Status of lease/tenancy agreements during the covid-19 pandemic

INTRODUCTION

Because of the Covid-19 episode and its quick spread all over the world, numerous urban areas forced travel boycotts, given asylum set up orders and upheld social distancing to slow its spread, which achieved huge interruption and vulnerability to organizations and economies. Although COVID-19 was an unanticipated event, the question of whether it holds as a valid excuse of not paying rent is still on the fence. Tenants have been burdened with the financial crisis as due to the national lockdown in almost all countries, people have not been able to earn and many have even lost their jobs. Savings are slowly coming to a standstill and the tenants have no means to pay their rent because of which they are constantly living under the fear of getting evicted by their landlords. A Landlord can take some gauge like waiver of lease for a month, defer lease or give rebate on lease or diminish lease sum. The Landlord can have a word with the occupant about the circumstance and conditions and attempt to oblige to their recommendations. The Tenant may do all that they can to hold up their finish of the deal and make certain to explicitly state any arrangements ideally as an addendum to the present rent or tenant contract including all the subtleties of the concurred courses of action and can take help of the choices given under the COVID-19 reliefs, plans and so on or gather assets or vouchers to support the inhabitants. Different countries over the world have tried to tackle this issue and have even come up with ordinances, rules, regulations etc. to protect the interests of the tenant class. These can be explained as follows:

CANADA

There are multiple orders, legislations and rules being formulated by the Canadian government in order to safeguard the lease parties. The following are some of the orders pertaining to that:

  1. Ministerial Order No. 005/2020: This order prohibits the landlord from having remedies applied against a tenant unless and until it is proved that that the landlord made reasonable efforts from his side to enter into a payment plan and it was the tenant who refused to do so. These remedies include termination of tenancy/lease for the default in paying rent, service charges, expenses for utilities etc. This order came into its effect from 1st April 2020.
  2. Bill 11, Tenancies Statutes (Emergency Provisions) Amendment Act, 2020: This restricts the landlords from augmenting the amount of rent during the period of lockdown. After lockdown, rent amount can obviously be increased but the same shall have no effect retrospectively. At the same time, when the lease is actually being terminated on account of failure to pay the rent, it must be checked that the same failure arose without the reason of any unnecessary increase in the amount of rent.
  3. The Late Payment Fees and Penalties Regulation Alta Reg 55/2020: These regulations shall limit the landlord from charging any kind of late fees from 1st April to 30th June 2020. This prohibition works on the similar footing as the increase in the amount of rent. After lockdown, late fees can be increased but the same shall have no effect retrospectively.
  4. Ministerial Order 20/2020: This order shall protect the tenants from being evicted by the civil enforcement agencies in Canada for a breach of the lease/tenancy agreement if the breach is associated to COVID-19, however this order had standing only till 30th April 2020.

 

Standard considerations to be ensured before evicting the tenant:

  1. Uniform policies: Due to the COVID-19 pandemic, landlords are suggested by the government to go for standardized policies that make it easier for both the lease parties.
  2. Having records: Proper records by the tenant make a strong case before the Residential Tenancy Dispute Resolution Service (“RTDRS”) or any other court. This also ensures the parties to be clear on communication so that there is no vagueness left.
  3. Payment directions: It is suggested by the government that there should be re-negotiating of the payment clauses before deciding to evict the tenant. This should be done for the reason that there might be a resolution in the near future and the eviction might not even be necessary then.
  4. Time requirements: The RTA and related guidelines contain a few procedural prerequisites. Most timetables require “clear” days, which means the day of notice and the day of the applicable activity happening don’t tally. Landlords ought to comprehend the courses of events for the various advances they may take to cure a significant break of a private occupancy understanding, for example acquiring a request for recuperation of ownership prior to employing a common implementation organization to expel an occupant.
  5. Common freedoms and expected separation: If the purpose behind removal is connected somehow or another to an inhabitant’s age, mental or actual incapacity, or some other secured ground under the Alberta Human Rights Act, RSA 2000, c A-25.5, this may trigger an obligation to oblige the occupant instead of continuing with end of their tenure.

INDIA

In India, an order was issued under Section 10(2)(l) of the Disaster Management Act which permitted the State to implement lockdown measures from 29th March 2020. This order was issued when the country was facing problems with the tenancy agreements as landlords were forcing their tenants to either evict the premises, or were not ready to provide any type of concession when it came to the amount of rent to be paid. The Hon’ble High Court of Delhi, in the case of Ramanand & Ors v. Dr Girish Soni & Anr CM APPL. 10848/2020, took note of the unfortunate conditions and circumstances arising out of the COVID-19 pandemic. It discussed the problems of the disruptions occurring in the lease/tenancy agreements and how the jural relationships between the lease parties has changed over time. The most important question that was to be answered was as to whether the tenants formed a class which could be exempted from giving rent during which the national lockdown lasts. The Hon’ble High Court was of the opinion that in such an unprecedented situation, there cannot be a straitjacket formula that could be applied in each and every case however stated that broad parameters could definitely be kept into consideration while deciding a matter.

Firstly, the Court noted that the dual relationship between landlord and tenant can be in different forms. It said that these relationships can either be described under the specific contract framed by the lease parties, or by the law itself. If it is the former situation, then the terms and conditions described in the contract will have to be strictly followed. In the contract cases, the force majeure clause shall be covered under Section 32 of the Indian Contract Act, 1872. The fundamental significance of this is that if the contract specifies waiver, then the same shall be determined by analysing the force majeure clause as per Section 32. If, however the relationships are not governed by any contract but law, then the same shall be determined as per the provisions of the Transfer of Property Act, 1882, the Act which governs the concepts of leases and tenancies.

Secondly, Section 108 of this Act states that “the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf”. This means that for a lessee to seek protection under the Act, there needs to be total destruction of the property in full means and this must be due to the force majeure event. Until and unless there is complete destruction of such property, Section 108(B)(e) cannot even be invoked.

Therefore, the Hon’ble High Court of Delhi was generous enough to adjudge in favour of the tenants by concluding that mere temporary non-use of the property during the national lockdown does not render the entire lease agreement to be void. It further elucidated that the question of whether the rent should be suspended or not must be decided on a case to case basis.

UNITED STATES OF AMERICA

United States of America has similar rules and precedents as India when it comes to tenancy agreements during COVID-19 pandemic. Their judicial framework shall also work on the principles of force majeure and doctrine of frustration. Doctrine of frustration under contract law basically means a situation wherein the contract cannot be enforced due to certain unprecedented happening of an event. This would result in the contract being ‘frustrated’ for which no party can be blamed.

CZECH REPUBLIC

The parliament of Czech Republic passed the Prohibition of Commercial Lease Termination Act which measures the lease agreements and attempts to protect both lessor and lessee, hereinafter referred to as the “lease parties”.

Tenant’s rights and obligations:

  1. Per the Act, from 12th March 2020 to 30th June 2020, the tenant cannot be forced to pay the rent and he cannot be evicted on the ground of non-payment of rent. This right is available till the time the tenant is able to prove that the same happened due to some government restrictions because of which his business was not in operation.
  2. Although the tenant can show loss of revenue in his business, but the same does not act as an excuse to not pay the deferred amount. The only result of this Act would be that non-payment of rent now cannot be the reason for the termination of lease agreement.

 

Landlord’s rights and obligations:

  1. Landlord cannot be held liable if the tenant is not able to use the leased premises due to governmental measures which corroborates to the fact that landlord would not be responsible for any damages incurred by the tenant.
  2. The landlord cannot be pestered to grant a discount on rent as he is not the reason for the losses suffered by the tenant in his business.
  3. It is the obligation of the tenant to prove that there are other circumstances which exist due to which the lease/tenancy agreement must not be terminated. The same can be done by showing relevant documents which support the tenant’s claim.

 

Termination of lease/tenancy agreements:

  1. Landlord cannot on a premature basis terminate the lease agreement in default with payment of rent and charges (including service charges) if the payment of rent accrued from 12th March 2020 to 30th June 2020. However, these rights stay with the landlord if the termination is to be done for other reasons.
  2. As the proprietor is kept from satisfying its commitments under the rent arrangement legitimately by the administrative measures (it can’t permit the occupant to utilize the premises), it isn’t at risk for such a “breach” of its commitments and it doesn’t comprise an explanation behind termination of the rent by the tenant. On the off chance that there is no extraordinary arrangement in the lease/tenancy agreement, the occupant may attempt to apply the material change of circumstances clause and to renegotiate the rent conditions.

 

Financial help from the State:

  1. The government of Czech Republic is doing everything that it can for maintaining the financial and economic interests of the country’s entrepreneurs. The government is on the verge of preparing various instruments which shall help in giving support to them.

CONCLUSION

It can be concluded without any doubt that judicial courts all over the world have tried to accommodate the class of tenants in a reasonable and just manner so that they are not rendered homeless due to the unfortunate pandemic and the biased lease/tenancy agreements.