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Shubham Agrawal (Company Secretary and Lawyer)     27 March 2020

Force majeure in a lease deed

A company has taken a property on lease where there is force majeure clause as under: 12.1 Neither Party shall be in default under this Deed by reason of its failure or delay in the performance of its obligations, if such failure or delay is caused by Acts of the God, Government's laws and regulations (other than the consents agreed to be obtained under this Deed) or any other case beyond the control of the Parties hereto. The Parties however, on ceasing of the course or event of such delay or failure, shall immediately resume their responsibilities and discharge their respective obligations under the Deed. In case the Force Majeure conditions exists for more than 30 days, the Lessee shall have the right to terminate the Deed without providing any notice as contemplated for Lock-in Period. Upon such termination, the Lessee shall have the right to receive all amount due from the Lessor including security deposit. So query is, if during this lock down period the company is closed as business is shut and is not using office can the company claim this as force majeure event and ask for rent waiver?


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 6 Replies

G.L.N. Prasad (Retired employee.)     28 March 2020

This is the query:

So the query is if during this lockdown period the company is closed as a business is shut and is not using office can the company claim this as a force majeure event and ask for rent waiver?  

N O.  As activities of business and lease are separate and as the rent is paid on possession and enjoyment of the property, and though there is a lockdown, the lessee is in possession and enjoyment of the property though there is a lockdown.

SIVARAMAPRASAD KAPPAGANTU (Retired Manager)     28 March 2020

The clause is very clear and hence the answer to your query is that the Company who took the building on a lease cannot ask for a waiver of rent. The clause I think was merely copy-pasted into the agreement to cover any possibility of the tenant not being able to pay the rent physically. Now, although there is a lockdown, banks are working and online payments are very much available.  Therefore, the tenant has to make the payment of the rent even during the lockdown period.

 

The tenant once had taken over the possession of the premises has to pay the rent whether he runs the business or not unless otherwise, there is a specific clause stating that only in the event the tenant conducts business rent is to be paid. I do not think that is the case.

P. Venu (Advocate)     28 March 2020

Yes, the lesee needs to pay the rent/lease money unless a public policy, to the contrary, is duly enacted by the Government.

T. Kalaiselvan, Advocate (Advocate)     28 March 2020

I agree with the experts above stating that the the clause mentioned by you may not be applicable to this situation.

This is a situation called lock down and it is temporary.

This cannot be considered as force majeure 

You may not be eligible to  take shelter under the current crisis to seek exemption or waiver of rental payment during the lock down period.

 

Dr J C Vashista (Advocate)     29 March 2020

Well advised by experts, I agree.

Nothing more to add.

Shubham Agrawal (Company Secretary and Lawyer)     29 March 2020

Thanks a lot to all respectable members for answering my query.smiley


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