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Residential Rental Obligations in the time of the Coronavirus

Residential landlords and tenants may be unsure as to their rights and responsibilities during the national lockdown and the period that follows thereafter.

Whilst in a number of limited cases, commercial tenants may be entitled to a partial or complete rental remission during the lockdown, this is almost never the case with residential tenants. The main reason for this is that during the lockdown, residential tenants are not deprived of beneficial occupation of their leased premises. Accordingly, residential tenants remain liable for rental and associated charges at all times.

Below is some practical advice for landlords and tenants to consider during this period.

 

Landlords

As a landlord, one should be cognisant of the fact that tenants may be unable to earn an income, or may earn a reduced income, during the lockdown period and this may put severe strain on their finances. As such, landlords should try to assist tenants, within reason, by allowing a tenant in good standing,  who intends to pay rental, an opportunity to defer payment of rental partially, alternatively to consider utilising the tenant’s deposit towards arrears that may be owing, affording the tenant an opportunity to reinstate the deposit at a later stage. If the tenant is in significant arrears, or there is some other compelling reason not to assist the tenant, such as the leased premises not being kept in an appropriate condition, leniency towards the tenant would not be recommended.

 

Insofar as rental deferments are concerned, for example, where a tenant’s monthly rental is R10 000.00, the landlord could accommodate the tenant by accepting payment of R5 000.00 in May 2020 and allowing the tenant to repay the deficit by way of two further instalments of R2 500.00 each, over and above the following two full monthly rental payments. Where a landlord and tenant do agree to a rental deferment arrangement, it is advisable to have this reduced to writing and formalised, usually by way of an acknowledgement of debt.

 

Insofar as the appropriation of a deposit is concerned, many residential lease agreements make provision for this. In essence, the landlord and tenant agree that should the tenant fall into arrears, the landlord may, at its discretion, apportion the tenant’s rental deposit towards such arrears and thereafter, require the tenant to reinstate the deposit to its original amount. A landlord should, however, be cautious when adopting this approach as a rental deposit is intended to cover the landlord in the event of any damage being caused to the leased premises for which the tenant is liable. As such, landlords may expose themselves, particularly where a the tenant is nearing the end of the lease and cannot reinstate the deposit. Again, as before, if the landlord and tenant agree to the apportionment of the tenant’s deposit towards arrears, it is advisable to have this formalised, in writing.

 

While it is often advisable for a landlord to assist a tenant in good standing, at the same time, landlords must be cautious of situations where tenants are either unwilling or unable to pay due to lockdown. A tenant that was in arrears prior to the lockdown is most likely going to fall further behind on rental payments. Opportunistic tenants may even try to use the lockdown to their advantage in an attempt to avoid their rental payment obligations.

 

Where a tenant is unwilling or unable to pay or reach a repayment arrangement, it is advisable that the landlord takes immediate action to place the tenant in breach. Residential tenants are afforded protection in terms of the Consumer Protection Act. This legislation provides that a landlord would be required to give a tenant 20 business days written notice to remedy its non-payment breach before a lease may be cancelled. Accordingly, a landlord should not delay in taking steps to place its tenant in breach, thus commencing the legal process as early as possible and before the arrears grow larger and more difficult to collect. This is particularly important because during the lockdown most court operations are suspended. Once the lockdown is lifted, there will be an influx of matters at Court, leading to congested Court rolls. A landlord who does not act quickly and decisively may find themselves waiting many months before an eviction application can be heard.

 

Tenants

It is highly recommend that tenants who find themselves in situations where they cannot pay their rental in full or in part, communicate effectively with their landlords.

 

Tenants should be cognisant of the fact that landlords have bonds and levies to pay. Further, landlords are similarly suffering economic hardships during this time. If a tenant is aware that it is unable to make payment of the rental in full or in part, it should advise its landlord without delay. By being honest and upfront with the landlord regarding its financial position, the parties will be more likely to reach an amicable solution. Where a tenant acts reasonably and in good faith, the landlord is usually amenable to reciprocate.

 

Although it may not be possible to pay rental in full during the lockdown, tenants should always pay the landlord for all services at the leased premises, such as electricity and water, as and when same fall due for payment. These services are being enjoyed by the tenant, and the landlord remains liable to the Municipality for these charges at all times.

 

If as a landlord or a tenant, you require assistance in dealing with a rental related query, do not hesitate to contact your rental agent or your attorney.

This article was written by David Wainstein a director at Harris Inc., in association with Etchells & Young Property Brokers.

Harris Inc. is a specialist property law firm, providing expert and cost-effective advice and services in all commercial and residential property related matters, as well as conveyancing.