TENANT-LANDLORD disputes increased by as much as three-fold for some firms since early April, after the movement-restriction order was imposed because of the Covid-19 outbreak, according to lawyers who spoke with The Malaysian Insight.

Closures of restaurants and small and medium businesses also led to an increase in breach of contract suits, they said. 

Lawyer Marcus Tan said his firm saw a 50% rise in such cases after the MCO was imposed on March 18, mostly from labour and leasing disputes. 

Prior to the MCO, most disputes were over the rent and utility arrears. 

After the coronavirus outbreak, the disputes centred on whether tenants can terminate their contract early to save their businesses.

Many employers also enquired whether they are legally allowed to stop payment of wages or whether they can force employees take unpaid leave.

“Many employers asked whether they can just lay off employees. Employees also consulted on how to take further action to protect their rights,” Tan told The Malaysian Insight.

For lease problems, many small and medium enterprises faced cash-flow problems, he said. Rent accounted for a sizeable chunk of business expenditure, with commercial tenants consulting lawyers on how to terminate their contract.

“They wanted to know the legal consequences of early termination, which was in accordance with the terms of the lease signed.”

Lawyer Ryan Ho said consultation for tenancy issues rose by 200%, as many landlords found that even if a tenant violates a contract, they can’t replace the locks and must obtain a court order to remove a tenant.

“Of course, in order to obtain a court order, the landlord must entrust a lawyer to carry it out. Most disputes of this type are in the commercial sector.”

Ho expects another wave of consultations in October when Bank Negara ends the six-month loan moratorium.

“I expect another wave of legal disputes would be set off,” said Ho.

Eric Choo’s firm saw consultations on tenant disputes increase by 50% during the MCO.

“Fortunately, many homeowners understand the impact of the epidemic on tenants, so they are willing to make concessions,” said Choo.

“Many homeowners are willing to be accommodating because if the tenant cancels the contract during the restricted movement period, it is not easy to find a new tenant. There needs to be a compromise.

“Some homeowners also agreed to let tenants pay rent with their two-month deposit. This is also the first time that the contract has been settled in advance due to the virus pandemic. It is not that tenants who deliberately wants to break their contracts.”

Lawyer Farhan Haziq Mohamed said generally, homeowners are willing to negotiate with the tenant. 

Legal action is the last resort when a tenant breaks the contract and leaves or both parties are unable to reach a consensus.

During the MCO, Farhan’s firm received many tenancy consultations from businesses in the catering industry, fitness centres and retailers.

Tan said the more common commercial consultations were for mall tenants, who wanted rent reduction. 

“Normal leases will not allow or will not contain rent reduction clauses. So, to reduce their rents, they must get the malls to return to the negotiating table. The compromise depends on the negotiation conditions,” said Tan, adding that most tenants are from malls with fewer visitors. 

Tan proposed a “force majeure” law to protect developers from suits for being unable to meet contractual deadlines, as Covid-19 has made it impossible to meet construction targets.

Developers have been pressing Putrajaya for a law to protect them by inserting a force majeure clause under Schedule H or G of the Housing Development (Control and Licensing) Act 1966.

Tenants and landlords have to work the termination clause into the contract to clarify under what circumstances can it be terminated, said Tan.

Putrajaya will only table the Covid-19 Temporary Measures Bill, with force majeure elements, at the July meeting. – June 15, 2020.