Covid-19: Can it release my business from paying rent?
02 April 2020, Japie Kruger
The Covid-19 pandemic has caused uncertainty for all South Africans, especially when considering the implications that it can have on a business and its obligations in terms of a written agreement. With the lockdown having come into effect on 26 March 2020, a question to be answered is whether or not tenants, especially restaurants, bars and coffee shops will still be liable to pay rent if they cannot operate.
The general term used in our law when referring to an impossibility to perform under a written agreement as a result of calamities is known as “force majeure” or an Act of God. Although the specific terms and conditions of the written agreement will stipulate the obligations of the contracting parties when such an event takes place, the following conditions must be present for a force majeure-clause to come into effect:
- The impossibility must be objectively impossible.
- It must be absolute and not just probable or relative.
- The impossibility must be unavoidable having regard to the reasonable person.
- It must not be attributed to the fault of either party.
- The fact that a disaster or event was foreseeable does not mean that it would have been foreseeable or could have been avoided.
In terms of South African common law there is no closed list as to what falls under force majeure
. As always in order to escape any uncertainty an agreement must specify the specific events not leaving anything open for interpretation. If your lease agreement contains a force majeure-
clause and it makes reference to a pandemic, then the current Covid-19 pandemic would have triggered the clause to come into effect and the obligation to pay rent may be extinguished.
Before acting in terms of the agreement it is advisable to consult with your attorney in order to ensure that the force majeure
clause covers the current pandemic that we are facing, so as to not commit a breach of the agreement through repudiating it.
In the event that your lease agreement does not contain a force majeure-
clause, the legal principle of supervening impossibility will be applicable. In such an instance the tenant will have to objectively prove that performance is impossible and not merely difficult or more costly.
Before taking any action firstly consult with your attorney to consider the specific agreement and obligations imposed therein.