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Implications of Lockdown Regulations for Landlords

Implications of Lockdown Regulations for Landlords

Implications of Lockdown Regulations for Landlords

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1. We refer to the above issue in light of the lockdown ordered by the President on Monday 23 November 2020. We also wish to refer to our general letter of 16 March 2020, which sets out the general principles applicable in the present circumstances.

2. Firstly, it is important to note that the regulations pertaining to the so-called lockdown have not yet been gazetted – we expect the same to occur on Wednesday 25 March 2020. We will only be able to give proper advice, once these gazetted regulations have been considered. We will follow up on this letter once we have viewed these regulations.

3. From the statement made by the President, the following is clear:
3.1. The lockdown will commence at midnight on Thursday 26 March 2020. At this stage, it will endure for a period of 21 days, i.e. until Thursday 16 April 2020. In terms of the Disaster Management Act, 57 of 2002 (“the Act”), this period may, of course, be extended.

3.2. Only certain essential services personnel will be exempted, which include medical personnel, state security services and persons concerned with the sale and distribution of food and basic goods. It is anticipated that a full list will be published later today.

3.3. All shops and businesses will be closed, save for supermarkets, pharmacies, petrol stations, banks, laboratories, the JSE and health care providers.

4. As stated in our previous letter, these regulations carry the penalty of criminal sanction if disobeyed, and therefore landlords, tenants, and the like are to comply with these requirements.

5. Also, as stated previously, the present lockdown will probably amount to casus fortuitus, which is an incidence of vis major, and which is defined as an exceptional or extraordinary occurrence that was not reasonably foreseeable1. It has been held2 that 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.

6. In light of the ban on general trading which has now been issued, it seems as if tenants who do not fall within the exempted categories, will be prohibited from trading for the 21-day period. Accordingly, they probably will not receive the full beneficial occupation of their premises, and, depending on the wording of their lease agreements, might be entitled to a rent remission. It is important to note, in our view, that a total rent remission will probably not be applicable, as the tenants will still be using the premises during this time, as their business assets will still be situated in the premises. It is, of course, a substantial reduction in use. In any event, each remission (if any) will need to be dealt with on a case-by-case basis, to determine whether a remission ought to be granted, and if so, what the amount of such remission ought to be.

7. The president has also announced various measures to alleviate the economic effects of the lockdown. Tenants and other businesses should be encouraged to make use of the measures, and to do so in a responsible measure. Also, most lease agreements require tenants to obtain and keep in place, their own insurance for their businesses, which normally includes business interruption insurance. In our view, tenants ought to be encouraged to claim against their insurance first.

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