INDIA Law and Practice Contributed by: Vivek Chandy, Archana Tewary, Kumarmanglam Vijay and Megha Arora, JSA
The cost of insurance is sometimes charged back to the tenants as part of the maintenance charges. In India, business interruption (BI) insurance is not sold as a standalone product and is depend - ent upon property coverage. BI cover in India can be taken as a separate policy only in con - junction with a fire insurance/machinery/boiler explosion policy, or as part of a package in prod - ucts such as industrial all-risk insurance, which covers both property damage and business interruption. It offers protection to the net profit, standing charges and an increase in the cost of working to maintain normal output/turnover. The COVID-19 pandemic and consequent lock - down orders did not trigger payments under such BI policies because they have not resulted in physical damage to the insured property of the policyholders. The Supreme Court of India has consistently held that, when interpreting insurance contracts, the terms of the policy will govern the contract between the parties and it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves. Thus, it is unlikely that courts will interpret BI policies to cover the COVID-19 pandemic or the lockdown, unless such situations are specifically covered by the policy. 6.12 Restrictions on the Use of Real Estate The usage of a project/building is dependent on the zoning of the land and any conditions run - ning with the land. At times, land is allotted to a landlord for a determined purpose, such as bio - technology or IT-related uses, and the landlord would impose the same restrictions on the ten -
ants. Non-compliance with the usage conditions could result in a termination of the lease. 6.13 Tenant’s Ability to Alter and Improve Real Estate Generally, a tenant is only permitted to per - form non-structural alterations at the premises (including fit-outs); structural alterations are only permitted with the landlord’s prior consent, which may be conditional. The landlord may also require the tenant to reinstate the premises to the condition they were in prior to the alteration upon the expiry or termination of the lease. A tenant that takes land on a long-term lease would have the right to develop the land as they require, subject to the applicable law. Upon the expiry or termination of the lease, development on the land would revert to the landlord, at no cost or at an agreed cost, based on the contrac - tual understanding. Under Indian law, the owner of the land and the owner of the building constructed thereon can be different people. Any gain on a transfer of development rights in a property is subject to tax as income of the landlord. The transfer of development rights to the tenant for develop - ing the land and for commercial exploitation is subject to GST and is taxable in the hands of the tenant (under the “reverse charge mechanism”). GST payable by the tenant is subject to condi - tions and is calculated in the manner prescribed under law. 6.14 Specific Regulations Laws relating to leases do not differentiate between residential, industrial, commercial or retail leases, but commercial treatment may dif - fer from market to market.
357 CHAMBERS.COM
Powered by FlippingBook