Moreover, distinguished Governments all over the world in an effort to contain, prevent and/or outrightly stop the further spread of the coronavirus disease, have also introduced measures aimed at reducing and/or outrightly ending the devastating effects of this highly contagious disease. Notable amongst the measures introduced, for instance in Zambia, include the introduction of legal measures such as statutory instruments numbers 21 and 22 of 2020 which provide legal provisions and guidelines on how to contain, prevent and/or stop the spread of this disease.
Further, executive orders have also been issued restricting and/or outrightly banning the carrying out of certain lines of business activities such as the operation of bars, night-clubs, gymnasiums, schools and universities and restaurants for a certain period of time until further notice. All this has been done in order to contain, prevent and/or outrightly stop the spread of this common enemy called coronavirus disease.
Therefore, as a result of these inevitable but highly important measures taken by distinguished Governments all over the world, most business enterprises including certain categories of employees working for these affected enterprises have been negatively impacted in terms of income generation capacity thereby likely to default on rental fee payments to their respective landlords.
SO, WHAT ARE SOME OF THE SIMPLE SOLUTIONS THAT BOTH LANDLORDS AND TENANTS AFFECTED BY THE EFFECTS OF THE CORONAVIRUS CAUSED ECONOMIC CRISIS CAN IMPLEMENT RIGHT NOW?
Well, the relationship between landlords and tenants is governed by a legal instrument or rather a contract known as a "Lease" which simply spells out the rights and duties of each party to the agreement based on "Consensus ad idem" or a "meeting of the minds". Therefore, what this means is that the parties are at liberty to get back to talking terms and find amicable ways of dealing and resolving the issues affecting them.
The Parties Can Decide and Mutually Agree To:
1. FREELY Excuse one of the parties to the contract (especially tenants who are on the weaker side) from paying rental fees and Extend the time required to perform the contractual obligations under the contract during the affected period of the coronavirus disease restrictions just like Brooklyn Landlord Mario Salerno of New York, U.S.A and Jeff Larabee did to their residential and business premise tenants respectively. Watch Videos below for Details:
3. Outright termination of the entire contractual obligations under the said contract and this therefore means that the contract comes to an end.
The first two possible solutions are preferable but not the last one. Why? Two reasons for this:
Firstly, because no one in their sane and right mind will want to start a business during this time of crisis which falls within the restricted line of businesses and rent business premises knowing fully well that it will be difficult or impossible to do that kind of business at this point in time.
Secondly, even if a landlord was to decide to evict a tenant during this period of the coronavirus disease restrictions, he or she would still find it hard or difficult to locate other tenants to occupy his or her premises where the line of business falls within the restrictions imposed by the authorities.
So, it is therefore much easier and better to keep tenants already occupying your premises (particularly business premises) during this hard and difficult time than to evict such tenants so that when things normalize you as a landlord would still be in a position to recoup your accumulated rental fees than risk not having anything if you decided to evict your current tenants in favour of the unknown ones. And should a tenant completely fail to pay accrued rental fees for whatever reasons, then you as a landlord still has the option of suing the defaulting tenant for the recovery of the same even if it took you a long time to do that. But finally you would still be in a position to recover your money in the final analysis.
SO, WHAT'S THE LESSON TO BE LEARNT FROM THIS CORONAVIRUS CAUSED ECONOMIC CRISIS?
Well, that people ought to anticipate in advance things that could go wrong in their business transactions and/or business agreements and then try by all means possible to incorporate such terms and conditions as be may necessary to avoid or to at least completely reduce or eliminate the occurrence of such unforeseen circumstances to a bare minimum.
Moreover, people also need to learn to diverse their investment portfolios or rather their income generation sources (see >>https://www.davikrealestate.com/video.html) so that when one investment portfolio or one income source does not perform well such as in times like these, then another investment portfolio or income source will still compensate for the other failing one thereby still maintain a level of financial security and freedom thus avoiding financial stress and cater for unforeseen circumstances.
Furthermore, this brings in 2 distinct legal concepts or doctrines that ought to be discussed in summary namely: force majuere and frustration. There is a lot more detail to these two legal concepts than meets the eye. However, only an overview of these concepts will be discussed herein in order to cement and concretize this write up.
Force Majeure is simply french for "Superior Force" meaning that it represents something that happens which is beyond the control of the parties to a contract and so renders the performance of the obligations under the contract impossible or rather very difficult to carry out. Examples may include: Acts of God such as natural calamities like storms, earthquakes, volcanic eruptions, sudden and natural disease outbreaks, etc which result in the disruption of economic activities thereby affecting businesses in the short and/or long term process. Therefore, all these represent examples of force majuere events. And sometimes, even a change in law may represent a force majuere event. Normally provisions relating to force majuere are often incorporated in commercial agreements such as in construction or supply of goods and services. And a provision relating to the same must be expressly incorporated beforehand in a contract if a party is to rely on it later on. And where such a provision has not been expressly incorporated in a contract beforehand, then an affected party may not plead force majuere as a defence. Instead, that affected party can plead frustration as a defence.
Successful pleading of force majuere as a defence by one of the affected parties may result in one of three scenarios namely:
i. Extension of time required to perform the contractual obligations under the contract for the period of the force majuere event; and
ii. Temporary suspension but not outright termination of contractual obligations; and lastly,
iii. Outright termination of the entire contractual obligations under the said contract and this therefore means that the contract comes to an end.
For force majeure to be successfully pleaded, an affected party must satisfy three requirements namely:
1. That the event must be beyond the reasonable control of the affected party;
2. That the affected party’s ability to perform its contractual obligations under the contract must have been prevented, impeded or hindered by the force majuere event; and lastly
3. That the affected party must have taken all the reasonable steps, precautions and/or measures under the circumstances which sought to avoid or mitigate the force majuere event or its consequences.
THE DOCTRINE OF FRUSTRATION
In the absence of an express force majeure proviso in a contract, the parties may then be able to rely upon the doctrine of frustration. By distinction, the doctrine of frustration is not available to an affected party if the contract contains an express force majeure proviso since the said express proviso will be treated as the agreed manner of apportioning the risk between the parties concerned.
The Doctrine of Frustration will apply where:
1. the underlying event is not the fault of any party to the contract;
2. the event or circumstance happens after the formation of the contract and was not foreseen by the parties; and
3. it becomes physically or commercially impossible or difficult to fulfill the contract, or transforms the obligation to perform into a totally different obligation from that initially undertaken by the patties.
The doctrine of frustration automatically brings the contract to an end. Therefore, the parties to a contract will no longer be bound to perform their future obligations under the contract. So, because of the resultant effects of the doctrine of frustration, the burden of proving frustration is much higher than that for contracts containing force majeure provisions.
NOTE: LOOKING OR INTERESTED IN BUYING OR INVESTING IN LAND IN ZAMBIA?
Well, look no further: See available land below.
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ABOUT THE AUTHOR - DAVID KAPALU
David Kapalu is a Real Estate Investment Consultant who happens to be a duly Registered Member of the Zambian Institute of Estate Agents - MZIEA No. 321, an Internet Marketing Specialist, Motivational Speaker, Public Speaker, Life Coach and Trainer. He is also a 4th Year Bachelor’s Degree Law Student studying with the Zambian Open University. He is Someone who Understands his Subject so Well and Knows how to Reduce Complex Matters into Simple to Understand Matters.
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