The Impact On Retail Commercial Tenancy – Is It True That I Do Not Have To Pay The Rent During The Covid-19 Pandemic?

(Temporary measures for reducing the impact of Coronavirus Diseases 2019 (Covid-19) Act 2020)

Q1. What is the Temporary Measures for Reducing the Impact of Coronavirus Diseases 2019 (COVID-19) Act 2020 (“COVID-19 Act”)?

A:  It is an Act that sets out temporary measures to address the effects of the COVID-19 pandemic on the country’s economy and welfare. The COVID-19 Act also addressed the issue on the contractual obligations and claims, and provides temporary relief measures in relation to any inability to perform certain contractual obligations.

Q2. What are the temporary relief measures that COVID-19 Act has provided?

 A:  The temporary relief measures in the COVID-19 Act are divided into three categories: –

  1. Part II – in addressing the inability to perform contractual obligation
  2. Part III to Part XVIII – the modification to Malaysian legislation
  3. Part XIX – in addressing the inability to perform statutory duties or obligations or to conduct statutory meetings

Q3. Does COVID-19 Act provide any temporary relief measures with regard to the retail commercial tenancy?

 A: Yes. COVID-19 Act has provided temporary relief measures to some of the specified categories of contracts, which included contracts for lease or tenancy of non-residential immovable property matter.

 Q4. Is retail commercial tenancy included in the COVID-19 Act?

A: Yes. Retail commercial tenancy is included in the COVID-19 Act under Section 7 which provides a relieve contractual obligation and suspension of the party to the contracts to perform contractual obligation.

Section 7 of the COVID-19 Act provides that any party that is unable to perform any contractual obligation under contracts specified categories in the COVID-19 Act due to the measures prescribed, made or taken under the Prevention and Control of Infectious Diseases Act 1988, the non-defaulting party or parties to the contract cannot exercise their rights under the contracts. This including the retail commercial tenancy.

Q5. Does it mean that no rental is payable from 18.3.2020 to 31.12.2020?

A: Yes. Any rental, services charges and/or penalty that is accumulating from 18.3.2020 until 31.12.2020 is not payable. Section 7 of the COVID-19 Act provides that you will not be liable if you cannot pay the rent, services charges and/or penalty due to the temporary measures taken to curb COVID-19 pandemic.

Q6.How about after 31.12.2020, can all payments during 18.3.2020 until 31.12.2020 be back-charged?

A: If the suspension of the contractual obligation under the contracts is permanent in nature, then those payment from 18.3.2020 to 31.12.2020 cannot be back-charged. However, if it is temporary suspension, then those payments can be back-charged upon 31.12.2020, depending on the approach taken by the Court should there be a dispute.

Q7. What are the elements that I need to fulfil before Section 7 of the COVID-19 Act can be invoked?

A: First element is that the party’s contractual obligation is made under the contracts specified categories in the COVID-19 Act as specified in the said Schedule.

Second element is that the party’s inability to perform the contractual obligation is due to the measures prescribed, made or taken under the Prevention and Control of Infectious Diseases Act 1988, which includes the measures that were prescribed during the period of Movement Control Order (“MCO”), Enhanced Movement Control Order (“EMCO”), Conditional Movement Control Order (“CMCO”) and Recovery Movement Control Order (“RMCO”). The inability to perform must to have been caused materially by the COVID-19 measures.

Q8. Does my inability to pay the rent of the retail property during COVID-19 pandemic constitute inability to perform certain contractual obligations?

A: Yes. As the measures prescribed during MCO, EMCO, CMCO and RMCO had caused the tenants inability to operate the retail property as usual and due to that the tenants cannot pay the rent, that would constitute inability to perform the contractual obligations under the retail commercial tenancy contracts.

Inability to pay the rent during COVID-19 pandemic due to the measures prescribed is defined as one of the inabilities to perform certain contractual obligations under the retail commercial tenancy contract. Hence, Section 7 of the COVID-19 Act will apply whereby the landlord cannot exercise their rights under the contracts during 18.3.2020 to 31.12.2020.

Q9. Am I right that I will not be liable if I do not pay the rent from today until end of this year?

A: Yes. Under Section 7 of the COVID-19 Act, you will not be liable if you cannot pay the rent due to the temporary measures to curb COVID-19 pandemic from 18.3.2020 until 31.12.2020. All the contractual rights of the contracting party will be suspended until 31.12.2020.

Q10. Am I right that I would not be charged with a fine or penalty if my business is opened with late operation during this COVID-19 pandemic?

A:Yes. Section 7 of the COVID-19 Act has provided that if you cannot perform your contractual obligation under the contract i.e. to operate your business as usual operation hour due to the temporary measures to curb COVID-19 pandemic, the landlord cannot take any legal action against you. The landlord’s contractual rights under the retail commercial tenancy contracts will be suspended until 31.12.2020.

Q11. I am a tenant of a retail shoplot in a shopping complex. Due to the enforcement of the Movement Control Order by the Government, I cannot open my shop for business as usual. Am I going to be fined by the Landlord due to the non-operation of my shoplot?

A: No. As the non-operation of your shoplot is due to the temporary measures taken to curb COVID-19 pandemic where you cannot perform your contractual obligation under the contract, hence the landlord cannot charge you any penalty or fine on that basis.

Q12. Whether the landlord of the retail property can take distress action against the tenant who is unable to pay the rent due to COVID-19 pandemic?

A: No. Under Section 7 of COVID-19 Act, when the tenant is unable to contractually pay the rent due to the temporary measures taken to curb COVID-19 pandemic, the landlord cannot take any legal action against the tenant from 18.3.2020 until 31.12.2020. This includes its right to execute distress action.

Q13. If the rental cannot be charged from 18.3.2020 to 31.12.2020, can the landlord back-charge the tenants after 31.12.2020?

A:It depends. If the suspension of the contractual obligation under the contracts is permanent in nature, then the rental from 18.3.2020 to 31.12.2020 cannot be back-charged. However, if it is temporary suspension, then the rental from the period of 18.3.2020 to 31.12.2020 can be back-charged upon 31.12.2020, depending on the approach taken by the Court should there be a dispute.

Q14. I have not paid the rental of the retail property since March 2020. Can the landlord terminate and/or suspend my tenancy contract?

A:  No. Under Section 7 of the COVID-19 Act, the landlord cannot terminate and/or suspend your tenancy contract if the rental was not paid due to the temporary measures taken to curb COVID-19 pandemic.

Q15. Would I be liable if I do not pay the utilities fees of my retail property due to the measures taken to curb the COVID-19 pandemic?

A: No. Under Section 7 of the COVID-19 Act, if you are unable to pay the utilities fees due to the measures taken during COVID-19 pandemic, hence you will not be held liable.

Q16. As the COVID-19 Act only provides measures relief until 31.12.2020, what will happen after 31.12.2020?

A: Based on Section 5(1) of the COVID-19 Act, the protection given to defaulter of a contract shall operates from 18.3.2020 until 31.12.2020 subject to any extension given by Minister of Law by order published in the gazette.

If there is an extension of the COVID-19 Act, then the effective period of the COVID-19 Act will be extended and the measures relief will automatically be extended. If there is no extension, hence from 1.1.2021, the non-defaulting party will have the rights to exercise its contractual rights under the contracts as usual.

Q17. Until when COVID-19 Act will be enforced?

A: The COVID-19 Act deemed to have come into operation on 18.3.2020 until 31.12.2020. However, the COVID-19 Act provides for specific periods of operation for the relevant Parts and the Minister has the power to extend the operation of the COVID-19 Act.

Keywords: Retail Commercial Tenancy issues, Tenancy problems, Landlords and Tenants, Shopping complex retail tenancy, Recovery of rental, Retail property, COVID-19 Act Malaysia

THIS FAQS ARE PREPARED AND PUBLISHED BY MESSRS GAN & ZUL, ADVOCATES & SOLICITORS, KUALA LUMPUR.
-GENERAL DISPUTE RESOLUTION AND APPELLATE DIVISION-
Prepared by:
Gan_Zul_Mr_Ben_Lee_Partner

Ben Lee Kam Foo (Partner)
Head of Dispute Resolution
Arbitrator & Adjudicator
Fellow of ADR, AIAC
Cross Border Taxation Planning

Nur Amalin Shahida Sabidi (Associate)
General Dispute Resolution
Commercial Retail Tenancy Disputes
Contractual, Land and Commercial Disputes
Matrimonial Disputes

Nabila Zakariah (Associate)
General Dispute Resolution
Appellate Division
Contractual, Land and Commercial Disputes
Matrimonial Disputes

Gan & Zul is an established legal firm in Malaysia which consists of experienced litigation lawyers. Our firm provides a wide spectrum of legal services covering various aspects of laws includes dispute resolution, debt recovery, land, bankruptcy, insolvency and corporate dispute. We are also a firm construction lawyers based in Kuala Lumpur.
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