The spread of the COVID-19 and the subsequent lockdown has brought the Indian economy to a halt. Due to the loss in economic activity, a large part of the population is struggling to pay their bills. Rent is the most significant expenditure for many individuals and households.
Since the beginning of the lockdown period, many are confused whether they can be exempted from paying rent during the lockdown. There is a patchwork of laws that govern the rights of those living in rented apartments and houses. Let’s take a closer look at them.
Which Law Governs Leases?
A lease is a proper term for a renting arrangement. A lease is a contract that you enter with your landlord. The lease is governed by the Transfer of Property Act, 1881.
Under this Act, once a lease arrangement has been entered, the landlord must allow the lessee to have possession of the apartment and continue it until the lease expires or is terminated.
According to Section 108 of this Act, the lessee must pay the agreed-upon rent within the time in the contract.
Can a Lessee Stop Paying Rent for the Duration of the Lockdown?
To understand whether a lessee can be made exempt from paying their due rent, we must look at the doctrine of frustration under section 56 of the Indian Contract Act and Section 108 of the Transfer of Property Act.
Since the current situation that has been caused by the coronavirus can be classified as an Act of God, we need to check what the rights and duties of a lessee are in cases wherein an Act of God provision is absent within the contract the governs the lease relationship.
As per the Contract Act
According to the Contract Act, a contract can be considered to be void once it becomes impossible to do the acts that have been stipulated by the contract.
In this case, since the coronavirus pandemic has made it impossible for tenants to earn a living and pay their rent, we may make the argument that the contract that governs the lease relationship between the lessor and the lessee has become void.
Continuing the same argument, we can say that since the contract is now void, the lessee is under no obligation to pay rent to their landlord or lessor. However, this would also mean that the lessor can ask the lessee to vacate the premises since the contract is now void. Hence, calling the entire contract void due to an act of God is a double-edged sword for lessees.
General Law or Specific Law
There is another problem to relying on the Indian Contract Act rather than the Transfer of Property Act to judge whether a lessee can legally refuse to pay rent that is due.
In the case Kedar Lall Seal v. Hari Lall Seal, it was held by the Supreme Court of India that, if a general law and a specific law both apply to the same situation, then the more accurate law will hold precedence.
Under the Transfer of Property Act
Hence, since the Transfer of Property Act has a more specific provision that deals with such a circumstance, we cannot rely on the wordings of the Indian Contract Act to judge this issue.
Under section 108 e, it is stipulated that if land or property becomes unusable due to certain circumstances such floods or violence, then the lessee can consider the lease void and is no longer under any obligation to follow the terms of the contract.
Hence, in such circumstances, the lessee can refuse to pay their rent since the contract is to be considered void. However, if the contract is to be deemed invalid, then the lessee loses the right to continue to dwell on the leased property or apartment.
There is another problem with relying on this section of the Transfer of Property Act. This section specifically applies to situations in which the land or property becomes unusable due to an outside force. In the present case, the properties have not become unusable.
According to the existing laws in India, in the present scenario, a lessee cannot refuse to pay their rent to their landlords without forgoing the right to dwell on the premises.
Due to the present unforeseen circumstances, many renters are unable to pay their monthly rent. We can hope that the Government implements a scheme that helps renters in such times. You can find out more about gst on rent, and gst rates list to understand your position during the coronavirus lockdown better.