Lockdown: how to deal with rent and levies

Lockdown: how to deal with rent and levies

MAIN IMAGE: Marlon Shevelew, director Marlon Shevelew and Associates.

By Marlon Shevelew

Many people will not be able to earn an income during the nationwide lockdown from midnight 26 March till midnight 16 April. What are landlords who are unable to pay their levies to do? Is there any reprieve for tenants who are unable to pay their rental? Has our government done enough to offer reprieve?

The first critical question to ask is whether the COVID-19 pandemic qualifies before the law as a force majeure or in Latin a vis major event. The same would apply for the nationwide 21-day lockdown.

What is vis major?

Vis major (otherwise referred to as an ‘act of God’) is a legal term that refers to a superior power or force which cannot be resisted or controlled. A related legal term is casus fortuitus which means an exceptional or extraordinary occurrence which is not reasonably foreseeable. In order to qualify as either vis major or casus fortuitus an event must be uncontrollable and unforeseen. Such events can result in complete or partial release from obligations.

COVID-19 and the lockdown qualify as vis major events

The general consensus is that COVID-19 is an event which satisfies the above criteria. There have been instances of manufacturing companies declaring force majeure as a reason why they are unable to comply with their obligations, and online booking platforms refunding clients who are unable to make use of bookings made. Both of these classes of reactions are indicative thereof that COVID-19 qualifies as vis major.

The 21 day lockdown announced on 23 March operates as vis major as well.

Landlord’s position

Where a landlord is faced with a tenant who closes up shop and/or refuses to pay full rental, his/her response must be informed by an assessment of the loss of beneficial occupation which the tenant has experienced, which will be discussed below. In light of the lockdown, a landlord will likely not be entitled to compel tenants to pay full rental if the lockdown has forced those tenants to close up shop.

A landlord will not be able to lawfully refuse to pay levies because of COVID-19; there is no way that COVID-19 impacts on ownership in a manner that will release the landlord from these obligations. A landlord will also not be entitled to pay reduced levies or mortgage payments because his tenants are unable to pay him, or because he is unable to earn an income himself (even in the light of the lockdown).

Some banks are offering relief programs for property owners and those should be seriously considered by any landlord that is struggling to meet its obligations. These are a concession from the banks and not necessarily an entitlement of landlords.

Further reading: New coronavirus banking rules will allow for payment holidays and other measures

Tenants’ position

The effect of COVID-19 on tenants must be determined along the same lines as above. If there is a direct effect on the beneficial occupation which the tenant has paid for, then the tenant will be entitled to a remission of rental. If the effect is merely indirect, then the tenant will not be entitled to remission of rental.

A tenant who cannot pay his rental because he has not received an income is not entitled to refuse to pay rental. Although the loss in income was ultimately caused by COVID-19, the effect is not related directly enough to release the tenant from paying rental. Otherwise any person who is ever retrenched would be able to refuse to pay rental. That can never be the case.

It is only if the person’s beneficial use of the property is directly affected by force majeure that said person will be entitled to remission of rental. In the example of a self-employed person who cannot earn an income, the effect is indirect, and therefore that person will not be released from fulfilling the obligations in terms of the lease.

A commercial tenant, who cannot use a property for the purpose which it was let will be entitled to remission of rental for the period of the lockdown.

Effect of the disaster regulations

The nationwide lockdown will be enacted in terms of the Disaster Management Act. The regulations published under this Act also impact on the rights and obligations of landlords and tenants.

Commercial tenants who are now forced to curtail their trading hours experience a direct impact on the beneficial use and enjoyment of the property. Such a tenant should be entitled to pay a reduced rental. If, however, the tenant merely is struggling because business in general is scarce, but has not been impacted directly, then the landlord will be justified in refusing to accept a reduced rental.

This will be the situation before the lockdown, and will be the situation once the lockdown comes to an end.

Effect of the lockdown

The lockdown which was announced will have the effect that many obligations cannot be complied with, for example:

  • A tenant will not be able to vacate property during the lockdown.
  • Landlords will not be able to give occupation to tenants during the lockdown.
  • Estate agents will also not be able to attend to incoming and outgoing inspections.

The scope of the lockdown is unclear at this stage, and the Presidency has yet to publish the extensive list of exceptions to the “stay at home” rule announced. Until this has been published, it must be assumed that everything which is not an essential service will have to stop. In light of the strict sanctions a conservative approach should be taken when deciding whether or not any activity is excepted from the lockdown.

Conclusion

COVID-19 is a vis major event. Its effect must be evaluated on a case by case basis. If the effect is direct and immediate, then a party will likely be entitled to some reprieve from its obligations. If not, that person will not be entitled to be released from complying with his obligations. The lockdown will drastically increase the number of situations directly affected by COVID-19.

The steps taken by the South African government will have a serious impact on the obligations between landlords and tenants, which both landlords and tenants must be mindful of.

About the author: Marlon Shevelew is the director of law firm Marlon Shevelew and Associates Inc. Shevelew is a well-known expert authority on residential property law in South Africa.

Showing 31 comments
  • Anna Broekhuizen
    Reply

    Thank you for the informative article.

    Please advise: my landlord has requested I release 1 month of the double damage deposit I am holding in the Trust Account. Tenant does not want me to pay April rent only the services as he does not know when his next pay check will be.
    Do I need permission from the tenant to release the 1 month deposit?

    • Helene Meissenheimer
      Reply

      A real dilemma – excellent question. Thank you Anna, I’ll follow up on this for next week’s issue of Property Professional.

      • Helene Meissenheimer
        Reply

        Hi Anna, Riëtte Bornman, Attorney, Notary Public and Conveyancer at STBB responds as follows (comments condensed, full comments next week in Property Professional): Taking current legislation and typical contractual clauses into account, in terms of the Landlord and the Tenant, the deposit cannot be released during the period of the lease agreement. The rental agent, can furthermore, under no circumstances, pay the deposit out to the Landlord, as this will be a breach of the agent’s fiduciary duties in terms of the Consumer Protection Act.
        The Rental Agent is encouraged to scrutinise the terms of the Lease Agreement and to facilitate mediation between the parties, during these trying times where performance can become difficult. If the matter is dealt with in accordance with the terms of the Agreement and the parties remain in dispute, they are to be advised to refer the matter to the Rental Housing Tribunal once they are in a position to do so after the lockdown.

        • Elize
          Reply

          Good afternoon.
          Question on behalf of my mother.
          My mother is a pensioner, but she also has 2 properties that my father left her when he passed away. As you know, the government pension is not even R2000. She relies on the 2 properties to pay for levies as well as to pay for her medical aid, food etc.
          As landlady, what are her rights and obligations with regards to the rent from her tennants? Both properties are houses and not for business use

          • Helene Meissenheimer

            Hi Elize, as Marlon explained, her residential tenants would ito the law be obliged to pay their April rent as they are enjoying the benefit of their rental properties by living there. However, if they approach her to ask for some form of reprieve because of lack of income due to the lockdown, it is up to her discretion on how to handle the situation. These are difficult times for many people.

      • Elsa
        Reply

        Can you maybe help clear up the issue that parents with children in universities will face? Many have signed lease agreements for private student accommodations where students are no longer in the accommodation as they were told to pack up and return home.

        • Helene Meissenheimer
          Reply

          Hi Elsa, yes I’ve asked Marlon Shevelew to comment on this as well as the other major issues raised here about rent and levies.

      • Lisa
        Reply

        Good Day. What does this mean for me please? I own two fast food outlets and had to close due to lockdown. I have no other source of income, pay monthly rental to landlords in advance who are now demanding their monies, which I have paid. What happens next month if there’s no income, how will I pay the rent then? Kindly advise further. If I don’t have rent money to pay, what are my rights?

        • Helene Meissenheimer
          Reply

          Hi Lisa, the lockdown is hitting the fast food industry very badly. Are you referring to your rent due on your fast food outlets or your residential premises? The law makes a difference between the two and the tenant’s legal obligation to pay rent in spite of an ‘act of God’ or force majeure as is the case with the lockdown.

    • Naima Bhyat
      Reply

      Hi Good day all… my situation is this:
      1. I am a single mother, and sole earner with 2 dependents
      2. I work from home doing informal treatments for people
      3. This is my only source of income
      4. During the Lockdown , I am prohibited from offering service and therefore unable to earn an income
      5. I will be unable to pay for my rental this month.
      6. What can be a solution for me?

  • Anne-Marie
    Reply

    If a tenant cannot pay their rent due to no income as a result of the COVID-19 situation, may
    the tenant request the agent / landlord to use part of their deposit as rental payment?

    • Sarah
      Reply

      I have a tenant who is behind with 3 months. He has been promising to pay but so far nothing. The electricity bill alone is already 20000 rands. The rentals in arrears are over 70000. The contract is concluding end of April.
      Just after the lockdown. I’m outside the country and not able to return due to the coronavirus but also due to work commitments.
      What should I do in this situation?

  • Anne-Marie
    Reply

    And the tenant also undertakes to repay the amount used from the deposit as soon as income has been reinstated?

  • Ria Pieters
    Reply

    My tenant gave notice on 27 February 2020. Now he is turning around and says he cannot be out on 28 March 2020 as his notice said he would be. What now?

  • Joe
    Reply

    Kan ek julle epos adres kry adb my epos is joeverkoop@gmail.com

  • mignon
    Reply

    My husband is self-employed, we will be able to pay the landlord this month but what about next month if there is no income?

    • Helene Meissenheimer
      Reply

      Very good question Mignon and one I am sure that many are worried about. We’ll follow up on this.

      • Allan
        Reply

        As a private landlord, who depends on the income from commercial leases, including a couple of national tenants, to live, pay bonds, rates, service provided, insurance etc I have a problem with this.
        My argument is that the virus is the cause but the decision to lockdown the country was made by a government, not God. The lock down is therefore not an act of God and this should be argued by SAPOA.
        Mr Shevelew’s comment on this please.

  • memory
    Reply

    I was supposed to leave the place 31 March when my lease finish. So, I asked the landlord if I could stay until 21 lockdown is over. She agreed, now agent is claiming I still under him if I still stay on that property. I told him my lease with him is finished, I asked my landlord for extension coz of disaster. The agent is refusing to give deposit money coz I still stay on the property while month back when I needed help he told me he does not manage the place, the landlord does, his lease finished.

  • Elmien Kukkuk
    Reply

    Same problem. my husband is a small business owner. We won’t even generate an income this month because he couldn’t finish some of the jobs he’s busy doing so no payment. What can we do..? Already received a letter from Aida that they will blacklist us if we don’t pay.. need some information please

  • Talje
    Reply

    Both my husband and myself are real estate agents. So earn only commission. However all our deals were on process. Now the deeds office and attorneys are closed. We had a deal due for registration but it did not happen in time before the lockdown. How can we explain this to our landlord?

  • Phil Rowley
    Reply

    The ST Act requires all owners to pay their levies no matter what.
    IF owners decided, because of the virus thingy, not to pay, many bodies corporate would become bankrupt.
    Are Levies on the same footing as Rents?
    This is a vital question.

  • Patience
    Reply

    I am a self employed hairdresser and due to the covid 19, i did not raise enough money for this month and will not be able to pay rent where i work and where i stay. What should i do?

  • Michelle
    Reply

    The company that I have started working for has closed for the 21day shutdown. I have been informed that since I do not have annual leave these days are unpaid days and will be advised closer to the time if work will resume.
    My partner has also been unable to work due to the restaurants and nightclubs being closed before lockdown began. Where do I stand legally on this situation.

  • Michelle
    Reply

    I would really appreciate advice on this. I can pay for the utilities as my family are using them but I cannot afford to pay everything and still support my children.

  • Robyn
    Reply

    I am directly affected by the lockdown as I work in aviation as a freelancer who works on a “no work no pay” model and as we know all passenger travel has been suspended. I have informed the managing agent for my complex that I won’t be able to pay levies due by me as a result of the lockdown. The last time I worked was on the 16th of March. There’s been no income. I was informed that I HAVE TO PAY. What am I to do?

  • Nick Ord
    Reply

    Great interpretation Marlon. Any guidance on the amount of remission? Would prorata be a good estimate?

  • Melissa
    Reply

    Good day, I need advice as I moved into our new home middle of the month and paid our first rent! A few days later its’ lockdown. We are self-employed and earn money on a day to day basis! Due to lockdown we can not work, so no income! How do we go about our next rent?

    • Helene Meissenheimer
      Reply

      Dear Melissa, legally you are obliged by your rental agreement to pay the rent due as you are living (‘enjoying beneficial occupation’ is the legal term) in the residence. However, speak to your landlord – see if you can come to some kind of agreement that will help you both.

  • Lorraine Love
    Reply

    Thank you for this article. I have a question : a client of mine is unable to pay his rates due to no income and lockdown. Can these be waivered by the municipality? Does this fall into a credit life insurance policy? He also wants to know what the maximum interest is that the municipality can charge.

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