Covid-19

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On 15 March 2020, the Minister of Corporate Governance and Traditional Affairs, declared a National State of Disaster in terms of section 27(2) of the Disaster Management Act in response to the COVID-19 pandemic. 

The state of disaster lapses after 3 months on 15 June 2020, or it may be terminated earlier or extended further by the Minister. 

There is no doubt that the collection of rent in the next few months will be challenging. Many businesses and individuals face the prospect of zero or reduced income in the coming months. 

Compounding non-payment of rent 

Compounding the non-payment of rent is a very real scenario for tenants who are in self-quarantine and therefore unable to vacate, and with courts closed to issuing new processes or allocating new hearing dates, landlords are further prejudiced from enforcing their rights. 

TPN Credit Bureau, SSLR Inc. and Fullard Mayer Morrison Inc. have created a State of Disaster – Rental Recovery Pack for landlords and property managers to use free of charge. 

Importantly, tenants whose income has not been affected by the State of Disaster are expected to continue to pay their rent in the ordinary course of business. 

Rental Recovery Pack 

Tenants whose income has been lost or limited due to retrenchment; have been placed on temporary unpaid leave; and commission earners who are unable to work but who have all previously exhibited a trend of paying their rent in full are candidates for the Deposit Utilisation or Rent Deferment Agreements. 

The Rental Recovery Pack allows for four scenarios: 

  1. Tenant Income Declaration Document 

    This Declaration Document should be completed by all tenants who would like to apply to the landlord or property manager for their deposit to be used as rent or a deferment of rental. 

    The purpose of this document is for the tenant to declare the reason for their loss of earnings and to allow the landlord or property manager to confirm this with the employer as well as request the necessary supporting documentation. 

  2. Deposit Utilisation Document 

    Ordinarily, a tenant’s deposit is held in trust until the lease has ended and the tenant has vacated but these are extraordinary times. The Deposit Utilisation Document is an agreement between the landlord and the tenant that the deposit can be used to pay the rent. 

    It’s important to note that this document includes a repayment plan so that the deposit will be reinstated over instalments for the remaining period of the lease term once the State of Disaster has been lifted. 

    This option is suitable to tenants who acknowledge liability. Where the tenant defaults on the repayment of the reinstatement of the deposit, the landlord will be in a position to easily take further legal action. 

  3. Rental Deferment (Payment Holiday) Document – Residential Tenant 

    This Rental Deferment Document takes into consideration that the residential tenant’s obligation to make full rental payment is suspended for the period of the State of Disaster or a shorter period should the lease be validly cancelled by either party. 

    Importantly, this option includes a repayment plan for the rental to be reinstated over instalments for the remaining period of the lease term once the State of Disaster has been lifted and also provides for the landlord to withdraw from the indulgence under specific circumstances. 

    This is to be utilised where the tenant acknowledges liability, if the tenant defaults on the repayment of the reinstatement of the rental, the landlord can take further legal action on the basis of this document. 

  4. Rental Deferment (Payment Holiday) Document – Commercial Tenant 

    This Rental Deferment Document takes into consideration that the commercial tenant’s obligation to make full rental payment is suspended for an agreed period which could be the period of the State of Disaster, or some shorter or longer period. 

    Importantly, the Document provides, as an option, for the tenant to make a minimum monthly payment during the period that its normal payments are suspended. The document also provides for the landlord to withdraw from the indulgence, in specified circumstances. 

    This document is to be used where the tenant acknowledges liability, should the tenant default on the repayment plan, the landlord can easily take further legal action. Where the tenant is not a natural person, the person signing the agreement binds himself as surety and co-principal debtor in order to secure the repayment of the deferred amounts.

Tenants who have already displayed a trend of non-payment

The question that remains is, how should you deal with tenants who have displayed a trend of non-payment and would have defaulted on rent regardless of the State of Disaster? 

We suggest that landlords and property managers continue with their collection process of uploading their tenant data to TPN and initiating Credit Bureau update notifications to the tenant, sending TPN Letter of Demands and Lease Cancellation notifications. Should the tenant fail to vacate after cancellation, make sure that the file is ready now to hand over to your attorney as soon as the State of Disaster is lifted and the Courts begin to operate as normal. 

The TPN Letter of Demand is discounted at 50% while we are in this disaster period. 

Self-quarantined tenants

Another situation that might arise where the lease agreement has ended or is about to end but the tenant is no longer able to vacate due to the need to be quarantined or remain in isolation. TPN has included an Addendum to the Lease Agreement in the Rental Recovery Pack which extends the existing terms of the lease agreement on a month-to-month basis. 

As part of our strategy to support the property industry TPN, SSLR Inc. and Fullard Mayer Morrison Inc. are happy to make the State of Disaster – Rental Recovery Pack available to all landlords and property managers free of charge. 

Please feel free to reach out to us! 

Stay safe 

Michelle Dickens
MD of TPN Credit Bureau

Lockdown for landlords, your questions answered
We are in an unprecedented situation with our country never before being placed in a national lockdown. Understandably, landlords and property practitioners have very important questions that need to be answered on what this means for the rental industry during the next 21 days and beyond. TPN and SSLR Inc. put our heads together to answer your most pressing questions: 

Question #1: What happens to tenants who need to move on the 1st of April?

This has been the most frequently asked question since lockdown was announced by the President last night. The reality is that nobody is moving during a nationwide lockdown. It would be contradictory to the Disaster Management Act and therefore illegal to do so. 

Only essential services on the list published by the Government may operate for 21 days from 23:59 on Thursday, 26 March. This list does not include estate agents or moving companies. 

TPN has developed the Rental Recovery Pack, together with SSLR Incorporated Inc. and Fullard Mayor Morrison Inc., to help our residential and commercial landlords get through the National State of Disaster period. The pack is available at no cost and can be downloaded from the TPN Shop where we specifically recommend signing the Month-to-Month Addendum of Lease. 

For instructions on how to use the Rental Recovery Pack, please watch our TPN YouTube video.

Question #2: How do I handle In-coming and Out-going inspections?

According to the Rental Housing Act, out-going inspections must be performed within 3 days of the tenant vacating the premises. As you are not allowed to leave your house, it will be impossible to perform an out-going inspection. Similarly, as nobody will be able to move out and with nobody moving in, there will be no need for an in-coming inspection to be performed during lockdown. 

Question #3: What happens to an Eviction Order now?

An Eviction Order that was granted before the lockdown can’t currently be enforced as Sheriffs will in all likelihood not be working. In an instance where you are busy with an Eviction, always deal directly with the attorney that handled the matter. 

It is extremely important that tenants who have not paid their rent are placed on terms and that the necessary Letter of Demand has been sent so that you can act immediately after the lockdown has been lifted. The TPN Letter of Demand has been discounted by 50% during the time that we are in a National State of Disaster. 

Question #4: Can the tenant cancel their lease agreement in the usual way?

The tenant still has the right to cancel the lease agreement by giving 20 business days’ notice. The landlord’s right to charge an early cancellation penalty remains in force and should the landlord suffer damages as they are not able to find a replacement tenant due to the lockdown, the landlord would still be able to charge loss of rental as part of these damages. 

It is unclear in law at the moment as to whether the days during the lockdown can be counted as business days. Until there is a directive which will come from the Judge President, we have to treat business days as business days in which case, the tenant would be entitled to cancel the lease but not be entitled to vacate until after the lockdown. 

Question #5: I have a vacant property, can I charge my new tenant rent from the 1st of April even though they can’t move in?

We find ourselves in extraneous circumstances. Where the tenant is not physically able to move in during a national lockdown, the landlord would have no claim against the tenant for rent due during the lockdown. The situation is as a result of a force that is outside of either the tenant or the landlord’s control. 

Question #6: Does my tenant have to pay rent?

There is a falsified document said to have been issued by the Department of Health doing the rounds on social media. It claims that ‘Health Minister Zweli Mkhize has barred landlords from collecting rent money from their tenants for the next 90 days’. This is fake news which has been verified as such in an article by News 24 with comment received from the Department of Health spokesperson, Lwazi Manzi. 

Tenants are still bound by their rental agreement. Should a tenant have difficulty in paying their rent due to the COVID-19 pandemic, we strongly suggest that you make use of the free TPN Rental Recovery Pack to negotiate the best possible out-come. 

Conclusion

It is important to remember that this time will pass. Where you have a very good tenant, it might be wise to mitigate your damages as far as possible rather than getting rid of that tenant. In the end, we have to get through this time together and minimising the damages we suffer is often best achieved through negotiation in a way that is mindful of the greater good of all. 

TPN will be operating in full but remotely. This is the perfect opportunity to sit down and create new opportunities. This is when innovation happens, when people become amazing – the time will pass whether we use it productively or not, so let’s step out of it better, together! 

By Richard Mayer, Fullard Mayer Morrison Inc.

Are employees entitled to a paid salary during lockdown?

The lockdown announced by President Ramaphosa on Monday night has drastic and far-reaching consequences for employment relations in South Africa. 

Although not explicitly stated in Monday’s Presidential announcement, as matters currently stand, the forced leave that has been imposed upon employees by the lockdown is unpaid leave. 

No obligation on employers

There is accordingly no obligation on employers to pay salaries to employees who cannot perform their normal work functions by reason of the lockdown. Many employers do not have the deep pockets and strong balance sheets to heed President Ramaphosa’s call for employers “to take care of their workers during this period” by continuing paying salaries during the lockdown. 

Agreed paid leave

Employers who are unwilling or unable to the pay salaries to employees who cannot work during during the lockdown have a number of options open to them to attempt to ensure that employees do not suffer unduly. The first option is that they can reach an agreement with the employees that they take paid leave for whole or part of the period from 26 March to 16 April. 

Naturally, any paid leave taken by employees during this period will be deducted from the employee’s annual leave allocation, reducing the leave available to employees to be taken on a voluntary basis. 

UIF claims for unpaid leave

It is open to employees who are forced take unpaid leave to claim short term Unemployment Insurance Fund benefits and where a business employing more than 50 employees is forced to cease operations, the Department of Labour will send a special team to the business to help process the UIF claims. The President has also promised assistance to pay employees’ salaries through a Temporary Employee Relief Scheme. 

Nevertheless, the Department of Labour and other government agencies are likely to be over-stretched by the calls on its resources as a result of the lockdown and the impact of COVID-19. The processing of UIF claims will inevitably take much longer than usual. Likewise, the funds to assist small businesses and employees affected by COVID-19 derived from the funds donated by the Rupert and Oppenheimer families and allocated by the Department of Small Business Development are likely to take too long to reach many businesses when relief funding is most needed. 

Conclusion

Despite the great uncertainty and disruption of the days ahead, TPN will be operating as usual during the lockdown and its call centre will continue to assist its clients and help with their queries. 

We are in the most uncertain of times. It is more important than ever that we continue to move forward with our goals wherever possible in an even more focused way than before. 

Make a positive contribution

As an employer, it is within your power to offer employees the certainty of a fully updated, verified employment history on TPN credit bureau and allow them to bounce back positively from the most dramatic disruption we will experience in our life-times. 

The TPN Team will continue to process UIF data and Payment Profile data – please submit your files to data@tpn.co.za

Employees who find themselves in the job market for either a new or an additional income, our advice is to ensure that your employer continues to submit their employee data to maintain your verified employment information on the TPN System during this time.