TO EVICT OR NOT TO EVICT… THE EFFECT OF THE LOCKDOWN ON RESIDENTIAL LEASE AGREEMENTS

fhbc_rocketmailer_nov_01_13An introduction

For many of us our home loan or monthly rent instalment is the largest expense, making it one of the most difficult payments to honour during the Covid-19 pandemic, but still no regulation or special relief measures have been announced for tenants who can’t afford to pay their rent during lockdown.  Is this a problem? 

Definitely not.  Have a look at the following legal rules:

  • The Covid-19 crisis and the nationwide lockdown qualifies as a “vis major”. 
  • What is a “vis major”?

    The terms force majeure, vis major and casus fortuitus are used interchangeably and refer to an extraordinary event or circumstance beyond the control of the parties, including a so-called “act of God”. 

    According to the case of Joint Venture between Aveng (Africa) (Pty) Ltd and Strabag International GmbH v South African National Roads Agency SOC Ltd and another, it is generally accepted that a qualifying event (a force majeure or vis major) is one that is: 

    • unforeseeable (at the time of entering into the Contract), 
    • unavoidable in terms of occurrence or impact and
    • impossible to overcome. 

    Furthermore, in Transnet Ltd t/a National Ports Authority v Owner of mv Snow Crystal, the Supreme Court of Appeal stated that there is a need to:

    • look to the nature of the contract, 
    • the relation of the parties, 
    • the circumstances of the case, and 
    • the nature of the impossibility invoked by the defendant, to see whether the general rule ought, in the particular circumstances of the case, to be applied. 
  • At this stage, after taking the above into consideration, there is no doubt that the worldwide Covid-19 pandemic together with our country’s national lockdown, duly qualifies as a vis major.  
  • A common example is employees whose salaries have been cut or who didn’t receive any salary, because of employers suffering financial hardship during the lockdown. 
  • That being said – what does it mean for tenants and landlords? 
    • For tenants:

      Generally speaking – the obligation to pay rent will remain, but can be suspended in the event of a tenant being financially incapable to pay his/her monthly rent.  This incapability must be directly or indirectly linked to the consequences of the Covid-19 pandemic.  Such a tenant may arrange a payment holiday and payment arrangement with his/her landlord. 

      That sounds quite easy, but what if your landlord or the estate agency representing your landlord does not want to enter into such an agreement? 

      First of all, section 11CA of the Disaster Management Act 57 of 2002, clearly states that no person may be evicted from his or her home (formal or informal dwelling) during lockdown.  Therefore – even if a landlord refuses to grant a payment holiday – you are still protected from being evicted during lockdown, should you not be able to make your rental payment. 

      Moreover, taking into consideration the adverse effects of the Covid-19 pandemic, landlords and estate agents will not easily be granted eviction notices immediately after lockdown, as the vis major will not magically vanish once the lockdown period has been lifted.  We anticipate publication of a regulation in this regard.  

      What if my lease agreement contains a clause waiving relief measures in the case of a vis major?  The intention of such clause is to protect the landlord from losing rental income due to an unforeseen or uncontrollable event/circumstance the tenant may face during the lease term.  Here the vis major only affects the tenant and his/her ability to pay rent.  The worldwide Covid-19 virus outbreak, on the other hand, isn’t something that personally and solely disrupted the tenant’s financial ability, but it affected our country and the rest of the world too. 

      What to do?  As tenant you should notify your landlord of your financial position and provide him/her with proof of your salary reduction or financial loss due to the Covid-19 virus.  You may ask for a payment holiday or offer to pay an amount that you can afford at the moment.  

      For the best interest of both the tenant and the landlord, it is advised that you put the arrangement into writing (including any special terms or conditions and the repayment schedule you have agreed to). 

    • For landlords:

      As a landlord, the chances of you also being negatively affected by the lockdown in one or more way is 100%.  This has not been overlooked.  

      With all of the major banks in South Africa (including Nedbank, ABSA, FNB and Standard Bank) having announced various payment relief measures for their clients, with home loan payment holidays as one of the measures, landlords (property owners) are in a quite favourable position (during this time of crisis). 

      “The Home Loan Payment Relief Plan gives you a 3-month non-payment period during which you will not have to make any repayments on your Home Loan.  Interest, service fees and insurance will accrue and be capitalised but you will not need to pay these during this period.” – ABSA

      May I use the tenant’s deposit as his/her rental contribution during the lockdown?  

      No, unfortunately not.  In terms of section 5(3)(g) of the Rental Housing Act 50 of 1999 a security deposit may only be applied by the landlord on the expiration of the lease term and cannot be used as rent during the existence of the lease term (during lockdown). 

In summary, it is important to take note that even though the lease agreement remains an enforceable contract, with its duties and responsibilities assigned to the tenant and the landlord, the parties are encouraged to find a midway.  In this way it will come down to a circle of financial assistance where home owners make use of the payment holidays as made available by our local banks in order to mitigate their loss of income and at the same time enabling tenants to make you use of rent payment holidays.  Ultimately, this circle will be a win-win situation for both parties. 

To contact us, kindly send a mail to our legal department: 

Adv Lorraine Oosthuysen
lorraine@fhbc.co.za
Chantél van der Merwe (LLB)
c.vandermerwe@fhbc.co.za

Source Reference:

1. Government Notice No. R. 465 published on 16/04/2020:
https://www.gov.za/sites/default/files/gcis_document/202004/43232rg11089gon465.pdf

2. Remission on rent:
https://www.golegal.co.za/covid19-remission-rent/

3. ABSA Payment Relief Plan: Home Loans:
https://www.absa.co.za/personal/covid-19/covid-19-payment-relief-plan/home-loans/

4. Rental Housing Act 50 of 1999

5. The position of landlords and tenants during lockdown:
https://aswanepoel.co.za/wp-content/uploads/2020/04/the-position-of-landlords-and-tenants-during-the-lockdown.pdf

6. Joint Venture between Aveng (Africa) (Pty) Ltd and Strabag International GmbH v South African National Roads Agency SOC Ltd and another

7. Transnet Ltd t/a National Ports Authority v Owner of mv Snow Crystal