The Maharashtra Government (“GoM”) through Department of Housing on 17th April 2020 issued an advisory recommending that landlords and home owners shall suspend the collection of rent from tenants for at least 3 (three) months. This advisory does not apply to license fees for commercial establishments.
This Advisory comes as a major step for real estate sector amidst the COVID-19 lockdown. The GoM has directed the landlords and the home/ flat owners shall neither be entitled insist on collection of rent nor evict the tenants on account of failure of payment of rent for a period of 3 (three) months starting from 17th April, 2020.
It is not clear under what authority or legislation the said advisory has been issued from a reading of the same.
It is however clear that the Advisory has been issued for the relief of tenants during the COVID-19 lockdown. Such a blanket suspension of rent without having regard to the complex interrelationships between landlords and tenants gives rise to some issues –
When does the rent so suspended become payable? Does the tenant have to pay 3 months rent at one shot at the end of this moratorium period? What happens if the tenant is unable to pay or defaults at a later time. It is quite unlikely that a tenant who is unable to pay monthly rent would be able to shell out 3 months payment at one go.
What happens if at the end of 3 months the tenant requests for adjustment of the balance leave and license period instead of payment of the total accrued rent for the period. Should the landlord accpet such request? Is he bound to?
Is the moratorium on rent collection – interest free? What is there is clause in the agreement which states that interest will be paid on all delayed payments. Are interest clauses also suspended for the period of moratorium?
Interesting issues arise in a situation where the lease or license expires during the moratorium period.
– Can licensees continue without payment of rent;
-After expiry of the leave and license – can the tenant be evicted?
-Will payments for accrued rent be collected post 3 months or can the landlord insist on adjustment of security deposit?
The move of the GoM has left the landlords/flat owners clueless would lead to rifts between landlords/flat owners and the tenants on account of people taking multiple interpretations or trying to take advantage of the various greys that this notification contains.
It is necessary that the GoM forthwith release guidelines and regulations with respect to the advisory/circular dated 17th April 2020 to facilitate swift and seemless execution.
-Nitin Jain, Partner