Table of Contents
Ever since the first case of Coronavirus was reported in India, on January 30, 2020, when a student from the Wuhan University came back home to Kerala’s Thrissur district for vacations, the number of infections in the country have been on the rise. The economy has been dealt a sudden jolt, owing to the lockdown imposed to curb the spread of the virus. In the short-term, businesses with medium to no-risk appetite, may be forced to resort to pay-cuts and layoffs. Unfortunately, this will cost many dearly.
Mohit Singh has been living in 57-year-old Ajay Sharma’s property as a tenant, for the last one year. Unfortunately, Singh, who belongs to a mid-income family, has lost his job. So, he approached Sharma for a rent waiver but the latter refused, citing that rent from two of his properties, was the only sizeable income for him. Sharma is about to retire in a year’s time and his wife is a teacher. Their household income is Rs 1.50 lakhs per month. Their expenses include parents’ welfare, daughter’s education, funds for retirement corpus, monthly necessities, personal medical expenses, municipal charges, expenses incurred on domestic help, commuting, etc.
Singh, however, believes that Sharma should offer some relief on rent payment, given that he has always been paying his rental dues on time and has maintained the decorum that a tenant is supposed to. Singh has also availed of the RBI’s loan moratorium, to divert his EMI money to other urgent needs. He also feels that the authorities have urged landlords to provide rent relief to tenants wherever possible and Sharma should take note of it. In some cases, the authorities have requested landlords not to force their tenants, especially migrant workers and students, to pay their rent. They should be allowed to defer the rent payment by at least a month’s time.
Disaster Management Act, 2005 and rent payment
On March 29, 2020, the Union Ministry of Home Affairs in an order said, “Wherever the workers, including the migrants, are living in rented accommodation, the landlords of those properties shall not demand payment of rent for the period of one month.” Further, it said that “If any landlord is forcing labourers and students to vacate their premises, they will be liable for action under the Act,” invoking measures under the Disaster Management Act, 2005.
While this stands true for workers and students, it is most certainly to help the economically backward, who have to sustain far more pressure than people with regular jobs and a decent lifestyle.
Can a tenant be evicted for non-payment of rent?
Aditya Pratap, advocate, Bombay High Court, says that non-payment of rent can lead to eviction of the tenant from the premises. “The timely payment of licence fees is the essence of an agreement. Secondly, the law presumes that every person will save for a rainy day. If a person has no income during a particular month, he/she is expected to pay out of his/her savings. Thirdly, the dominant purpose of a residential rental agreement is to give the premises on a residential basis. Whether a tenant is working or not, he/she is occupying the premises and legally, a landlord can avail of the eviction remedy.”
Remedies for landlords, tenants who do not prefer eviction
Given the circumstances, the eviction of a tenant and their family might not be a humanitarian move. Landlords who do not wish to evict their tenants and financially-stressed tenants, must put their heads together to arrive at a consensus. Here are some tips:
“Practically, I would advise landlords to consider mediation,” says Pratap. If you are someone who can afford to bear one or two months of deferred payments, go for it. However, your tenant’s track record must be good and you must ensure that you can trust him/her. A cordial negotiation is the way ahead and one-sided decisions should not be imposed upon either the landlord or the tenant.
Note that with mounting health and safety concerns owing to COVID-19, even courts have placed a temporary ban on eviction. A landlord can file an eviction case in a court, but the case might not be heard, as only urgent matters are being listed for hearing.
Novation of contract
Section 62 of the Indian Contract Act, 1872 reads: “If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.” This means that you can go in for a novation and create a supplementary contract with new terms, meant for the benefit of both parties.
Commonly asked questions
What if the tenant was just about to move into a property on rent?
Suppose that a tenant, Manik Nath, was just about to move into Animesh Sinha’s property on rent but could not do so, because of the lockdown instructions valid across India? In such a case, Nath can invoke the ‘force majeure’ clause, as he has not occupied the property. He will not be expected to pay the rent and he can claim a refund of his deposit.
What if the tenant wanted to move out of the property and is unable to?
Let us consider another example. Priyank Gujral was about to move out of Vikram Naik’s property by April 1, 2020. Unfortunately, the plan did not work out. Gujral thinks he can excuse himself from paying the rent for April, 2020. He says that his landlord was aware of his plans to shift out of the property and should not have any problems. According to advocate Pratap, Gujral will have to continue paying the rent, because he is occupying the premises. His intention of moving out of the property does not count here. If the landlord is agreeable to a waiver of the rent, then, that is a mutual agreement. However, by law, such a rent waiver is not allowed.
The authorities have taken several steps, to combat the fallout of the Novel Coronavirus pandemic. These include the following:
COVID-19 Response (Urgent Management Measures) Legislation Act
The COVID-19 Response (Urgent Management Measures) Legislation Act came into being on March 26, 2020. Restrictions were imposed on terminating a tenancy for an initial period of six months, that is, from March 26, 2020 until September 25, 2020.
Relief for migrant labourers
Delhi chief minister Arvind Kejriwal appealed to landlords to make it easier for their tenants to survive the economic difficulties brought about by COVID-19. He suggested that they should accept rents either in installments or should not coerce migrant workers and students to pay the rent.
In Uttar Pradesh, the state government also issued an order to the effect that if landlords were caught harassing their tenants, this could lead to imprisonment. In Maharashtra, the housing department advised landlords to abstain from evicting the tenant and defer the rent collection, if possible.
RBI’s loan moratorium
For those severely hit by the pandemic, the Reserve Bank of India (RBI) extended an EMI holiday on all term loans for a period of three months, which was further extended for another three months up to August 31, 2020. For those struggling to bear the expenses towards rent and loans, the EMI holiday was a relief. Independent reports state that about 45% of people who had taken loans from financial institutions, availed of the EMI holiday.
Who can seek rent waiver as per the Disaster Management Act, 2005?
Economically depressed sections can seek relief under the Disaster Management Act, 2005. This includes construction workers, migrant labourers. Even students can ask for relief. However, financially-strained sections of the society are at the core.
Can I ask for a refund of the security deposit if I was unable to move into a new property on rent?
Yes, if you were unable to shift into a new house due to the COVID-19 lockdown, you can ask for a refund. It is legal.