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Covid-19 relief for retail landlords and tenants as competition laws eased

30 Mar 2020

South African businesses across all sectors are finding themselves between a rock and Covid-19 lockdown right not. 

SEE: Navigating an economy hit by downgrades and a deadly virus - what the experts have to say

Measures to stem the impact has seen government create the Covid-19 Temporary Relief Benefit, which allows certain businesses to apply for assistance for up to three months including having a portion of salaries paid to workers. Business owners will however have to prove the impact of the lockdown to their businesses (To apply for the Covid-19 TERS Benefit from the UIF by sending an email to covid19ters@labour.gov.za where you will be prompted with further instructions).  

'Competition rules for retail sector relaxed' 

The Minister of Trade, Industry and Competition Ebrahim Patel has also issued various regulations, seeking to address the difficulties facing businesses during this time. These regulations govern various parts of the South African economy, with only essential services, related to healthcare, consumer goods and banking for example, being allowed. 

The Covid-19 block exemption for the retail property sector has since been issued by the minister opening up a "safe harbour" for firms in the sector to co-ordinate particular activities to ensure the survival of tenants of retail properties during the Covid-19 national disaster, says Webber Wentzel legal experts.

Cara du Plessis, Senior Associate for Webber Wentzel explains the exemption saying, “Certain retail tenants and retail property landlords are free to reach agreements between and among one another in relation to payment holidays and/or rental discounts for tenants”

However, as the block exemption includes a number of carve-outs and specific requirements, businesses in the retail property sector need to be extremely careful that their activities do not fall foul of the Competition Act.

“For example, the agreements and practices may only be implemented for the sole purpose of responding to the Covid-19 national disaster. Furthermore, the exemption does not apply to any communication or agreements relating to pricing (unless specifically authorised by the Department),” says Tenisha Burslem-Rotheroe, Webber Wentzel Candidate Attorney.

'Addresses limitations on evictions' 

The exemption also addresses limitations on the eviction of tenants and the suspension of or adjustment to lease agreement clauses that restrict the designated retail tenants from undertaking reasonable measures required to protect their viability during the national disaster.

“These agreements, provided they meet certain conditions, will be exempt from the provisions of sections 4 and 5 of the Competition Act which prohibit anti-competitive agreements between competitors (section 4) and anti-competitive agreements between suppliers and customers (section 5),” says Burslem-Rotheroe.

The exemption only applies to retailers involved in clothing, footwear and home textiles, personal care services, and restaurants. Any businesses seeking to apply the exemption may only do so at the request of and in co-ordination with the Department.

“It is unclear why the Department has limited the exemption to such a narrow category of businesses when a plethora of other retail businesses who rent property from landlords will undoubtedly also be affected, not only by the national disaster, but in particular by the 21-day lock-down,” says Du Plessis.

“The department should not be surprised if it receives a tidal wave of concerns, not only from the designated retailers, but also other retailers who have not been identified.”

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