MRCA Legal Consultative Dialogue

MRCA Event

MRCA Legal Consultative Dialogue

On 4 June 2021, MRCA conducted a legal consultative dialogue featuring legal experts that included Dato’ Manjit Singh, Managing Partner of Manjit Singh Sachdev, Mohammad Radzi & Partners and Datuk Ringo Low, Managing Partner of Ringo Low & Associates. The session was moderated by Dr Afendi Dahlan, Business and Legal Director of DR Group Holdings Sdn Bhd.

T

he session addressed important topics that are abuzz in the retail industry currently. Concerns from retailers were raised during the session in view of the COVID-19 pandemic that has been affecting the retail industry in many aspects. Both Dato’ Manjit and Datuk Ringo shared their perspectives on the questions posed from the floor.

The session enlightened MRCA participants on the laws and regulations that are in force as well as the extent to which retailers are protected by the COVID-19 Act.

Q1 In view of the COVID-19 Act, what are the chances of the landlord suing the tenant for damages and evicting the tenant? How does the COVID-19 Act affect the parties for termination of tenancy before the due date?

Panelists: The tenancy agreement is binding for both parties. The tenant is protected from being sued if they are within the period of the COVID-19 Act and if the landlord pursues the matter, the tenant can refer the matter to the Minister under this Act. A mediator will be appointed by the Minister in charge of Legal Affairs in the Prime Minister’s Department (the Minister), to arrive at a settlement, which is binding on both parties. The protection that this Act offers is limited to that particular period.

Q2 With sales impacted by the pandemic and tenant unable to pay rental, is the COVID-19 Act applicable to the tenancy agreement between shopping mall and tenant? If yes, what is the impact on the rental payment? Is the landlord eligible to collect the late payment interests? Is there any other means of recovery of the outstanding if they are unable to proceed with the legal procedures under the COVID-19 Act?

Panelists: The main courses a landlord can take include applying for Writ of Distress for rentals owing not exceeding 11 months. This can be obtained within a period of 3 months where the property in the premises will be seized and auctioned to fulfil unpaid rentals. Another course of action is to sue for damages for unpaid rentals which may take between 6 to 12 months. It is not as simple for a tenant to claim that they are unable to pay rental as a result of the government’s MCO measures as the tenancy agreement is not solely resting on the MCO circumstances. At the same time, the tenant has the right to go to the Minister and state the case that the business is unable to operate and be profitable. The Minister will appoint a mediator and come to a settlement or resolution.

Q3Are employers able to claim compensation from the state governments if staff experience serious side effects?

Panelists: The Federal government has announced that they have allocated RM10million for individuals affected by side effects of this vaccination that require lengthy treatment or resulting in death. However, the state governments have not come up with any announcement on any

compensation for side effects of the vaccines. In the case of the Selangor state government stating that vaccines will have to be paid for by employers, there arises a contractual situation. Under these circumstances, employers and employees taking the vaccine have to be careful about what they sign because the Selangor state government would probably include exclusion or limitation of liability clauses. If receiving payment for the vaccines, the Selangor state government has some legal obligations to ensure that these vaccines are safe, and there may be cause of action for side effects subject to limitation of liability.

Q4Under the case of delay in re-delivery of vacant possession of demised premises to mall management due to MCO/ RMCO where the tenant is not allowed to do reinstatement works in that period of time, the mall is charging full rental till successful handover date, despite the delay of vacant possession not caused by the tenant. Can the tenant stand firm not to pay rental for the delay in handover which was not caused by the tenant? How can we renegotiate contracts that were signed prior to the pandemic?

Panelists: In this circumstance, unless there is a force majeure clause in the agreement the tenant is obligated to reinstate the premises to its original form. The tenant should review the agreement on whether there is a force majeure clause. In the event of dispute due to COVID-19 pandemic, the tenant can approach the Minister to mediate this situation. However if taken to Court, the original terms in the agreement will be upheld. Hence the best option is to refer to the Minister. Under the present situation, a wise landlord would be willing to renegotiate and reconsider the rental based on compassion and understanding.

Q5With MCO regulations shortening the hours of business operations, can the landlord still charge the tenant rental for a shorter or nonoperation time like this? Should the rental be prorated? How to determine market rental rates during this time? Is there a need for a termination agreement if either party would like to withdraw from an MOU?

Panelists: Usually there is allowance in the agreement for change of timing in business operations hours. However, under this pandemic situation, there is an arguable case to talk to the landlord that the reduction in utility due to the inability to operate, should flow down to the tenant. This is once again based on negotiation. The tenant can once again ask the Minister to mediate. We are very much dependent on the government’s guidance. However, as business operations is shorter just by a few hours, most landlords may not agree to a reduction in rental. A property valuer is the best option to determine the market rental rate. As for termination agreement, a properly drawn-out agreement in the form of MOU or letter of offer or any contract should rightfully cover situations for termination.

Q6In the case of an outstanding rental of below RM500,000, the landlord has imposed that unless the tenancy is renewed for another 3 years, there will be no rebate. Can the landlord impose such a term, which appears to be duress? Can the landlord reject the force majeure in the tenancy agreement?

Panelists: The landlord can impose any terms to grant the rebate, and as a tenant you can either agree or disagree, hence the tenant cannot claim to be under a situation of duress. Once again, the tenant can seek mediation from the Minister. It is highly unlikely for the landlord to agree to include a force majeure clause halfway through the tenancy agreement. If clauses are not included before the agreement is signed, the tenant will be unable to include the clauses once the agreement has been signed or in force.