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  • Writer's pictureGavin Jayapal

Malay Mail:- Covid-19: What happens if tenants can't pay rent on time?





Full article available here.




 

Lawyer Gavin Jay Anand Jayapal said that tenants unfortunately cannot delay making rental payments to landlords because of the MCO, but also noted that landlords could decide to allow it.


“Most, if not all tenancy agreements, tend not to incorporate such clauses. On a humanitarian basis, some landlords may agree. However, if a tenant is receiving his/her salary in full, then rent shouldn't be deferred,” he said, confirming that it would be up to both parties to negotiate and reach a mutual agreement for rental to be deferred if the tenant is facing financial difficulties.


When tenants delay their rental payments, Gavin said that the consequences would depend on what is stated in the tenancy agreement.


“Most tenancy agreements will specify that upon default, a landlord shall be at liberty to deliver notice to the tenant outlining said default, together with a warning that if rent is not paid, the tenancy agreement shall be terminated. If a tenant were to default, a very strong possibility would be that the landlord shall issue a notice to the tenant,” he said.


8. Ongoing tenancies vs tenancies yet to take effect


Gavin said the current Covid-19 situation and MCO would amount to a force majeure event or situations outside of a tenant’s control that causes inability to perform the contract through paying rental on time, adding that the use of force majeure clauses would typically result in termination of the contract.


“As such, if a tenant were to invoke force majeure, they would essentially be saying, ‘I cannot perform the contract due to events outside of my control’. In line with this, the contract would be deemed terminated and the tenant would be obligated to return the premises to the landlord.


But he said that given the MCO, the force majeure clause would be “highly infeasible” and a “very undesirable” clause in the tenancy agreement to rely on, especially for residential tenants as they would then have no place to stay after using the force majeure clause to terminate the contract.


Force majeure clauses will apply to tenancies that have been signed but haven't come into effect as of yet (ie. the landlord and tenant have executed the tenancy agreement, but the tenant hasn't moved in yet). In such a scenario, either party may invoke the force majeure clause, if they so wish (Act of God).


“For tenancy agreements currently ongoing, the force majeure clause may be applicable if the ongoing coronavirus situation renders performance of the contract impossible.


This would be highly fact-sensitive and in general, the coronavirus situation probably won't allow for the force majeure clause to be invoked to terminate a tenancy agreement,” he said, giving as example a situation where the force majeure clause may not apply as when a residential tenant is still living in the rented house when the MCO takes effect.


 

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