In the economic turmoil caused by Covid-19 lockdown, many people have not been able to pay their residential rent. Under government lockdown regulations – which try to ameliorate this problem – where do tenants and landlords stand legally?
Two main scenarios emerge in the regulations passed by government in terms of the Disaster Management Act, says Grant Nirenstein, director at law firm Knowles Husain Lindsay Inc. One is where the tenant is actually occupying the landlord’s premises, and the other is where a residential lease agreement has been signed but the tenant has been prevented by the lockdown regulations from taking occupation.
“Where the tenant is in the premises, any financial hardship resulting from the lockdown in no way detracts from their obligations to pay rent,” says Nirenstein. “If parties were able to wriggle out of their contractual obligations by virtue of economic hardship – which is often unforeseen – written agreements would have little value. Indeed, the rule of law would be compromised, and financial lending institutions would have no incentive to advance credit.”
Where the tenant wants to take occupation but cannot, the situation becomes more complicated. A case like this could occur if the tenant is prevented from crossing a provincial border to reach the premises.
“This amounts to a supervening impossibility of performance,” he says. “That is to say, performance by the parties was possible when the contract was initially concluded, but thereafter became impossible through no fault of the parties.”
In this case, the contract remains in force if the impossibility of moving into the premises is only temporary. The parties’ contractual obligations are therefore not extinguished, but may well be suspended.
“The tenant would usually then be allowed to not pay rent for the period during which the premises cannot be accessed or enjoyed,” he says. “However, the terms of the lease agreements should always be consulted, as the parties might have agreed to something different.”
If taking occupation becomes permanently impossible, then the parties’ respective contractual obligations are extinguished, as if the contract was never concluded.
Then comes the issue of tenants who cannot or will not pay their agreed rent during the lockdown; can they be evicted or not? Under normal circumstances, the landlord would have the right to evict – as long as they are fair and do not discriminate.
Under the lockdown regulations, however, it is no longer that simple. Initially, the regulations provided that no person may be evicted from their place of residence during the lockdown; the stipulated period ran from 26 March to 30 April 2020.
“This changed in Alert Level 4, when the courts were permitted to grant eviction orders, provided that any order of eviction would be stayed and suspended until the last day of Alert Level 4 – unless the court decided otherwise,” he says. “The position is the same under Alert Level 3.”
Ideally, landlords and tenants should try to resolve contractual disputes amicably and without the need for lengthy, costly litigation, says Nirenstein.
“A suitable compromise – such as a temporary ‘rent holiday’ or some other relaxation of the terms of the lease – is often better than letters of demand and months of legal wrangling,” he says. “Having said that, the parties should take some legal advice to protect their rights, especially when wanting to alter the lease agreement.”