During the COVID-19 Pandemic, the existing ‘rent/lease deed’ agreements have assumed greater importance for both landlords and tenants. COVID-19 and the lockdown has extreme implications for businesses across the globe and is impacting contractual relationships. In the light of the circumstances, pertinent questions that arise are whether tenants across the country will be entitled to any relief from paying rent and if landlords would have any legal recourse in disputes arising out of rent/lease deed agreements.
One most common legal remedy adopted by tenants, during these unprecedented times has been invocation of the 'Force Majeure' clause, in the lease deeds.
However, at this stage, it is to be noted that a non-registered lease deed may have legal consequences for both the landlord and tenant, during COVID-19 times.
The Supreme Court in a recent landmark judgment titled as Siri Chand [deceased] thr. Lrs. vs Surinder Singh 1 has dealt with an important aspect pertaining to the requirement of compulsory registration of a rent/lease deed for immovable property.
The moot question before the Hon’ble Supreme Court was “Whether the rent/lease deed in the instant case needed to be mandatorily registered as under Section 17(1)(d) of the Registration Act of 1908”.
Registration Act, 19082 requires mandatory registration of a lease deed pertaining to an immovable property let out (i) from year to year; or (ii) for any term exceeding one year; or (iii) reserving an yearly rent.
The Supreme Court, after taking note of the provision has observed that lease of immovable property from year to year, or for any term exceeding one year, or reserving an yearly rent, requires compulsory registration.
Civil Appeal no. 2617 of 2020 decided 20.06.2020
Section 17(1)(d) of the Registration Act 1908
The Supreme Court further noted that based on the provisions of Transfer of Property Act, 1882 and Rule of Construction, when a rent/lease deed does not provide for a period agreed on between the parties, then in such a scenario, it will be presumed that the lease deed is for a lease of immovable property, on a monthly basis.
Hence, based on the above provisions, the Supreme Court held that when the rent/lease deed does not mention the period of tenancy or other conditions of the rent/lease deed, in all such cases, it will be assumed that the rent/lease deed is on a monthly basis and the rent/lease deed shall not be compulsorily registrable under the Registration Act, 1908.
Implication of the above Siri Chand Supreme Court judgement on rent/lease deeds during COVID-19 pandemic and post COVID-19 era.
The Siri Chand judgment would bring a ray of hope for landlords during the unfortunate pandemic hour, where they are grappling to recover rents from tenants. The judgment is bound to impact those tenants, who are resorting to legal measures for waiver/suspension of rent as avoidance tactics for paying rent. Further, such tenants may also raise technical grounds against eviction; such as the one dealt by the Supreme Court in the Siri Chand Judgement, regarding, non-registration of rent/lease deed as per the Registration Act, 1908.
Interestingly, the Delhi High Court in a recent plea filed by a tenant for waiver of rent3 has already ruled that, in case the lease deed expressly mentions the Force Majeure clause then in all such cases, the tenant may claim the contract to be void, and resultantly surrender the premises to the Landlord. However, if the tenant wishes to retain the premises and there is no Force Majeure clause in the agreement, the tenant can delay in paying the rent, in light of the lockdown and COVID-19, however cannot seek for waiver of rent in such situations.
The Supreme Court in Siri Chand judgement clarified the position of law that in cases where lease agreement does not provide for duration of tenancy, it is not required to be registered under the provisions of the Registration Act. Further, in absence of any specification regarding duration of tenancy, presumption may be made that the tenancy was of monthly nature. Similarly, the Delhi High Court in Ramanand case as mentioned above, tried to delve into the legal position of the Force Majeure clause as in rent/lease deeds, helping in resolving few grey areas for both tenants and landlords.