By Geraldine Southern – Senior Associate
In November 2020, our client, landlord of a major shopping centre in Sandton instructed us to claim arrear rental and associated charges of over R2 million, which included the months of hard lockdown imposed in terms of the COVID-19 regulations and beyond.
Their tenant, a local restaurant, believed they were excused from payment because there was a “Supervening Impossibility” caused by the hard lockdown. They also sought to avoid payment of rental and associated charges after this period for reasons listed later in this article.
Hard Lockdown Implications
The tenant alleged that it received no use and benefit of the leased premises as they couldn’t legally access the premises as a consequence of the hard lockdown implemented in late March 2020. They contended that these events constituted an intervening event of impossibility which excused them from complying with the terms of their lease agreement.
Our counter argument was borne in the terms of the tenant’s lease agreement – “All payments in terms of this lease shall be payable monthly in advance no later than the 1st (first) day of each month, without set-off or deduction for any cause whatsoever, free of exchange, bank commission and charges”. The fact that they did not have access to the leased premises during lockdown did not excuse them from payment of rental owing to the landlord.
The Court found that there was potential merit in the argument that the hard lockdown might constitute an intervening event of impossibility. This might in turn excuse the tenant partially or in full from their contractual obligation to pay rental to the landlord for the months of April and May 2020. The rental for that period of the hard lockdown was therefore found to be “triable”, i.e. not appropriate for Summary Judgment and that it ought to be dealt with in trial in due course.
Post Hard Lockdown Implications
The tenant attempted to raise the defence that even post the hard lockdown period they were not obliged to make payment of full rental and associated charges to the landlord. Their reasoning, amongst other things, was that they were unable to attend to renovations at their leased premises at the time, given that the loosened lockdown restrictions permitted only certain business activities to resume operation.
They further alleged that when level 4 lockdown was lifted, they could not operate except under highly restrictive conditions. They used this as further grounds for not paying rental and associated charges.
Hadar Incorporated argued that despite any restrictive conditions, particularly in respect of attending to renovations at the leased premises, the tenant was factually able to occupy and trade from the leased premises after the hard lockdown and, as such, full rental and associated charges were payable.
Court Rules in Landlord’s Favour
The Court ruled in our client’s favour and Summary Judgment was successfully granted in the amount of R1.58 million for rental and associated charges for the months prior to and, more importantly, subsequent to the hard lockdown.
In essence, this means that the Court did not find merit in any of the defences raised by the tenant i.e. that rental was not due post the hard lockdown period as a result of any inconveniences suffered or restrictive conditions imposed. Nor did they find any reason why the full rental and associated charges should not be paid by the Tenant after such period.
The Way Forward
Rental due over the hard lockdown period remains a point of contention between landlords and tenants, yet to be clearly decided by the Courts. That said, our case bodes well for landlords seeking arrear rental for the post hard lockdown period. Although considered an unreported judgment, we can refer to and rely on this case when arguing in favour of landlords in matters.
We are very proud that this case is featured in the top 10 relevant cases pertaining to COVID-19 on the SAFLII (South African Legal Information Institute) for matters heard in the Johannesburg High Court.
Should you have a rental arrears query or require assistance with a property-related legal dispute, reach out to Geraldine Southern directly at email@example.com or visit www.hadarinc.co.za for more information on how we can help you.