In April 2023 the Supreme Court of Appeal confirmed that a tenant may claim a remission of rental where vis major interferes with the tenant’s beneficial use and enjoyment of the property, unless the terms of the lease provide otherwise. However, if the premises are sub-let there will be no interference with the head tenant’s beneficial use and enjoyment of the property and hence no rental remission may be claimed by the head tenant.
An owner of a commercial property in Cape Town had entered into a lease agreement with the head tenant, the Butcher Shop & Grill (Pty) Ltd (the Butcher Shop) for use as a restaurant. The Butcher Shop sub-let the premises to Apoldo Trading (Pty) Ltd (Apoldo) which conducted the business of the restaurant. Apoldo and the Butcher shop had the same sole shareholder, an individual businessperson. It was not explained why the business interests were arranged in this way.
The national lockdown imposed in response to the Covid-19 pandemic had the effect of initially precluding and then limiting the operation of the restaurant. The Butcher Shop claimed a remission of rental from the owner and, when this was refused, it withheld payment of rental. The owner applied to court to claim payment of rental in full from the Butcher Shop. The Butcher Shop launched a counter-application seeking a declaration that it was entitled to a rental remission.
The court confirmed that a tenant is ordinarily entitled to a remission of rental, either wholly or in part, where the tenant has been prevented either entirely or to a considerable extent, from making use of the property for the purpose for which it was let directly by some vis major or casus fortuitus event (ie. a superior force beyond the control of the parties). The lease agreement may however exclude or limit the common law right to claim a remission of rental in these circumstances. The terms of the lease did not exclude the right to a rental remission. The court accepted that the Covid-19 pandemic and at least the initial stages of the national lockdown did indeed constitute a vis major event, removing any doubt from previous judgments (Read here).
However, the court held that, because the Butcher Shop did not actually occupy the premises itself, and had instead sub-leased the premises, it did not itself suffer any interference with its use and enjoyment of the property. Only the party suffering interference and loss was entitled to claim remission of rental under the common law. The existence of the sub-tenancy in law precludes a claim by the head tenant for remission based on loss suffered by the sub-tenant.
This judgment confirms the principles applicable to claims for a remission of rental and is authority for the principle that that no remission may be claimed where the premises are sub-let. While owners/lessors will naturally seek to include terms in a lease that exclude the tenant’s right to a remission of rental in all circumstances, tenants may consider it appropriate to at least attempt to include terms which expressly permit a remission of rental to be claimed even if the premises are sub-let. These are matters for commercial negotiation followed by careful legal drafting.