Home News Lockdown may lead to litigations in commercial realty sector

Lockdown may lead to litigations in commercial realty sector

Lockdown may end sooner or later but that may be just the beginning of lengthy legal battle between the landlords and tenants. Tenants feel that since the office space was not used by them and that too due to reasons beyond their control, they are not obliged to pay any rent during lockdown. Some also point towards invoking Force Majeure as the shut down has taken place due reasons beyond their control.

However, landlords feel that force majeure does not apply as space is fit to use, occupier services are still functioning there and data processing is happening. Employees are not able to sit and work in facility not because of landlords’ fault, but because of other things which are beyond their control.

However, the same argument may not hold much water in case of retail leased properties as in such cases force majeure has to be viewed differently. Some retailers have already gone on record and have decided not to pay rent for the lockdown period. Some landlords may take a lenient view in case of retailers. Some of the landlords have expressed their willingness to look into the matter and understand some of the challenges which tenants are going through and willing to sit and discuss the issue.

Retailers were worst affected by the present lockdown. In fact, they were facing low footfalls even before the lockdown started as the public had stopped visiting places with large gathering fearing Coronavirus infection. Since retailers are operating on thin margin and high volume, falling footfall is the last thing they expect. And complete lockdown which followed later has resulted in closure of their business that too during peak festive season which is also summer vacation period.

Landlords may find upward revision of rentals difficult at the time of renewal at least for next one year. In case of new lease agreement, tenants may ask for postponement of lease period commencement.

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