Pune: Force majeure clause sparks battle between Awfis & Flexisales – ET RealEstate

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PUNE: As the long-standing economic slowdown deepens amid the COVID-19 pandemic, a slew of commercial and residential properties are now being vacated by tenants. But indicating the turmoil within this trend, one such termination of a rental agreement recently took an ugly turn at a commercial property in Viman Nagar.

In this case, the management of a well-known co-working space and an information technology enabled services (ITeS) company are at loggerheads over the interpretation of the force majeure clause in their contract.

A force majeure clause is defined as “that which relieves the parties from performing contractual obligations when certain circumstances beyond their control arise, making performance inadvisable, commercially impracticable, illegal, or impossible”.

Flexisales Marketing Pvt Ltd, which had rented 50 seats in the coworking space run by Awfis Space Solutions Pvt Ltd at Business@Mantri complex, terminated their agreement on April 1, 2020, invoking force majeure. Flexisales also sought a refund of their security deposit, citing “uncertainty on when the COVID-19 pandemic would be contained” and an inability to utilise the office as a result, so as to invoke the said clause mentioned in their contract.

This did not go down too well with Awfis, whose board of directors has on board businessman Amit Ramani and Radha Kapoor Khanna (daughter of beleaguered Yes Bank chief Rana Kapoor, who was recently in the eye of controversy). Awfis refused to accept the termination notice from Flexisales on the grounds that force majeure was being wrongly interpreted. Instead, they asked for rent till October 2020, which is the lock-in period of the contract.

From April till date, the two sides have been exchanging several emails over their difference of interpretation of force majeure. But the twist finally came in June, when one of the landlords from whom Awfis has rented a space got to know about the dispute. A representative of Shaymlal Agarwal wrote to Awfis about duplicity in their stand. “This is crystal clear that you are taking stands as per your convenience and also taking undue advantage of this situation. Please explain to us as to why the force majeure clause has different meanings as per your convenience and advantage,” stated a mail shot off by Agarwal’s office to Awfis. Awfis had invoked the same force majeure clause with Agrawal and sought a refund of advance rent that it had paid up. Irked by the stand taken against Flexisales, who also happens to be Agarwal’s tenant in another property, the landlord stated on June 24 that they will not consider the force majeure clause in their contract, and demanded rent till August 2022, the lock-in period they had agreed upon.

Amid this brouhaha, with neither Flexisales nor Awfis relenting, things got uglier. Cofounded by Rajasekaran Ganesh and Nupoor Ganesh, Flexisales demanded that they should be allowed to get their stuff out of the coworking space. On Monday, a day before the fresh lockdown this week, they were denied entry into the office and sought help from Viman Nagar police. Chaos reigned for the next few hours, with Flexisales finally breaking the lock and taking their wares out.

“We had no choice left but to approach the police. We had invoked force majeure, which was part of our agreement. We would have liked an amicable solution to a situation like this, which is at best a civil dispute. But we were being arm-twisted. We are now contemplating moving court for recovering our security deposit,” said Rajasekaran.

As for Awfis, they believe that “termination by Flexisales is not in accordance within the terms of contract. Flexisales should have adopted legal means for relief instead of taking the law into their own hands.” A spokesperson from Awfis, in an emailed response, refused to comment on their interpretation of force majeure citing non-disclosure in their agreement, and stated that it was upon a court to decide.

“The police will never allow any person to break open the lock and take the law into their own hands. We have already filed a criminal complaint before the police to take appropriate action against the culprits,” the spokesperson further stated.

Shyamlal Agarwal, who seems to have bowled a googly in the meanwhile, informed, “We invested heavily in our space rented to Awfis, and wanted to negotiate with them in good faith. They ought to follow business ethics in these tough times and find a solution that is acceptable to all.”

When Mirror contacted senior inspector Gajanand Pawar of Viman Nagar police station about the recent incident, he clarified, “We were approached by the tenant with a complaint that they had been unlawfully locked out. I sent my team to the spot to check. Once I realised that it is a civil dispute, we asked the two sides to sort it out.”

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Oyo Hotels & Homes terminates lease contracts for two Gurugram offices – ET RealEstate

NEW DELHI | BENGALURU: Oyo Hotels & Homes has terminated leases at two of its flagship corporate offices in Gurugram and is renegotiating the lease on a third, sources told ET, as the cash-strapped hospitality chain — battered by low occupancies due to the Covid-19 pandemic – moves to save on real estate costs.

The SoftBank-backed company has vacated its offices at Spaze Palazo and in Udyog Vihar, invoking the ‘force majeure’ clause, the sources said. Force majeure is enforced by companies during unforeseen events or in times of natural calamities.

Udyog Vihar had served as the headquarters of the Ritesh Agarwal-backed company for long. Oyo is also negotiating to terminate the lease on a third property, Capital Cyberscape, in which it occupied 150,000 square feet (sq ft).

“Oyo paid somewhere around 60 per square foot for 1.56 lakh sq ft office space at Capital Cyberscape, but that property has also now come to the market to be leased out,” a leading property consultant, who is aware of the development, told ET.

According to real estate industry experts, the company, which is valued at $10 billion, is estimated to have paid rent of around 1.9 crore a month across the three properties.

When contacted, Oyo confirmed that it was taking a relook at office space requirements, without going into specifics. “We are reconsidering office space requirements and revisiting our contracts with landlords not just in Gurgaon, but across the country, to arrive at mutually acceptable terms, while operating within the realm of the contractual terms and conditions,” a company spokesperson said.

Oyo Hotels & Homes terminates lease contracts for two Gurugram offices
In Spaze Palazo, the company occupied 120,000 sq ft, paying an estimated 58 per sq ft for a fully furnished office space, according to multiple real estate industry sources with knowledge of the matter. The office has been vacated and is in the market to be leased out by the builder.

Separately, at Udyog Vihar, where the company is believed to have occupied 50,000 sq ft, the lease has been terminated. Sources also told ET that the company is shifting a number of its employees to co-working space Workflo, a brand owned by Oyo.

The Covid-19 pandemic has resulted in Oyo undertaking a significant number of employee layoffs and furloughs, enforcing pay cuts and shuttering properties across markets, as it looks to restructure operations across the globe.

Last month, ET reported that companies including Oyo, Paytm, Ola, Swiggy, Zomato and Uber, among others, had reached out to builders to renegotiate their rental agreements, renewal clauses and rent escalations. They were also considering giving up a floor, consolidating offices, and shutting down regional divisions to cut long-term fixed asset costs.

Many startups have renegotiated rentals and invoked force majeure clauses as real estate is a major expense for most technology companies. For instance, ride-hailing app Swiggy, which in May laid off 1,100 people, said recently that it would identify and significantly reduce every single indirect cost such as hubs and office infrastructure.

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