Using The Pandemic To Get Out Of Your Lease

Commercial
Kayleigh Dale & Tsholo Netshivhale - January 28, 2022

How can you get out of a lease?

Generally speaking, there are a limited number of ways a tenant can get out of their lease without penalty. One of these ways is a “force majeure” or an act of God. This refers to any extraordinary circumstance, which is out of the control of the parties, such as a riot, war, earthquake or flood. In practise, this will generally suspend the agreement for the duration of the force majeure. These “acts of God” are usually clearly defined in your lease agreement, as well as each party’s respective obligations during that event. 

 

What happens when your lease agreement doesn’t have a force majeure clause? 

Where it is not The main question landlords will ask is whether their tenants are still obliged to pay the full rental amount to you? In these situations, your tenants can rely on the common law doctrine of supervening impossibility. When the performance in terms of the lease agreement has become impossible, at no fault of your own, the obligations are somewhat extinguished. Therefore, if your tenants are unable to pay your rent due to an event out of their control (that is not regulated in the force majeure clause), your tenant can rely on the doctrine of supervening impossibility to excuse the obligation to pay rent. 

 

The tenant, in the matter of Freestone Property Investments (Pty) Limited v Remake Consultants CC and another [2021] JOL 50979 (GJ), relied on this particular doctrine as his defence for not paying rent to the landlord. The tenant argued that the 2020 Covid-19 Regulations made it impossible for the tenant and the landlord to fulfil their obligations. The Regulations made it illegal to continue with operations (except for businesses that provided essential services) and made it impossible to pay rent. 

The court highlighted that the doctrine may apply to the hard lockdown period which occurred between March 2020 and April 2020. However, businesses were allowed to resume operations after that period thus making the doctrine inapplicable thereafter.

Can a tenant be prevented from relying on the Doctrine of Supervening Impossibility? 

The lease agreement will provide whether the tenant can rely on such a defence. If the lease agreement expressly prohibits the tenant from relying on the defence, the tenant cannot do so, even if such an event occurs. This reasoning was confirmed in the  MV Andre Builder Joiner CC v Nordien [2021] JOL 51847 (WCC) matter. 

What are the requirements for relying on the Doctrine of Supervening Impossibility?

  • The event must be the direct and immediate cause of the failure to pay rent. Covid-19 did not make it impossible to pay rent, rather the regulations themselves made it impossible, as businesses were prohibited from trading and earning an income. 
  • Your tenant must prove that paying rent was absolutely impossible and not just burdensome. If the monthly income is R25,000.00 but the monthly rent is R15,000.00, it is still possible to pay the rent no matter how burdensome it will be.
  • The court will make a value judgment on whether your tenants are entitled to a remission of rent based on the nature of the lease agreement, the relationship between the tenant and landlord, the nature of the impossibility and the specific circumstances of your case.

It is important to be cautious when relying on a force majuere clause or the doctrine of supervening impossibility. If your tenant outright refuses to pay rent, this will be deemed a repudiation of the lease agreement. In these circumstances, the landlord will be entitled to cancel the lease agreement and seek an eviction of the tenant.

Kayleigh Dale

Kayleigh Dale

Associate Attorney
Tsholofelo Netshivhale

Tsholo Netshivhale

Legal Researcher

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