Since the outbreak of COVID-19, the implementation of epidemic prevention and control measures in each region has affected the normal use of houses and apartments by their tenants to some extent. The house we are referring to here, include commercial office buildings, shop houses, and residential houses restricted to be entered by non-local personnel.
So, the question arises, are the tenants of above mentioned houses entitled to terminate the lease or a reduction in rent?
First of all, the outbreak and the corresponding prevention and control measures can be identified as a “force majeure” event, which we discussed in our previous post: Force Majeure? – To be, or not to be, that is the question! Generally speaking, there supposed to be a clause about the definition of a “force majeure” event and agreement about how to deal with it in the event of an occurrence of force majeure based on the principle of freedom of contract such an agreement will be applied preferentially. So, in this blog post we are going to focus on the application of the law in the absence of a specific agreement between the two parties.
1. Can the lease contract be terminated earlier?
Although the outbreak of COVID-19 does have an impact on the tenant’s normal use of the house, however, this event is usually a short-term event during the term of the lease and does not reach a level that makes the purpose of the lease contract completely impossible to achieve, and therefore, this event does not constitute a reason for one party to terminate the contract in general. Of course, if the tenant originally rented the house only for a short period of time, which coincides with the outbreak of COVID-19, the tenant should be entitled to terminate the contract in that case.
2. Rent relief?
However, the tenant is entitled to request rent relief under the “principle of fairness” or the doctrine “change of circumstances”. As a matter of fact, the “principle of fairness” is one of the basic principles of civil law in China.
At the same time, Article 26 of the <Judicial Interpretation II of Contract Law of PRC> explains the “change of circumstances” as follows: Where any significant change in the objective environment has taken place after the formation of a contract which could not have been foreseen by the relevant parties at the time of entering into the contract, and does not belong to any commercial risk occasioned by any force majeure cause, rendering the continual performance of the contract manifestly unfair to the relevant party or rendering it impossible to realise the goal of the contract, the People’s Court shall confirm whether the contract shall be varied or dissolved in accordance with the principle of justice taking into account the actual circumstance, where a relevant party petitions a People’s Court to vary or dissolve the contract.
However, the tenant is entitled to request rent relief under the “principle of fairness” or the doctrine “change of circumstances”. As a matter of fact, the “principle of fairness” is one of the basic principles of civil law in China.
In relation to the lease contract which is affected by the epidemic prevention and control measures resulting in the fact that the tenant can’t use the house normally, it would be unfair for tenants to require them to perform the contract in accordance with the original rent standards. According to judicial interpretation issued by the Supreme People’s Court and the corresponding cases during the outbreak of “SARS” in 2003（readers may refer to another article of ours for more information: Can I Terminate My Contract due to the NCP outbreak?), the tenant shall have the right to request a reasonable change of the contract and rent reduction accordingly.
Useful link:
The Supreme People’s Court of The People’s Republic of China
