On the 24th of March 2020, the Minister of Trade, Industry and Competitions published Regulations in terms of section 10(10) read together with section 78(1) of the Competition Act, Act No 89 of 1998. These particular Regulations are referred to as the COVID-19 Block Exemptions for the Retail Property Sector, 2020.

The purpose of the notice is to create an exemption which is compliant with sections 4 and 5 of the Competition Act for a limited category of agreements or practices between designated retail tenants and retail property landlords to enable them to continue to operate safely during COVID-19 interruptions. The Regulations are further designed to promote and enable the retail property sector to minimise the negative impact on the ability of designated retail tenants, including small retailers, to manage their finances during the national disaster and be in a position to continue normal operations beyond the natural disaster.

The Regulations exempt the following categories of agreements or practices between retail tenants and retail property landlords from the application under section 4 (agreements between competitors) and section 5 (agreements between suppliers, firms and customers) of the Competition Act for the sole purpose of responding to the COVID-19 pandemic national disaster and which exclude communication and agreements in respect of prices:

  • Payment holidays and/or rental discounts for tenants;
  • Limitations on the eviction of tenants; and
  • The suspension or adjustment of clauses in lease agreements that would restrict the designated retail tenants from undertaking reasonable measures required to protect their viability during this national disaster.

Therefore these Regulations open up the opportunity for landlords to work together between competitors and to enter into discussion with their tenants to ensure the survival of retail tenants during and after this national disaster.

To qualify for the exemption, such agreements must be extended to all such retail tenants in the designated retail lines, including small and independent tenants, if those tenants are South African. The designated retail lines are limited to the following:

  • Clothing, footwear and home textile retailers;
  • Personal care services; and
  • Restaurants.

The regulations merely allow for the discussion to take place and do not impose any obligations on landlords. Therefore tenants are still obliged to continue with their obligations in terms of their lease agreements.

Please note that these Regulations are only applicable while the national disaster subsists and will no longer be applicable once it has ended.

Disclaimer: The material contained in this document is provided for general information purposes only and does not constitute legal or other professional advice. We accept no responsibility for any loss or damage which may arise from reliance on information contained in this article.