By Joseph Cheah
While the Movement Control Order (“MCO”) is in effect, many people will experience financial difficulty. One of the financial obligations a person would have is payment of rent. A landlord-tenant relationship is governed by the tenancy agreement.
The question is:
can you rely on the force majeureclause to excuse your obligation to pay rent?
Most tenancy agreements contain a force majeure clause provision, which addresses the change of parties’ obligations due to an unexpected external event. Generally, the affected party may be relieved, whether by suspension of delay, of payment of rent. Some may even entitle the party to terminate the tenancy agreement.
Retail outlets in shopping malls maybe able to rely on the force majeure clause. The nature of the relationship is that the landlord shall operate the mall for shoppers to purchase products from tenant. Since non-essential businesses cannot operate, naturally rent would be waived during this period.
Matters may be different when it comes to residential homes. The nature of such contract is that the landlord provides the tenant a home for them to stay in. This tenancy is not affected by the MCO.
Courts have generally found that financial difficulties in and of itself is not enough to excuse a party’s performance to pay rent.
- Read your agreement: This is the first action you must take. Check if there is a force majeure clause. Identify if your businesses or your premise is affected by the MCO.
- Negotiate in writing: When discussing with your landlord on how to mitigate the effects of MCO, put your discussion and negotiation in writing.
- Collaborate: Consider if the landlord can make some concessions (eg: extend the tenancy, find a replacement tenant, sublet the premise). Communicate is key.