The big question on many landlord and tenant’s mind is what impact the 21 day lockdown in South Africa will have on their lease agreements.
The government has begun rolling out various forms of relief schemes outlined by laws and regulations aimed to ease the burden on SMMEs. One of these many regulations is the Department of Trade and Industry’s COVID-19 Block Exemption for the Retail Property Sector, 2020 (‘the Regulation’).
As a result, the abovementioned regulation applies to “Retail Property Landlords”, inclusive of businesses that lease retail properties, such as clothing, footwear, home textiles, personal care service and restaurants.
The Government has not as yet, provided any direct relief to tenants regarding the rent that is due and payable and have placed no obligations on landlords; what however has been imposed in terms of the abovementioned regulation, is that the landlord and the tenant enter into discussions or an agreement to try and ease the burden by calling for payment holidays, rental discounts, limitations on evictions and the adjustments of lease agreements.
Any decision reached, which is a variation to the lease agreement should be reduced to writing and signed by all parties.
Alternatively, when considering the current lease agreement, it should be determined what it states regarding exceptions to paying the agreed amount in terms of the lease agreement. Failure to mention exceptions in the case of force majeure, namely the national state of disaster, in this case the lockdown imposed in South Africa from Thursday, 26 March 2020 until 16 April 2020, as a result of COVID-19, would imply that the lease is payable as per usual.
Failure to make payment in terms of your lease agreement would result in a breach, with no other alternative agreement in place between the landlord and the tenant, would entitle the landlord to:-
- cancel the lease;
- claim arrear rental; and
- take legal action in term of the damages suffered as a result of the breach.
The only exception, despite what is stated in the lease agreement, is that the following cannot occur, during the lockdown period:-
- a tenant will not be able to vacate property during the lockdown;
- landlords will not be able to give occupation to tenants during the lockdown; and
- estate agents will also not be able to attend to incoming and outgoing inspections.
The Consumer Protection Act 68 of 2008 (‘the CPA’) may provide further recourse where a commercial tenant has an annual turnover or an asset value below a certain maximum threshold, and as such can provide a 20 (twenty) day notice period to terminate the lease agreement. It must however be borne in mind that an early cancellation fee may apply.
To conclude, the tenant should continue to pay their rental due as per their lease agreement unless they approach the landlord for relief and try and come to a sustainable agreement, and where possible amend the terms of the agreement, alternatively, but not limited to, provide a payment holiday or provide a rental discount. This shall be at the discretion of the landlord.
Prepared by Tracey-Lee Lindsay : Legal Services, PKF Octagon