C&A Friedlander Attorneys

Along with the Covid-19 third wave and the associated harder lockdown restrictions, the shocking recent events in South Africa, namely, the violent looting and unrest during July, have undoubtedly forced significant strain on economic activities. Despite the government’s pledge to avail a near R4 billion recovery fund to support the restoration of businesses devastated in the unrest, most affected businesses have already been caused to close down or left unable to trade from their leased premises, which inevitably affects its contractual obligations, especially lease obligations.

As seen in the age of the Covid-19 pandemic, force majeure has emerged as a major force serving as a remedy for many businesses to pause or exit lease agreements when they could not fulfil their lease obligations. Although the principle of force majeure is known to many, there is still a perception that the principle is only limited to natural events, known as ‘acts of god’. However, this is not the case. Force majeure may also be defined to include exceptional acts or events beyond the reasonable control of the party concerned, which also refers to events caused by people, such as disturbances stemming from third-party criminal activities, including unrest.

In practice, the scope of the force majeure clause will largely depend on the terms of the lease agreement and the obligations that are to be performed. A typical clause will seek to exclude or limit the liability of one or all of the parties to the agreement for any delay or failure to perform its obligations that result from the circumstances in question.

Most lease agreements do not contain an extensive force majeure clause. The risk of a poorly drafted clause is that parties are bound to the agreement and will not be able to escape its obligations, or alternatively, be forced to rely on the common law principle of ‘supervening impossibility of performance’ to suspend its obligations under such lease agreement provided that it has become objectively impossible for them to perform under the lease agreement as a direct result of the unrest.

Any party alleging force majeure, usually the lessee, will bear the onus of providing proof that they have not had beneficial occupation due the unrest. However, a lessee making such allegation of force majeure must do so carefully and with absolute certainty as an invalid allegation may constitute a repudiation of the lease agreement, entitling the landlord to an election whether to cancel the lease agreement. It should be relatively easy for the lessee to prove the aforementioned, mainly by proving how the destruction to premises occurred and that such destruction was not caused through any fault of their own.

Should a lessee who claims remission of rental due to their inability to trade from the premises because of the destruction which caused the lessee to vacate the premises, and the lessee has further proven that they were compelled to do so, given the real threat of its store being looted, and they had reasonable ground for doing so, the lessee shall be entitled to a total remission of rental from the date their store was violently destroyed.

Furthermore, a lessee who has paid rental in advance and is therefore deprived of beneficial occupation due to the looting will also be entitled to a remission of rental proportionate to the period of their loss of occupation from the date their store was looted.

As such, a lessee’s failure to comply with their rental payment obligations under a lease agreement, where failure is not justified in terms of either the lease agreement itself or in law, will be regarded as a breach thereof by such lessee. Therefore, in order to ascertain whether a tenant may be entitled to a remission in rental as a result of the unrest, the relevant facts of each particular case should be considered, specifically the terms of the lease agreement, the applicability of force majeure or the principle of supervening impossibility of performance.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).