'Unprecedented circumstances’ brought on by the Covid-19 lockdown regulations have seen a legal battle between a commercial tenant and a landlord thrashed out in the Western Cape High Court.

Central to the case was whether a tenant is entitled to withhold payment of rental to the landlord payable in terms of a lease agreement during the period of national lockdown and whether it is entitled to claim a rental remission, wholly or in part, as a result of the legislative restrictions caused by the imposition of the regulations.

In this case, the applicant landlord (trustees of the Bymyam Trust) own land and buildings situated in Greenpoint. At the time of conclusion of the lease, the respondent (Apoldo Trade) was a close corporation, which, in April 2017, was converted to The Butcher Shop and Grill (Pty) Ltd.

With the imposition of the hard lockdown, restaurants were required to close with the result that the respondent ceased operation of the restaurant on 23 March 2020.

As alert levels changed in 2020, the restaurant was allowed a seating capacity of 50% and its case is that the regulations imposed affected its business negatively with a substantial loss of turnover.

It is common cause that the respondent did not fulfil its obligations fully in terms of the lease.

The applicant instituted a claim of R1 576 919 as well as interest from 1 August 2020, to date of payment of all amounts due (it later delivered a notice of amendment reflecting an increased amount of R2 980 845).

Acting Judge M Pangarker ruled that the lockdown regulations were a form of vis maior (’of that there is no doubt’).

The issue was whether the respondent as lessee may claim rental remission where it has sub-let the leased premises.

The respondent relied on North Western Hotel Ltd v Rolfes Nebel & Co, a 1902 judgment of the erstwhile Transvaal Supreme Court as its authority that a tenant is entitled to rental remission from the landlord for a sub-tenant’s loss of the full use and enjoyment of the leased premises.

The government at the time forbade the sale of liquor in hotels and bars, resulting in the sub-lessee closing the hotel.

Thereafter, during the war, the sub-lessee re-opened the hotel as it was obliged to house military forces therein and after a further period, the sub-lessee lost the right to sell liquor on the premises, resulting in the hotel’s closure once again.

Unbeknown to the lessee, the sub-lessee instituted a claim for compensation with the authorities as a result of the losses caused by the military occupation of the hotel and damage caused to the hotel.

The lease was never cancelled.

Pangarker noted that the judgment does not contain a finding nor does it establish a legal principle that a lessee may claim rental remission where it is not in beneficial occupation or physical control of the leased premises; or, in other words, ‘that a lessee may claim rental remission where the loss of use and enjoyment of the leased premises is that of the sub-lessee’s’.

The respondent was ordered to make payment to the applicant of R2 703 191 as well as interest from 1 June 2021 to date of payment of all amounts due. 

Judgment