Covid-19: Discharging Your Legal Obligations Under A Tenancy Agreement. Yay or Nay?
Let’s cut the chase and dive right in: In lieu of what is happening right now (Covid-19 Pandemic), can a tenant decide to not pay rent to his landlord? In this article, we will briefly look at two legal principles that a tenant might be able to rely upon to do so.
Is there a force majeure clause in your tenancy agreement?
As the dictionary puts it, a force majeure is “an event that can generally be neither anticipated nor controlled/ circumstances must be abnormal and unforeseeable, so that the consequences could not have been avoided through the exercise of due care”.
Such clauses are usually present in a tenancy agreement. While the wording might vary from one tenancy agreement to another, it all boils down to the same thing- a force majeure clause frees both the landlord and tenant from any liability or obligation (in this case, the tenant is not required to perform his obligation under the tenancy agreement i.e. pay rent) if an unforeseeable event takes place, such as war, outbreak of diseases, natural disaster, etc.
However, two things that a tenant should be aware of in regards to this matter:
- A tenant cannot invoke force majeure as a reason not to perform their obligations under the tenancy agreement if there is no such clause in the tenancy agreement. The courts will not entertain such pleas nor will they imply into the tenancy agreement.
- In the event there is a force majeure clause in the tenancy agreement, the law dictates that a party that wishes to rely on the clause:
- Must be able to prove that the event (in this instance, Covid-19) falls under one of the categories in the force majeure clause and that he is being prevented from performing his obligations under the tenancy agreement as a result of the event; and
- Must be able to prove that the event was beyond his control and that there were no reasonable steps that he could have taken to avoid or mitigate the event or its consequences.
Is it impossible to perform, and thus frustrating the tenancy agreement?
Alternatively, a tenant can rely on the doctrine of frustration to discharge his obligation under the tenancy agreement. What is the doctrine about? Under section 57 of the Contracts Act, a frustration occurs when a contract becomes impossible or unlawful to perform, thereby rendering the contract void.
On face value, a tenant could rely on the doctrine to discharge his obligations. In reality, it is not that simple, as there are three criteria to be fulfilled before the doctrine of frustration can be relied on:
- The event (i.e. Covid-19) must not be an event in which no provision has been made in the tenancy agreement;
- The tenant is not responsible for the occurrence of the event; and
- The event must render the tenant’s obligation radically different from what was needed to perform under the tenancy agreement.
Not only that, and to pour more cold water on this topic, the Federal Court in Pacific Forest Industries Sdn Bhd & Anor v Lin Wen-Chih & Anor further stated that:
“a contract (in this case a tenancy agreement) does not become frustrated merely because it is impossible to perform. If a party has no money to pay his debt, it cannot be considered impossible to perform as it is not frustrating.”
In essence, can you discharge your obligations?
The short answer is no. The long answer is this: unless a tenant manages to invoke force majeure or rely on the doctrine of frustration as mentioned above (which, based on what has stated above, is not easy as it seems), the tenant must still perform his obligations under the tenancy agreement i.e. pay rent to his landlord, or risk being sued by the landlord for not fulfilling/ performing his obligations under the tenancy agreement.
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