Rent agreements in post COVID 19 era will be now written keeping Lockdown in mind. Lawyers already started putting such clauses in agreements.
By Varun Singh
The lockdown post the pandemic forced many commercial outlets to down their shutters. Though in many cases the rent meters were on.
The unprecedented lockdown meant business are shut for long, this would be the first time that something like this happened.
Many tenants and landlords have started having lockdown clause too in the rent agreements.
According to a Bandra based landlord, he received requests from his tenants asking 100 per cent rent waiver.
“One of the commercial properties tenant asked if 50 per cent rent for the lockdown period could be waived or he was willing to share 5 per cent of the total profit whichever is less,” said the landlord.
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However, for future rent agreement might not leave a scope for such negotiation,. In the post COVID 19 era, advocated are drafting agreement that mentions lockdown.
According to Adv Vinod Sampat, tenants and landlord are scared.
“Now for unexpected eventualities like COVID 19 in all probability clauses will be there in agreements say 50 per cent of rent will be payable in such situations,” says Sampat.
According to Sampat, few things have to be considered now. “If it is a commercial premises licencee may have spend huge amount on furniture and fixtures. They will be in a soup as they are on a point of no return. In future they may try and protect such expenses with clauses for reduction in rental,” said Sampat.
Though most agreements do have a force majeure clause, where unforeseen circumstance are taken care of. Many are still asking their lawyers to have the lockdown clauses mentioned in the agreements.
Adv Prakkash Rohira recently formulated a rent agreement, and in that he did put the clause of lockdown.
According to Rohira, “We must understand most of the Properties in mumbai yield a Leave and License income of between 2-3 per cent for residential and 4-6 per cent for commercial, which is lower than a Fixed deposit.
Rohira says, “In residential properties, newer Leave and License agreements through various preferred words clearly state that the License Fees will be payable despite whatsoever circumstances. Prices wherever theres room for reduction are being considered based on prior relations, flexibility and probability of finding a new Licensee.”
For commercial properties Rohira says, “With Regard to Commercial Real Estate Leasing, The conflict between Licensors and Licensees have remained as to who is to bear the losses in case of another lockdown. As new commercial leasing have started movement, instead of leaving it for the interpretation of the Courts, both Licensors and Licensees are preferring to have precise terms inserted in the agreement as to the protocol followed in case there is another “lockdown, epidemic, pandemic, social restriction, or change or imposition of law or order that would directly affect the operation of the business of the Licensee.”
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