Need Assistance in Negotiating with your Landlord for Covid-19 Relief
Now more than ever business owners are realising that their suppliers, customers and staff are all effectively partners in their business.
With premises standing vacant around the country, the burning question is - who bears the cost? This post sets out some very high level principles as well as our thoughts on how we can assist you to find a fair outcome.
This calculator is based on VERY broad principles and is really just an indicator based on our own thoughts on what type of rebates tenants could think about when negotiating with their landlords. It is of course, not a legal opinion, but just a best guestimate. To properly evaluate the situation, we recommend that you consult with an attorney.
Understanding the core of a lease agreement
A lease agreement is a reciprocal agreement, meaning that both the lessor and the lessee owe mutual obligations to each other. The lessor is obligated to give beneficial occupation of the leased premises to the lessee for purposes of conducting its business, and the lessee is in turn obligated to pay the lessor the agreed rental for the use of such leased premises.
In simple terms, your landlord gives you the keys so that you can operate your trade and you, in turn, pay the rent. If you have the keys but cannot trade because of something that is beyond either your control, or your landlords control, then the landlord cannot perform his obligation to you as a tenant.
What is a supervening event of impossibility of performance
In terms of South African law, in the event that any supervening event beyond the control of the parties arises which makes it impossible for the lessor to give the lessee beneficial occupation of the leased premises, then the parties may respectively be relieved of their reciprocal obligations under the lease agreement for the duration of such supervening event. Whether the lessee is entirely relieved of its obligation to pay rental, or whether it is only partially relieved, depends on the degree to which the lessee is deprived of its beneficial occupation of the leased premises, as well as on the provisions of the relevant lease agreement.
Is the national shut down a supervening event
The imposition of a governmental lock down due to the Coronavirus with effect from 26 March until 16 April 2020 constitutes a supervening event of impossibility for many tenants. Lessees engaged in any business activities other than the approved essential services, are not permitted to trade, and are thereby deprived of at least some degree of beneficial occupation of their leased premises. Under such circumstances, lessees may be entitled to raise the aforesaid defence that they are either completely relieved of their obligation to pay rental or are entitled to a remission of rental until such time as they are once again entitled to take beneficial occupation of the leased premises.
What we recommend that tenants do
We have prepared a template letter for lessees to place on their letterhead and send to their landlords to raise such legal defence and propose a remission of rental for the period that the lockdown endures, which you may adapt for your purposes.
We have also prepared a draft addendum to your lease agreement which you may submit to your landlord with a view to agreeing to remission of your rental until such time as the lockdown provisions are uplifted. You will then simply need to insert the agreed percentage of beneficial occupation during the lockdown period and the details of the lessee, the lessor and the leased premises in the definitions clause.
Geneate a Landlord COVID-19 Letter to your Landlord Now