Hell hath no fury like a Landlord scorned: Payment of Rent during the COVID-19 pandemic

The original proverb for the paraphrased title of this piece was adopted from a tragic English play called The Mourning Bride. Unfortunately, what was true for the dramatis personae Queen Zara and love in 1697, is now true for landlords and the pandemic-delayed rents in 2020.

The world is at its wit’s end. Anyone who doesn’t think that there is an ominous cloud of impending recession or that the financial system is crumbling deserves a reality check. No one in the financial system can strive to survive in isolation.

Let us take the example of the working of a lawyer’s chamber. Almost all lawyers of good standing and repute rely on fat monthly retainer cheques from bigwig clients which keeps the offices plush, the chamber going and the spirits high. On account of the pandemic, by and large all clients, including large corporations, have defaulted on retainer payments. Even the billables for the last quarter have not come through the door.

Despite these circumstances, lawyers are expected to pay the rent towards commercial leases, and the salaries of their colleagues and clerks. Large financial corporations have no shame in pleading penury and shamelessly saying in a three sentence email that they will, for the time being, not be able to honour their payments. This is without understanding the ripple effect this single non-payment will trigger. Lawyers will, of course, dip into their savings, and honour their obligations to support staff who are at the very bottom of the food chain, lest their poor clerks and their families starve of hunger and probably get evicted.

This illustration is applicable across the board. It is true for all businesses (big or small), professionals, as well as salaried persons. Everyone is pinning their hopes on some income which will help defray their expenditures, salaries, rentals, and somehow keep the show running.

One cannot shy away from paying the people at the bottom of the pyramid i.e. the house-help, the drivers, the factory workers. Friends who are young politicians and have some grasp of the ground level say that the poor migrant labour in their constituencies would say in so many words, ‘…we might or might not die of Coronavirus, but we will certainly die of hunger’.

Therefore, the one persona in this food chain worth negotiating for some respite with is perhaps the landlord. He is the only one in this transaction that can afford to take a haircut and cut you some slack. But will he? The answer is an emphatic no. Because today, he believes that the law is on his side. The key phrase here is "he believes".

The basis for landlords unwilling to give any waiver or indulgence to tenants is an order passed by the Delhi High Court which has been overly misconstrued and misinterpreted on the basis of some serious misreporting.

The order in the case titled Ramanand v. Dr. Girish Soni was rendered by the Court about three weeks ago. What the learned judge categorically states at the outset is worth quoting hereunder:

“The urgent application under consideration, raises various issues relating to suspension of payment of rent by tenants owing to the COVID-19 lockdown crisis and the legal questions surrounding the same. The COVID19 pandemic has had large-scale implications for human life. Contractual relationships and jural relationships between parties are severely affected due to the lockdown. The question as to whether the lockdown would entitle tenants to claim waiver or exemption from payment of rent or suspension of rent, is bound to arise in thousands of cases across the country. Though there can be no standard rule that can be prescribed to address these cases, some broad parameters can be kept under consideration, in order to determine the manner in which the issues that arise can be resolved.”

The three major findings of the Court are as follows:

1. The matter was one pertaining to a statutory tenancy under the Delhi Rent Control Act, 1958 and not of a contractual tenancy governed by Contract Law (paragraph 30).

2. In a contractual tenancy, where there is a force majeure clause or any other condition that could permit waiver or suspension of the agreed monthly payment, the same would be governed by such terms (paragraphs 11 & 14).

3. Even in the absence of a contract or a contractual stipulation, the tenant may generally seek suspension of rent by invoking the equitable jurisdiction of the Court due to temporary non-use of the premises (paragraph 26).

Almost all leading national papers have misinterpreted the decision of the Court. The decision has been reported as if a general principle has been laid down by the Court that rent is to be paid to the landlord in every eventuality. There has been a miserable failure in understanding the decision of the Court. This, despite the fact that the learned judge’s decision is immaculately worded and eloquently clarifies the position in law.

That being said, the trusting public of our city apparently now also receives professional legal advice over forwarded messages, which is treated as gospel truth. Without dwelling into what this forwarded message ailment is called, it would be advisable for the tenants to open their leases and check what indulgence the contract permits on account of a situation such as the present pandemic. And, if possible, it would also be judicious to seek professional legal counsel from something other than your newspaper or your smartphone.

Very pertinent information was revealed at a webinar on ‘Assessing the impact of COVID-19 on Rental Contracts’ (organised by FICCI and the Indian Council of Arbitration), wherein one of the speakers said that global office markets like Tokyo and Hong Kong have waived off rent, which stands at $600 per sq ft per annum. In India, the top office markets stand only at $15 per sq ft per annum.

Singapore has come out with the COVID-19 (Temporary Measures) Act, 2020, which provides for rental relief for tenants of commercial properties. The Act originally did not waive payment of rent, but provided for suspension of payment till the time the threat does not pass and the economy does not fully recover. However, as per an amendment effected last week, commercial property owners are now set to get four months’ worth of rental relief from April to July, while those renting spaces at industrial or office properties will get two months of help for April and May.

It remains to be seen whether the Government of India will be adept in introducing a similar sort of bailout package for tenants. Sans any waiver as such, the tenants would need to rely on the legal covenants in their contracts to seek a force majeure exception.

It was heart wrenching to see one of Delhi’s most iconic book stores at Khan Market draw its curtains last week on account of not being able to afford the rental for the shop, and not being able to arrive at some arrangement with the landlord.

Harry Golden, a famous American writer once said that “If the roof caves in and the tenants are sitting in the debris, they will laugh like hell. They will endure any hardship as long as it means trouble for the landlord.”.

The tables have turned. No tenant wants to exploit the landlord. The tenant only expects a just bargain to sustain his business. In a pandemic, he does not want to turn a profit. He only wishes to sustain and not perish. It would be fair and ideal if the landlords and the tenants come together and work out a mutually beneficial bargain.

The only problem is that it is not a fair world we live in.

The author is an advocate at the Supreme Court of India and the Delhi High Court. He may be contacted via email at mail@rushabaggarwal.com. The piece is partially satirical. Views are personal.