Marathe (ceo) 15 September 2013

Commercial lease default

I am one of the Directors of a Pvt Ltd company. My company entered into a commercial lease agreement with another company for a lock in period of 3 years at a certain rentals per month. However, we were not able to generate enough revenues to pay the rentals and started defaulting on the payments. After six months, it was verbally agreed to reduce the rentals but in spite of requesting to make a written agreement amendment they kept postponing it for another 5-6 months. Now they are telling to pay all the rentals or will take legal action. What options are available for me? As per contract, if we default on rental payment they can seize our assets.

We also have our business in other locations. Can they seize all our assets or can they just seize the assets that are in their property. Also, for the set-up etc, the company took a loan against one of my residential property (collateral), if they take a legal action can they also seize my residential property? Please guide me.

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2 Replies

Kolla Gangadhar (Practicing Advocate since 1986) 16 September 2013

Private Limited Company is entered an rental agreement, if rent is default as per agreement land lord can seize property, but he has to file suit in the court to get an order to seize property.

Marathe (ceo) 17 September 2013

Thanks for the reply. I would like to know that if my landlord gets the court order to seize property, does my business at other locations also get seized? Also, will the residential property against which I took a loan also get seized?

For ex, suppose my pending rentals till now is 10x, add to that the balance 2 year lock-in remaining, my total rentals remaining to pay if I break agreement is 35x. I have equipments worth only 8x within the said property. Other locations, I have another 20x worth of equipments. The company does not have any other physical assets. If the landlord goes to court, will I have to close my complete business and since I may still be short of the 35x can they seize my personal property as well.