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corporate commercial | 27 Mar 2020
BY Philip Geromont
ENSight

corporate commercial


South Africa: Coronavirus (COVID-19) lockdown | do tenants have an obligation to pay rent?

On 23 March 2020, the President of South Africa issued a statement informing the public that a nationwide lockdown would be enacted in terms of the Disaster Management Act, 2002. The lockdown commenced at midnight yesterday, 26 March 2020, and is set to end at midnight on Thursday, 16 April 2020.

In terms of the statement, all shops and businesses are to remain closed during the lockdown period, except for pharmacies, laboratories, banks, essential financial and payment services, including the JSE, supermarkets, petrol stations and health care providers.

For those shops and businesses which are to remain closed and operate from leased premises, the question arises as to whether the business owners (being tenants), must continue to pay rent to their respective landlords during the lockdown period.

Indeed, during this period, affected tenants will be deprived of the beneficial enjoyment of the leased premises, as it has become legally impossible for landlords to perform their obligation to give undisturbed use and enjoyment of the leased premises to their tenants.

In South African contract law, a legal impossibility of this nature would generally fall into the category of force majeure or supervening impossibility events. When performance of a contractual obligation becomes impossible, the party responsible for rendering the performance is relieved of its obligation, for the duration of the impossibility, and the other party to the contract is likewise relieved of performing its reciprocal obligation.

In addition to the above general principle, South African law contains a doctrine specific to lease agreements. In terms of this doctrine, a tenant is entitled to claim a total or partial remission of rent if through vis maior (force majeure) it is unable to have undisturbed use and enjoyment of the leased property.  In this regard, our courts have found that “A remission is claimable where the enjoyment of the property for the purposes for which it was let is hindered or prevented by some vis maior happening without the default, actual or constructive, of either party”. This quote was approved and applied by the Appellate Division in a case which makes it clear that an act of the legislature preventing performance qualifies as vis maior: “The intervention of the sovereign power, whether by legislation or by executive action, has the quality of vis maior”.

In the circumstances, tenants whose shops/businesses have to remain closed during the lockdown period, would, in principle, be released from their obligation to pay rent, either totally or partially, depending on whether they are totally or partially deprived of the enjoyment contemplated in the lease to which they are bound.

Tenants should, however, be aware that each lease agreement may contain specific provisions regulating force majeure and supervening impossibility events, in a manner that might derogate from the principles described above. Specific legal advice should therefore be obtained in each instance where a tenant wishes to claim remission of rent.

 

Philip Geromont

Corporate Commercial | Director

pgeromont@ENSafrica.com

+27 83 459 9966

COVID-19, also known as the Coronavirus, is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that was declared a pandemic by the World Health Organization on 11 March 2020. The disease has since been reported in over 190 countries.

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