such as the pandemic, as it will carry a far stronger legal sanction than under a disaster law.

Reference

  1. Doctrine Of Frustration – Corporate/Commercial Law – India http://www.mondaq.com
  2. Impact of COVID-19 on the Landlord and Tenant issues – India Legal www.indialegallive.com
  3. http://www.thehindu.com

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