General

Covid-19 Level 4 property transactions

On 29 April 2020 the Level 4 Regulations were published. This level commences on 1 May 2020. The end date is yet to be determined. We have no idea when we will move from this level, or in which direction such a move might be!

Leases are expiring; rentals are due; transfers were registered just before lockdown, but parties could not move, etc. – how does LEVEL 4 affect all of this? Here are the typical questions we have received, with our views:

1. May estate agents return to work?
No. Real estate is not included in the services that are able to operate. Courts, Deeds Offices, Master’s Offices; and business services required to allow these to function (including conveyancers and attorneys) may return to work, but only in order to allow these offices to function.

2. May my landlord insist on full payment of rental? (This includes commercial properties where the tenant is not allowed to trade and has no income; residential leases where tenants plead financial distress; as well as leases that were signed before the lockdown, and where the tenant is now unable to take occupation).
There is a lot of discussion online about Force Majeure/Vis Major (VM). This is a legal term that refers to a superior power or force which cannot be resisted or controlled, and which a person may rely on to excuse him or her from performing a contractual obligation due to “impossibility”. Examples of this are extreme weather events, wars, riots, or, in our case, legislation. The general consensus is that the current Government-imposed lockdown announced in South Africa on 23 March 2020 is a VM.

But this does not mean that everybody who has been affected by the lockdown will be able to use VM as an excuse to avoid paying rent!

It depends entirely on the particular circumstances of each and every matter. The scenarios below all assume that the leases do not have specific clauses in them that regulate the issue of VM. If they did, the lease agreements themselves will dictate the consequences. What follows is therefore a very brief discussion of the common law position.

Let’s first look at a residential lease where the tenant has continued to live in the leased premises but has lost his job as a result of the lockdown and now can’t pay the rent. This tenant will not necessarily be able to rely on VM to avoid paying rent. The main reason for this is that the tenant has not been deprived of his occupation and use of the property.

For commercial tenants who cannot trade from the leased premises, and for residential tenants who have been prevented from taking occupation of the property as a result of the lockdown, the picture is different.

In these cases, VM is preventing the commercial tenant from making full use of the business premises and is preventing the residential tenant from making any use of the residence at all. In accordance with an old Roman Law Principle, these tenants may be entitled to a reduction (remission) of rent equal to the amount by which their use of the property has been reduced. The amount by which a commercial tenant’s rental would be reduced would vary with the circumstances. For the tenant who has not yet moved into their home, the reduction in rental would be 100%.

3. May my landlord cancel my lease if I don’t pay?
Once again, one has to first consult the lease to see whether it has a VM clause and whether it deals with cancellation and if not, then as mentioned, the breach may be excusable in certain circumstances. Each matter will have to be determined on its own facts.

Therefore, in conclusion to questions 2 and 3, and given the fact that our law has never been faced with a lockdown situation, it is almost impossible to predict how our courts are going to handle these types of matters. Our advice to landlords and tenants is that they communicate with one another to try and reach a resolution by agreement as soon as possible.

4. May my landlord evict me if my lease is cancelled, or if my lease ends during lockdown?
The Level 4 Regulations that have just been published expressly state that an eviction order may be granted during this time (since the courts may also return to work from 1 May 2020) but that such orders must be suspended during lockdown level 4. While a court could order an immediate eviction, this would only be done in exceptional circumstances. One must also bear in mind that the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act (PIE), which governs the law regarding evictions from residential properties, allows the court a very wide discretion in determining the timing of an eviction, depending on the circumstances. It is most likely that Magistrates and Judges will show mercy to tenants who face eviction because of lockdown, and give them plenty of time to move, provided the tenant was not being unreasonable and trying to abuse the current situation.

5. May tenants/buyers move into new properties yet? May agents take clients to view properties?
No. The Regulations published on 29 April 2020 still limit movement and do not allow either.

6. May attorneys see transfer and bond clients to sign documents?
Section 16 (2) (d) of the Regulations state that you may leave your residence “to obtain services that are allowed to operate as set out in Table 1.” This to us means we may see clients to sign transfer / bond documents or for any matters related to litigation, deceased estates or notarial services because we are needed to enable the Deeds Office, the Courts and the Master’s offices to function.

We hope that this has cleared up some of the confusion that has arisen during this lockdown period.

Robert Krautkrämer and Deon Welz
Miltons Matsemela Inc
April 2020

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