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.
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.
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.
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.
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”.
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.
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