27th March 2020

Paying rent, and on time, has become a serious concern for a number of tenants, commercial or otherwise in the midst of the global pandemic engulfing us all.  This has led many to dust off their lease agreements in order to determine whether there is anything that would allow them some respite from the payment of rent in these times.

At the outset one cannot but emphasise enough that there is no hard and fast rule on the matter and every case must be looked at individually.

The most pertinent clauses in the Maltese Civil Code state as follows, the debtor of the obligation in this case being the tenant that owes the payment of lease:

1132.  (1) Saving any other provision of this Code relating to deposits, the degree of diligence to be exercised in the performance of an obligation, whether the object thereof is the benefit of only one of the parties, or of both, is, in all cases, that of a bonus paterfamilias as provided in article 1032.

 (2) This  rule,  however,  is  applied  with  a  lesser  or  a  higher degree of strictness in certain cases specified in this Code 

  1. The debtor, even though there has been no bad faith on his part, shall be liable for damages, where competent, both for the non-performance of the obligation as well as for the delay in the performance thereof, unless he proves that the non-performance or delay was due to an extraneous cause not imputable to him. 
  1. The  debtor  shall  not  be  liable  for  damages  if  he  was prevented from giving or doing the thing he undertook to give or to do, or if he did the thing he was forbidden to do, in consequence of an irresistible force or a fortuitous event. 
  1. Subject to the exceptions and modifications hereinafter specified, the damages due to the creditor are, generally, in respect of the loss which he has sustained, and the profit of which he has been deprived.

The concept of force majeure or fortuitous event is not expressly defined in the Civil Code. In case-law decided by the Maltese Courts on the matter it has been held that in the case of contractual default, in order for the debtor of the obligation to exempt himself from any liability he has to prove that his default was due to an obstacle that derives from an external cause, that was not attributable to him, either or indirectly, that it was insurmountable and unpredictable when using ordinary diligence.

Thus in order for a tenant to successfully argue that there has been an event of force majeure that exempt him from his obligations, the following conditions have to exist simultaneously:

  1. The event has to be irresistible in the sense that it puts the debtor in an impossibility to carry out the obligation.  If the event merely renders it more onerous or more expensive, the obligation still remains due.
  2. The event has to be unpredictable.
  3. The event has to be external
  4. The tenant should not have any responsibility in what is happening. The event has to be unavoidable and absolutely out of his control.

It has been further held that with regards to force majeure this has to be absolute and objective and therefore the difficulty in paying rent does not have to merely be gravely difficult or onerous.   In fact the courts have interpreted this to mean that for the debtor of an obligation to be able to exempt himself from his obligations, those obligations would have to have become such that if he had to enter into those obligations then he would be driving himself into financial ruin.

The fact that an obligation could have become excessively expensive is not an impediment to the carrying out the obligation and does not extinguish the obligation, but if proven it could grant to the tenant the remedy of the resolution of the contract.

The Maltese Courts have further taken on decisions of the French Cour de Cassation that reiterate the proposition that force majeure refers to events which make performance impossible, not to those which make it more onerous.  No doctrine of change of circumstances or economic impossibility or disappearance of the foundation of the contract or frustration of the adventure has been admitted by the civil courts, even in the aftermath of two catastrophic wars.  The impossibility to pay rent must be absolute.

It would be up to the tenant to prove that there was force majeure or a fortuitous event which exempts him from responsibility.

In this regard it is pertinent to point out that the First Hall of the Civil Court, in the case in the names Emanuel Ellul vs Victor Custo noe et, decided on the 3rd October 2002 has held that an agreement made between two parties remains subject not only to public order but also to the law itself.  An intervention by the legislator can always neutralise the agreements reached between the parties, subject to the adherence to fundamental human rights.   For this reason, an act of government, such as through the issue of a Legal Notice, could be deemed to be a fortuitous event that exempts someone from liability from defaulting on his contractual obligations.

Nevertheless, force majeure cannot be relied upon for the purpose of suspending one’s obligations, but rather, as a defence to a failure to carry out the same.

Thus, a global pandemic, the great economic downturn and Legal Notices ordering the closure of a number of businesses are not, on their own, sufficient to raise a defence of force majeure for the failure to pay rent.  The fact that the payment of rent has become more onerous does not exempt the tenant from the payment of rent.   The tenant would have to prove that paying rent has become impossible and would drive him to financial ruin, in which case, the tenant can opt to terminate the lease without being liable for damages to the lessor due to force majeure.

In short, therefore, if the tenant wishes to continue in the lease, then the payment of rent remains due.

How can we help?

We are monitoring developments in this regard and will provide updates as more information becomes available.

Should you require any further information or assistance on the matter, please do not hesitate to reach out to us on carl.grech@fenlex.com

© Fenech & Fenech Advocates 2020

Disclaimer │ The information provided on this Update does not, and is not intended to, constitute legal advice. All information, content, and materials available are for general informational purposes only.  This Update may not constitute the most up-to-date legal or other information and you are advised to seek updated advice.