What can I do if bank refuses rental NOC?
Hello, I have rented out my commercial space to a company to run their retail store. The property is under mortgage and hypothecated with a bank. The store has been operational for 3 months now. To register the rental agreement, the bank requires a No Objection Certificate (NOC). To provide the NOC, the bank is asking the tenant to add a clause in the rental agreement stating: "The Lessee would render their cooperation in case any recovery action is initiated by the Bank against the Borrower/Mortgagor in the future, including handing over the peaceful possession of the leased premises to the Bank if demanded by the Bank. In such a case, the Lessee has no objection to depositing the rent directly with the Bank, if there is a written demand by the Bank to that effect, and they shall not question the same." However, the Lessee is not agreeing to add this clause in the registration document. As a result, the bank is not providing the NOC, and the registration of the rental agreement is pending. What options do I have?
- An application can be filed to compel performace but the sucess of such application depends upon the fact if banks request is unresonable or unconscionable. - If the amount which is due is pending or repayment history is not consistent/un-timely, bank can contest such application. - In this situation, mediation can be considered, parties can considering hiring advocates for effective negotiation. - Even for a commercial purpose, the court considering all the competiting intrests especially that of a bank who has secured the assest and provided money which is still due. - In mediation or negotiation, the indemnity clause can be negotiated amongst all the parties, which will be more effective and swift.
Since the property is mortgaged with the bank, the bank will not issue an NOC unless the tenant agrees to the required clause. The clause is standard for the bank’s security. If the tenant refuses, either convince them to add it or proceed only with an unregistered agreement. Ideally, take legal advice to negotiate a middle path between bank and tenant. For further legal assistance contact us on our helpline number.
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