Realty+ Master class Webinar on “Covid 19- Real Estate Legal issues & Challenges” Demystifies Legal Intricacies
Realty+ Master class webinar on April 17, 2020 on unarguably the most talked about topic in present scenario brought together legal experts and real estate thought leaders to share their opinion on legal impact of lockdown on real estate. The Webinar was attended by more than 3,500 viewers and they also participated in a live poll on various questions related to legal issues.
The discussion on the topic “Covid 19- Real Estate Legal issues & Challenges” was moderated by Neeraj Bansal- Partner Advisory Services, Head Corridors (ASEAN, HK, Taiwan), KPMG in India. He began the discussion with the often talked about applicability of Force Majeure clause. Explaining the force majeure clause in contracts during a pandemic situation N G Khaitan, Senior Partner, Khaitan & Co stated, “After this lockdown, force majeure has become the most important topic to the entire business world. Basically force majeure is a civil law in India and every contract has a different connotation of the act. As far as it is concerned it is a bilateral contract between two people having alternate allegiance Under RERA force majeure has been defined to include calamity. Even the government of India has given a number of waivers under force majeure. A force majeure clause can even provide for suspension of contract. Covid 19 has been considered a force majeure and hence a number of reliefs and waivers have been given. In terms of rent agreement, force majeure only excludes performance of the contract. There is no excuse as far as the payment part is concerned. Payments are never excused. They can only be temporarily suspended. Also, in relation to force majeure there cannot be a termination of lease.”
Giving the homebuyer’s perspective, Farid Karachiwala, Partner – J. Sagar Associates said, “As far as leases are concerned the general provisions of Doctrine of frustration that are set out in the Indian contract don’t really apply with leases that come under the transfer of property act. A lease agreement bides the lessor and the lessee under terms they have stipulated for themselves in the contract. But situations like the current pandemic and subsequent lockdown are not specifically set out in a contract. However, this does not mean the party is rendered completely unable to enforce his rights under the general statute. However, the current situation does not render the property destroyed or permanently unfit, which are the terms mentioned in the general statute. Just because a lessee cannot use the premises due to the lockdown does not mean he is not in occupation of it. So, I believe the lessee should comply with the obligations under the contract and is required to pay the rent. Force majeure does not mean you can randomly terminate the contract. The agreement can be modified to accommodate the current crisis. ”
Siddharth Batra, Advocate-On-Record, Supreme Court of India, Former Additional Advocate General, Haryana added, “The devil is in the detail, so the terms of force majeure has to be detailed in the contract. SC has stated that merely due to loss or lack of performance, force majeure cannot be invoked. It is not a general principal and can only be applied to some situations that are prior mentioned in the contract. The Court will not come to the rescue of someone who refuses to pay rent just because of no active business. This will just end up in a litigation and result in more problems and damages. There can be a compromise in the rent formula but all in all the landlord is completely right to ask for rent even during this time. The SC has made it very clear that section 56 does not apply to lease deeds.”
Taking into account the migrant worker situation and the fact that real estate projects cannot be put on hold indefinitely, Ananta Singh Raghuvanshi, Senior Executive Director, Experion elaborated, “We welcome the government’s strict lockdown rules as it is necessary to deal with in the current epidemic virus spread. Short term disruptions do not effect long term players. Real estate is a very resilient industry and we have handled numerous changes and once again I believe we will overcome. This is not a permanent crisis. What we need to be clear of is that developers are running business and cannot be chewed up from all sides. I feel ready-to move-in properties are the best solution right now. Now is also the time to sit with all the stakeholders and find a common solution. It is unprecedented problem we are all facing and hence need a mutually beneficial solution that might not be found in a contract.”
Ashok Mohanani, Chairman Ekta World. Vice President NAREDCO Maharashtra sharing a developer’s take on the current crisis situation said, “There are 5 stakeholders in our industry- developer, consumer, government, approving authorization and lender. So in a time of crisis all should face equal brunt. We expect every developer to put all his resources towards completing his projects. As far as the consumer is concerned it is expected that he make payments on time and should not unnecessarily opt for the choice of litigation. As for lenders the RBI has released new norms concerning the moratorium period. This is for one year for NBFCS and 24 months for banks. This is a very good move and will greatly help all of us in real estate. In addition, I agree that rent should continue with conditions. To have a win-win situation for all parties.”
Harsh Vardhan Patodia. President Elect. CREDAI, CMD, Unimark Group added, “There has to be a definite negotiation between the lessor and the lessee due to the situation we are all facing. The best situation would be to agree to some kind of deferment so that rent can be paid to the landlords when the business normalizes. They cannot be deferred as we are still paying the minimum electricity and other charges in order to keep the premises intact. There will also be an increase in cost due to the guidelines set by the government and so this all has to be accounted for and the cost will have to be passed on to the tenants. So, the time has come for the tenants and landlord to sit together and work out a suitable formula for rent.”
Concluding the session, Neeraj Bansal summarized, “This business interruption could not have been foreseen by either the developers, buyer or lenders and hence the only result can be to work together to find the best possible solution. It’s a difficult situation that we are all in and the right steps taken by all each stakeholder of the industry will help us get out in good shape and as soon as possible. Now is the time to take a step back and evaluate our positions and make necessary compromises for the future of the industry as a whole.”
The discussion was followed by the question and answer session with a group of industry professionals from varied fields. The Q&A panel included – Ashwin Mehta, Managing Director, Pankti Management Consultancy Pvt Ltd, Divya Malcolm, Partner, Kochar & Co., J S Augustine, Real estate expert, Former CMD Strategy Team Ashar Group, Agnelorajesh Athaide, Chairman, St. Angelos Vnct Ventures and Shailesh Goyal, Director of Simulations, PR Management services. The Webinar concluded with the taking up of audience questions by the speakers.
The Realty+ Master class Webinar was enabled by the technology partners Indus Net TechShu Pvt Ltd and Digital Marketing University.com