COVID-19: RELIEF PACKAGE FOR RETAIL TENANTS, SOUTH AFRICA
Regulations have been published exempting certain agreements and practices between (i) South African retail tenants in designated trading lines and (ii) businesses involved in the supply of rentable space in the retail property sector, from the application of sections 4 and 5 of the Competition Act, 1998 (governing restrictive horizontal and vertical practices).
Following this, on 7 April 2020, South Africa’s retail landlords announced an industry-wide assistance and relief package for retail tenants in response to the COVID-19 pandemic and lockdown (Relief Package).
The Relief Package is an initiative of the newly-formed alliance of retail property landlords, known as the ‘Property Industry Group’. This alliance is led by the SA REIT Association (SA REIT), SA Property Owners Association (SAPOA) and SA Council of Shopping Centres (SACSC).
The primary focus of the Relief Package is to protect jobs (of the retailers, their suppliers and service providers) and therefore greater assistance is offered to small, medium and micro enterprise businesses (SMMEs) across all sectors. However support is also provided to large retailers who are affected by the lockdown.
The extent to which retailers have been prevented from trading in compliance with the lockdown, is taken into account in the Relief Package.
The Relief Package’s core relief period is the months of April and May 2020 (Relief Period). The Relief Package has different categories of relief offered for different categories of retail tenants, as specified in the below table:
The Relief Package is to be applied nationally and is based on the premise that the lockdown does not exceed the 21-day period. Highlights of the Relief Package are as follows:
- to qualify for the benefits of the Relief Package, retail tenants will need to undertake not to retrench staff during the Relief Period;
- there will be no evictions during the Relief Period for all tenants whose accounts were in good standing as at 29 February 2020;
- the relief offered to qualifying retailers for the Relief Period will be in the form of (i) rental discounts, where rental will be waived partially or fully for such period, and (ii) interest-free rental deferments, where the deferred rental would be recovered over a period of six to nine months from 1 July 2020 onwards;
- the reference to ‘rental’ only includes rent, operating costs and parking rental, as such tenants will nevertheless be required to pay all rates and taxes recoveries, utility cost recoveries, as well as insurance in full for the Relief Period; and
- less support is allocated to retailers that have insurance cover or receive relief (or are eligible to receive relief) from other sources.
Each landlord can use its discretion in the relief and assistance that it provides to a retail tenant, however the Relief Package stipulates the minimum that qualifying retail tenants can expect from landlords during the lockdown.
The Property Industry Group also announced that landlords will, on a case-by-case basis, consider providing relief for office, industrial and hospitality tenants where the lockdown severely impacted the tenant and where it is justified. Such relief terms will be negotiated directly between the relevant landlords and tenants.