COVID-19: Force Majeure &rental obligations

Apr 7, 2020

Article by: Hein von Lieres and Joshua Barlow

The lockdown has made it impossible for many businesses to continue trading. Does this mean that tenants that cannot trade are entitled to a remission of their rental? There is no simple answer.

Force majeure is an unforeseeable event beyond the control of the parties to a contract which makes performance of the contract impossible. A common example of force majeure is earthquake, flood, war or a plague. Force majeure could excuse a party from performing in terms of a contract.

The COVID-19 lockdown may constitute force majeure, however, this does not automatically entitle a tenant to a rental remission. Many leases do contain provisions which expressly or implicitly prevent a reliance on force majeure.

All relevant circumstances must be considered when determining the effect of a force majeure, such as the explicit provisions of the existing lease agreement, the extent to which a tenant is unable to use the leased premises for the intended purpose, and the steps which the tenant has taken to mitigate its losses.

There is no ‘hard and fast’ rule. All relevant circumstances must be considered. Amongst these are the lease provisions dealing with force majeure; circumstances which, for the vast majority of leases and landlords, have gone untested. If you would like to discuss the implications of the COVID-19 lockdown on your lease, please contact us.