The
landlord and tenant relationship can be traced back to the 10th
century. It is an intrinsic relationship that is here to stay, however it
ultimately evolves.

Landlords
and tenants, as an inseparable pair, currently face a significant challenge.  

I
write this article with conflicting feelings – on one hand being a
landlord’s attorney and, on the other, as a tenant. While my primary aim is to
consider the legal position, there are also practical suggestions to manage the
relationship during this tumultuous time.

In
this unprecedented situation, it is natural that certain tenants will look to
their landlords for assistance. The landlord’s position is, however, precarious,
despite a popular misconception that landlords hold unlimited funds or can
afford to withstand non-payment of rentals.

Landlords
pay rates and taxes, utilities consumed by their tenants at their properties, and
other operational costs, including staff salaries. Most significantly, most landlords
have substantial bond repayments and other debt instruments that they must
service.

The
below information serves as a guide for tenants and landlords in these challenging
times. One must regard the entire contents of this article to understand the
legal position and, with understanding of the other side’s position, hopefully
reach an amicable resolution to protect the symbiotic relationship between
landlord and tenant.

Contractual
law and lease agreements

In contractual law, generally, in the event of a vis
major
(synonymous with force majeure)a superior power or
force which cannot be resisted or controlled – the result is that one or both
parties are excluded from liability and from fulfilling their contractual
obligations.

In my view, the Covid-19 outbreak, and the resultant
government lockdown, fall within the definition of a vis major.

Therefore,
a tenant intending to rely on vis major to be exempt from paying rental
(in full or partially) must prove that it did not have full beneficial
occupation of the leased premises for a defined period.

In
this regard, the tenant might be entitled to a remission of rental for
the number of days that they were unable to have full beneficial occupation of
the leased premises.

Most
modern lease agreements contain a rental payment clause that excludes any
deduction or set-off for any reason whatsoever.

Furthermore,
certain leases also specifically exclude liability against the landlord for any
claim, of any nature, for any loss or damage suffered directly or indirectly by
reason of vis major

In
such cases, despite the lockdown, rental remains payable and the landlord is
within its rights to claim payment.

However,
if the lease agreement does not contain a rental payment clause, as referred to
above, a tenant without full beneficial occupation may seek a remission of
rental.

At best, for any tenant that is
entitled to a remission of rental, utilities, rates and taxes and other such
fixed costs remain payable without any remission whatsoever.

Categories of tenants

Residential tenants will remain in
occupation of their premises during the lockdown period and therefore enjoy
full beneficial occupation. There is no contractual or other right for such tenants
to withhold rental payment.

Retail tenants (with the exception of
those that fall within the definition of essential services) will not be in full
occupation of their premises during the lockdown period and will not generate
any income. Despite this, if their lease agreement contains the aforementioned
rental payment clause, they are contractually obliged to continue making
payment.

Commercial (offices) and industrial
(warehouses and factories) tenants are in the same position as retail tenants.

Business assets in the leased premises

The argument by retail, commercial and
industrial tenants is that, practically, even though they are obliged in terms
of the lease agreements to pay rental, they do not have the full use and
enjoyment of the leased premises.

One must, however, give regard to the
fact that although the tenant’s human resources will not be in occupation, the
tenant’s business assets remain in the leased premises and the tenants
accordingly do still enjoy some use and benefit of the leased premises.

Practical advice

Tenants – continue paying rental as per
your contractual obligations. If your lease does not have a deduction or
set-off clause, request a remission of rental for the appropriate number of
lockdown days.

Landlords – where possible, assist
tenants (especially those who are in good standing) through this difficult time
with deferred rentals (partially or in whole) with fair repayment terms to be
agreed. It is obviously in your best interests to help good tenants survive.

It is important to note that the above
is subject to careful consideration of each matter on a case by case basis and
that there is no general rule or answer.

Finally, my advice is for everyone to communicate,
be fair, respect and be kind to each other and work together to overcome this.
Our actions now, as landlords and tenants, will set the foundation for our
future beyond this crisis.

Liad Hadar is director at Hadar Incorporated
– Property Law Specialists. Views expressed are his own. If you are a tenant or
landlord and have a follow-up question, you may contact the firm at  [email protected]
.
  

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