So many property owners across the world are worried about the implication of Force Majeure clause in their registered lease agreements, which they think will make them loose their rents due to the lock downs forced by various governments. It seems that a lot of people with bad intentions are using this lame excuse to avoid paying or delaying their rents. I strongly feel it is not correct & tenants can not use “force majeure” clause to simply claim a forceful waiver of rents unless specifically mentioned.
There is no specific definition of Force Majure clause and it is as per the term mentioned in your lease agreements.
I am talking about such a clause in lease deeds:
That the Tenant shall not be liable to pay Rent and the Owner shall not be entitled to claim any Rent, if any natural calamity like earthquake, flood, rioting, lightning, etc. cause any damage to the Property rendering it unfit for the commercial activity of the Tenant, for such period the Property remains so unfit, however, only subject to a maximum period of three months. The Tenant may terminate and vacate the Property upon expiry of the said period of three months. In the event the Tenant does not exercise such termination/vacation the Tenant shall liable to pay Rent notwithstanding any such damage to the Property.
My opinion on the situation & this clause…
The Tenant continues to use / and / or occupy/ Benefit from the Leased Property even during the Lockdown Period and all his office furniture, equipment, fittings etc. are inside the Leased Property as it is & the Tenant continue to be in the full possession of the Leased Property as such. Tenant continues to derive benefit from the Leased Property, not only in utility but in reputation on account of not only conducting but appearing to conduct, its business in the Leased Property.
The Leased Property is not damaged & has not become unfit for the usage by the Tenant. It is also to be noted that no portion of the Leased Property has become uninhabitable or unusable due to any natural calamity like earthquake, flood, rioting, lightning, etc.
It is evident that the Tenant, and the tenant alone, has access to the Leased Property at this point of time even.
The inability to operate a commercial establishment from the Leased Property cannot be equated to be inability to use or occupy the Leased Property.
The Owner has leased the Leased Property to the Tenant & allowed the Tenant to use it for the lawful purpose. It means to comply with all laws of state is an absolute obligation of the Tenant & Owner can not be held responsible for any such lockdown orders of government or for that matter any other enactment of any new law.
Owner is fully complying with it’s obligation towards government and paying all taxes w.r.t. said premises.
Therefore the obligation of the Tenant to pay rental and other charges is not waived as there is no Force Majeure event has happened & nothing has happened as such which may be preventing the occupancy of the leased premises.
To further simplify this:
If the Leased Property is neither sealed nor rendered unfit for use or occupation and the Tenant continues to occupy the Leased Property in consonance with the Lease Deed then there is no force majeure event has happened.
Payment of lease rental is not contingent upon the health of the business operating from the Leased Property but is purely for the exclusive use of the Leased Property by Tenant.
Therefore it will not be wrong in concluding that even if the Tenant is not able to operate its business from the Leased Property & not generating revenue thereof is completely liable to pay the full lease rental as it is timely.
Owner fully reserve their right to file for breach of contract, in the eventuality that Tenant decide not to pay the rent for the Leased Property as agreed upon.
Tenants & everyone has to understand that owners have to pay Salaries, Mortgage Payments, EMIs etc. & therefore it is very important to receive the rents timely.
I wish to thank my son Aashish (soon to be a lawyer), Mr. Suresh Mittal (CA) & Mr. Vishal Ohri for helping me to build this opinion.