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Landlord’s Rights and Regulations Under Covid-19

Landlord’s Rights and Regulations Under Covid-19

Landlord’s Rights and Regulations Under Covid-19

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1. We refer to the above pertinent issue in light of the recent directives and regulations issued by the South African government due to the outbreak of the Covid-19 virus.

2. Prior to dealing with the specifics of lease agreements allow me to first deal with some general principles, whereafter I will apply these principles to lease agreements, and the wider context.

3. Firstly, as a general principle of the law of contracts, whenever there is a case of supervening impossibility, a party to a contract who is negatively impacted as a result of that impossibility may be excused from performing in terms of that contract. Generally, when there is a vis major (a superior power or force which cannot be resisted or controlled), a party will be excused from performing in terms of an agreement. Furthermore, casus fortuitus, which is an incidence of vis major, is an exceptional or extraordinary occurrence that was not reasonably foreseeable. It has been held that the plague is an incidence of casus fortuitus. In our view, the present COVID-19 outbreak is analogous, and the resultant government bans constitute vis major.

4. Where a tenant wishes to rely on vis major or casus fortuitus to be excused from having to perform in terms of an agreement, that tenant bears the onus to prove that it did not have the beneficial occupation of the leased premises for the duration of the non-payment period, and furthermore has to prove that the occurrence was unforeseen, uncontrollable, and the direct cause of the inability to perform. If the circumstances ought to have been foreseeable, in the specific circumstances of the specific tenant, no remission of rent will be granted.

5. It goes without saying that the tenant’s failure to have the beneficial occupation of a leased premises must be the direct and immediate result of the casus fortuitus. Therefore, a tenant will only be entitled to claim a loss of beneficial occupation of leased premises due to casus fortuitus if the outbreak of disease itself led to the closure of the business. As an example, it has been held that a tenant who conducted a stationery business was not allowed a rent remission where the war had caused a drop in trade, but that it would have been so entitled if the war had prevented the customers from dealing with the tenant.

6. The remission of rent (if any) will also only be available to the extent that the premises could not be used for the purposes let. Therefore, if the government were to close down the business for 3 days, a remission will only be granted for those 3 days.

7. It is, of course, trite that the parties may agree in their lease that the rent should be paid without any remission whatsoever. Such terms are usually found in modern leases, where it is held that rent is to be paid without deduction or set-off whatsoever. It has been held that the prohibition against set-off only applies to deductions that were reasonably foreseeable when the agreement was concluded. Similarly, it has been held in various cases that contractual terms contrary to public policy would not be enforced. As a simple example, it is against public policy to contract with a person to kill another person, and such a contract will not be enforced on this basis.

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