A lease agreement entails reciprocal rights and
obligations between a landlord and tenant or simply put, the landlord gives the
tenant the use and enjoyment of the let premises and in return the tenant pays
rental.
It occasionally occurs that extra ordinary and
unforeseen events, such as war, floods, riots, pandemics or acts of God prevent
one or both parties from performing their respective obligations. It is common
for a lease to have a ´
force majeure´ clause, the effect of which
can
be to excuse non-performance caused by
the circumstances
described in such a clause and for the duration thereof. The
effectiveness of a
‘force majeure’ clause depends on how effectively it
is worded and its interaction with rest of the agreement.
If a lease does not
contain a
‘force majeure’ clause or the clause does not cover the
prevailing event, all is not necessarily lost, as the common law may still provide
some relief, unless the parties excluded the available common law relief.
Assuming the common
law relief was not excluded, if the performance of a party’s obligations become
objectively impossible due to an unforeseeable and unavoidable
event, for example either a ‘
vis major’ (a superior force – like an act
of government) or a ‘
casus fortuitous’ (an uncontrollable accident),
which was not caused by the fault of a party, then the common law doctrine of
“Supervening Impossibility” dictates that each party’s obligation to perform (and
the reciprocal right to receive performance) is extinguished. It is however not
enough that the performance of the obligation under a lease agreement has merely
become difficult or costly.
The recent Covid-19 related lockdown and trading
prohibitions (for those not eligible for essential goods or services exemptions)
have given rise to the question as to the position of the tenants who were
legally prevented from making beneficial use of leased premises. Such a tenant
may,
depending on the proper interpretation of the terms and the lease, application
of the common law and available statutory relief, be entitled to a remission of
rent (due to curtailed beneficial use) or be exempted from the payment of rent
(due to total loss of beneficial use).
A tenant who fails to comply with its obligations
(including payment of rent), and who is not able to rely on an effective ‘
force
majeure´ clause in the lease or applicable common law, will be regarded as
having breached the lease.
Landlords and tenants affected by the recent Covid-19
Regulations are encouraged to thoroughly study their lease agreements and
assess their rights, obligations, and remedies. Admittedly such an exercise is a
complex task and a landlord and tenant would be well advised to seek the
assistance and guidance of a specialist legal practitioner.
IVO DOS SANTOS
Associate
Commercial
