Coronavirus and Reduction of Your Rent in China

Coronavirus and Reduction of Your Rent in China
Coronavirus and Reduction of Your Rent in China

In what situation can I ask for reduction of my rent? 

Does the outbreak of the epidemic constitute the force majeure?

Can I terminate my lease with the cause of force majeure?

The sudden outbreak of novel coronavirus affects our physical and mental health, but also brings great impact to business.

Many shops were forced to suspend business and no source of income. Many people working in top tier cities have to stay in their hometown, but still had to take the rent in another city. We all hope to mitigate our loss.

Here the two cases may answer your above question.

Case One:

Mr. Wang works as a head waiter in a restaurant in Beijing. In November 2018, Mr. Wang rent an apartment located in Xicheng District of Beijing and signed a five-year lease with a monthly rent of 5000 yuan.

On November 24, 2019, he paid the rent for the following quarter on schedule. On January 20, 2020, Wang went back to his hometown in Henan for the Chinese New Year.

On March 1, 2020, Wang was informed by the boss that the company was temporarily closed and employees may seek another job.Wang decided not to return to Beijing for the time being, so he asked the landlord to terminate the contract on the ground of force majeure.

王某在北京一餐饮企业担任领班,2018年11月,孙某将其位于北京西城区的公寓租赁给被告王某居住,租期五年,押一付三,每月租金五千元。2019年11月24日,被告按期支付了3个月的房租。2020年1月20日,王某回河南家乡过年。2020年3月1日,王某得到公司通知,公司暂时歇业,员工可以另谋职业。王某决定暂时不回北京,于是以不可抗力为由要求与房东解除合同。

Lawyer’s Opinion:

This apartment is used for housing, not for business. In this case, the tenant cannot return to the apartment caused by the epidemic (lockout, traffic control, etc.) and , but the apartment is still in the possession of the tenant.

The outbreak will not affect the performance of this lease. It is impossible for the landlord to differentiate the tenant when the lease was signed. Therefore, it is not legal obligation for the landlord to reduce the rent.

Generally speaking, the novel coronavirus pneumonia cannot constitute legal grounds for the rent reduction for residential housing, nor does it form the right to terminate the lease.

律师观点:

房屋性质民用类型。因该类房屋主要目的是居住,承租人并不能因使用租赁物业而直接产生收入。在这种情况下,承租人受疫情影响(被隔离、交通管制等)无法回到承租房屋的,尽管承租人无法实际居住,但该房屋仍在承租人的占有下,疫情并不会对租赁合同的履行产生影响。此时,减免租金并不是出租人的法定义务,承租人很难向出租人主张减免租金。

一般来说,“新冠肺炎疫情”对居住型的房屋,不成立减免租金法律上的理由,也不存在合同解除权。

Case Two:

Mr Li rented a store front house with 400 square meters for his preschool center in Shenyang. Now, because of the epidemic, the government issued an order that he could not open his school. Li asked the landlord to exempt the rent during the period when he could not open the business.

李某在沈阳一临界公建租赁400平米商铺,开办学前班,现在因为疫情受到影响,政府下发通知不能开业,李某要求房东免除不能营业期间的租金。

Lawyer’s Opinion:

In this case, the tenant has the right to propose to reduce the rent with the cause of force majeure. Because the rent of this kind of house comes from operating income to a large extent, and the tenant usually decorates or renovates the house.

The business is shut down due to the requirements of “postponement of school” and other administrative measures for prevention and control of epidemic. The tenant is entitled to a reduction or exemption of the rent during the “suspension period”.

Even if the school reopens after the epidemic stops spreading, it will still encounter the problem of a small number of students before the end of the epidemic, and the epidemic will still have subsequent impact on the tenant’s business. 

Therefore, the tenant can claim to reduce the rent appropriately according to the principle of “change of circumstances”.

律师观点:

这种情况下,主张不可抗力提出减免租金是可以的。因该类房屋承租人租金很大程度上来源于经营所得,且承租人通常会对房屋进行装修或改建。对于承租房屋因响应政府部门防治疫情的要求或者因政府要求“延期复工”等行政措施而导致停工停业的,承租人有权以不可抗力为由要求减免“停工期”的租金。

即便承租人在疫情稳定后重新营业,但在疫情结束之前仍会遭遇客流量小的困境,疫情仍会对承租方的经营产生后续影响,因此承租方可根据情势变更原则主张适当减少租金。

Legal principles:

Force majeure: In business circles, “force majeure” describes those uncontrollable events (such as war, labor stoppages, or extreme weather) that are not the fault of any party and that make it difficult or impossible to carry out normal business.

A company may insert a force majeure clause into a contract to absolve itself from liability in the event it cannot fulfill the terms of a contract (or if attempting to do so will result in loss or damage of goods) for reasons beyond its control.

Change of Circumstances: Like the “frustration of purpose” in common law, it designed to dea lwith the unfairness due to abnormal outside risks, balance and coordinate the interest between the two parties, maintaining economic order.

Doctrine of fairness: A general principle of fairness in private law could be seen as aprompt for domestic courts to entertain context-sensitive considerations, insuch a way as to redress, within the boundaries of judicial discretion, the predicaments of situationally disadvantaged parties.

Source of Law:

Contract Law of the P.R.C.

Article 5 The parties shall abide by the principle of fairness in prescribing their respective rights and obligations.

Article 94 The parties may terminate acontract if:

(i) force majeure frustrated the purpose ofthe contract;

Article 117 A party who was unable to perform a contract due to force majeure is exempted from liability in part or in whole in light of the impact of the event of force majeure, except otherwise provided by law.

Where an event of force majeure occurred after the party’s delay in performance, it is not exempted from liability.

For purposes of this Law, force majeure means any objective circumstance which is unforeseeable, unavoidable and insurmountable.

Article 118 If a party is unable to performa contract due to force majeure, it shall timely notify the other party so asto mitigate the loss that may be caused to the other party, and shall provide proof of force majeure within a reasonable time.

Interpretations of the Supreme People’s Court on Certain Issues concerning the Application of Contract Law of the P.R.C.(Part Two)

Article 26 Where material changes which are unforeseeable by the parties at the time of concluding the contract and which are not caused by force majeure and not are not commercial risks happen to objective conditions after the contract has concluded, and specific performance of the contract will be obviously unfair for one party or can not realized the contractual purposes, if the parties claim with the people’s court for alteration of rescission of the contract, the people’s court shall determine whether to alter or rescind the contract or not according to the principle of fairness and in line with the actual conditions of the case.

《中华人民共和国合同法》

第5条:” 当事人应当遵循公平原则确定各方的权利和义务。”

第94条:“有下列情形之一的,当事人可以解除合同:(一)因不可抗力致使不能实现合同目的;”

第117条:“因不可抗力不能履行合同的,根据不可抗力的影响,部分或者全部免除责任,但法律另有规定的除外。当事人迟延履行后发生不可抗力的,不能免除责任。本法所称不可抗力,是指不能预见、不能避免并不能克服的客观情况。”

第118条:“当事人一方因不可抗力不能履行合同的,应当及时通知对方,以减轻可能给对方造成的损失,并应当在合理期限内提供证明。”

《最高人民法院关于适用<中华人民共和国合同法>若干问题的解释(二)》

第26条:“合同成立以后客观情况发生了当事人在订立合同时无法预见的、非不可抗力造成的不属于商业风险的重大变化,继续履行合同对于一方当事人明显不公平或者不能实现合同目的,当事人请求人民法院变更或者解除合同的,人民法院应当根据公平原则,并结合案件的实际情况确定是否变更或者解除。”

If you have more questions about doing business in China, welcome to contact me.