COVID-19 and its effect on your lease

In light of the recent regulations published under the Disaster Management Act, 2002 and the State of Emergency Act, 1997, certain restrictions have been imposed to combat the Coronavirus threat.

These restrictions and in particular the nation wide lockdown, prohibit certain activities and place certain limitations on certain businesses, such as businesses selling liquor. In addition, the limitation on movement by the public is effectively preventing all retailers of non-essential products, from trading and Landlords will therefor face the possibility of defaulting tenants.

The emergency regulations will qualify as force majeure. Some leases may or may not have clauses specifically dealing with force majeure. If a lease is silent on this subject, one must refer to the common law.

The principle of force majeure is that if the continued full beneficial use of the property, as contracted to by the parties, becomes impossible because of force majeure, the tenant will become entitled to a rent reduction or a remission of rent for the time beneficial occupation was impossible. 

The tenant’s entitlement to a remission of rent must be a direct and immediate result of the force majeure. For example, a tenant cannot claim a remission of rental if he closes simply because trade has dropped off due to economic circumstances. But, if the law prohibits the activity, he or she would be entitled to a remission of rent.  For example liquor stores during the time of lockdown.



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