Measures to Handle Delinquent Tenant under Indian Laws post COVID 19

The concept of tenancy

A tenant is a person who pays a compensation or rent to use a house, premise, building or land, which originally belongs to a landlord or the rightful owner. Nowadays, the induction of tenants is also governed by a duly registered agreement, unlike the olden times when there was no agreement for the said purpose. Based on the various types of  agreements for tenancy that are  entered into, the following types of tenancies exist:

• Statutory tenant:This type of tenant is governed under the Maharashtra Rent Control Act, 1999 and can be evicted only on the restrained grounds, as allowed in the said Act. Under this Act, there can be no testamentary bequest with respect tenancy  rights nor can the tenant assign, transfer, mortgage, sub-let, give on license the  tenancy rights.
• Lessee: A lease comes under the purview of the Transfer of Property Act 1881 and gives a lot of rights to the lessee, as opposed to other forms of tenancy. In leases, we come across leases for a term of 100 years or even in perpetuity which gives very little rights to an owner once he has leased out his property.
• Licensee:A licensee occupies the premises at the inclination of the Licensor and for a minimum period of 11 months. This right can be acquired back by filing a case with the Competent Authority if the tenant refuses to vacate and therefore, it is the safest option available to landlords. The agreement that controls this tenancy is a Leave and Licence Agreement, which has to be duly registered.

However, we have to keep in mind that the Tenancy Agreement, Lease Agreement or the Leave and licence Agreement are all compulsorily registered  and non-registration of the same can land the landlord behind bars.

The COVID Crisis and Tenancy

From 21^st March 2020, the entire country went into a lockdown to stop the spreading of the COVID 19 virus. This pandemic situation led to a wave of depression and  recession in terms of people suddenly becoming unemployed, with massive job losses, leading to a scenario where many people were  rendered homeless for not being able to pay their house rent. The situation was tough for the landlords too, who may have loans or EMIs on their tenanted properties and relied a lot on the rent payments to pay their EMI on a loan.

Looking at the plight of the tenants, the Government of different states tried intervening in various ways for eg: CM of Delhi Arvind Kejriwal called upon the landlords to exonerate  rent for atleast 3 months. He also offered that the government could help pay rent, if tenants could not do so in this pandemic situation. On the other hand, Uttar Pradesh government published an authoritative ruling to imprison or penalise landlords failing to grant concessions in rent collection.

When all this tussle was going on for rent payments, suddenly by the judgment dated 21^st May 2020, the Delhi High Court  ruled in Ramanand and Others v. Dr. Girish Soni and Others that there was no excuse for not paying rent in the period of lockdown on account of COVID-19. The Court ruled that a tenant may get a waiver or suspension of rent subject to the fact that the contract contains a force majeure clause that makes provision for such a situation. However, it highlighted a postponement to the payment of rent scenario as an option without any complete relaxation.

Dealing with a Delinquent tenant

As we all are aware, payment is the essence of any leave and licence Agreement and non-payment of the compensation/ Rent can lead to the eviction of the tenant. Further, all the initiatives taken  by various Governments were mostly advisory in nature because there was a complete absence of either a Government Circular or Ordinance to grant respite to tenants during the COVID Pandemic Lockdown. Therefore, the tenants were left with no option but to pay the rent unless there is a mutual agreement between the landlord and the tenant to delay payments for a few months. On the other hand, most commercial tenancy contracts have the Force Majeure clauses,  which can help the tenant claim some respite till the situation improves.

But others who cannot take respite because of the absence of the clause, can work out an arrangement with the landlord in the following ways:

• Postpone Rent payments mutually:We can try and defer rent payments for some time by altering the arrangement to include that payments can be made after a few months. On the other hand, to give some respite to the Landlords, interest can be charged on the said deferred payments. This will help the landlords too, who may have EMIs or Loans pertaining to their property on their heads. We are aware that the RBI has also given a moratorium on loans during the COVID pandemic, therefore the landlords can consider these options for their Delinquent tenants.
• Novation of Contract:Once the tenant and the landlord have agreed on the new payment terms, they can move for altering the earlier agreement under Section 62 of the Indian Contract Act by rescinding the original agreement and re-registering an agreement with the newly agreed terms.
• Adjust the Security deposit: If the parties are unable to sort out the differences amicably, the landlord can adjust his pending dues against the security deposit lying with him and evict the tenant. This is mostly in cases where the Agreement does not have a Force Majeure Clause for the tenant to approach a Court of appropriate jurisdiction to protect him.
• Relief under Disaster Management Act, 2005:The tenants who belong to the Economically depressed sections can seek relief under the Disaster Management Act, 2005 eg: construction workers, migrant labourers or students  can also seek relief in order to avoid being evicted out of their house.

Conclusion

In order to get the best possible outcome, both parties to the tenancy can, in their best interests, work in unison to figure out short term solutions for rent payment, until normal dealings and commerce resumes again. However, if short term solutions do not work out then it may lead to ugly scenarios, wherein tenants may get vacated for non-payment of dues, in the absence of Force Majeure to protect them in non-commercial Agreements