We are now one week into the lockdown announced by President Ramaphosa, the impact thereof has been unprecedented on everyone, not only in our personal capacity but in our professional capacity as well.
Most businesses, barring those involved in what government refers to as ‘essential services’, are unable to operate normally. Only those businesses that can operate remotely on any level will be able to continue with any type of business activity, and even then the results are still very limiting.
What is the impact on the commercial property industry?
Both landlords and tenants will be affected by this lockdown, tenants rely on their business operations to generate income which covers all their operating expenses, rental included. Even with productivity brought to a standstill tenants are still liable for their rental even though their business are now non-income producing.
What can you as a tenant do?
The first step is to have a look at your lease agreement. Does it cater for instances like these, ie. is there a force majeure clause? This clause is often included to protect against a possible risk which may result in rendering the performance of contractual obligations impossible through no fault or act of either of the parties.
If the clause is included in your lease agreement then you need to determine whether the lockdown in your circumstances does qualify as a force majeure, and if so you would need to be able to justify this.
If the clause is not included in your agreement then you would have to rely on what is included in the agreement, together with the principles of common law.
In either case our suggestion would be to approach your landlord directly to discuss the situation and the impact that the lockdown has on your business’s ability to perform its rental obligations.
There are potential solutions to the problem, for instance, instead of paying the gross rental, offer to cover the operating costs of the property for a specific time and in turn offer to pay the net rental owed during this period over a few installments going forward. This will assist the landlord in at least covering his operating costs. He in turn may be able to negotiate a payment holiday with his bank as far as bond repayments are concerned, should there still be a bond on the property.
Another potential solution is to negotiate a rent free period now and increase the term of the lease by this period. In other words you don’t pay rent for 2 months now but your lease term is extended by an additional 2 month period in order for the landlord to recoup lost income. All operating costs during the rent free period would still be payable by the tenant.
One of the benefits of the law of contract is that it allows the parties the freedom to agree and bind themselves to any form of arrangement provided that the arrangement is legal, so you are entitled to renegotiate terms provided that your landlord is in agreement. We feel that considering the very unusual and extreme circumstances surrounding the lockdown that landlords will hopefully be amenable and understanding to tenants needs, provided of course that a practical solution is proposed.
How can we assist?
We see this as an opportunity to add value to the industry, being a team of very experienced brokers led by a well known developer and landlord with a long family history in the business puts us in a position where we can relate to the problems on hand from both a landlord and tenants point of view. Should you be in a position where your business is being affected by the current situation at hand then please get in touch, we are currently operating remotely and we can have a look at your lease agreement and discuss potential solutions, and even help to negotiate solutions with your landlord. Most of whom we already deal with on a regular basis and have longstanding relationships with.
For these and any enquiries please email us on firstname.lastname@example.org or email@example.com or you can contact Richard (084 654 4111) or Sandro (082 899 8304) directly and we will handle your query accordingly.