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Hotel challenging eviction due to Covid-19 in Constitutional Court

The Constitutional Court is currently challenging the eviction of a hotel. It claims that Ma-Afrika Hotels was unable to pay rent because it could not operate during strict lockdowns.

Ma-Afrika Hotels was one of many South African hospitality groups severely affected by the pandemic and government’s lockdown restrictions, and has launched an application for leave to appeal to the Constitutional Court against an eviction order brought by its landlord.

In the meantime, the application for leave of appeal has been granted to suspend the eviction order.

Venezia Trust was the landlord and took Ma-Afrika Hotels in court on February 2021 to get an eviction notice because Ma-Afrika had difficulty paying rent during the pandemic. 

A spokesperson for Ma-Afrika stated that the company had a 10-year lease agreement for the guesthouse with Venezia Trust and paid meticulous rent from April 2019, when it opened, until lockdown began in March 2020.

The Supreme Court of Appeal rendered its judgment on 4/11/2022. It referred the claim for arrears rent back to Western Cape High Court for resolution.

READ ALSO: Santam ordered by the SCA to pay for all business interruption claims

No one imagined disaster when they signed the lease

Ma-Afrika claims that the parties didn’t foresee a catastrophic event in the form a pandemic and that enforcement of the lease was against public policy.

The lockdown and pandemic caused the non-existence of occupancy at the guesthouse between April 2020 and August 2020. The guest house could not accommodate guests after the national disaster alert levels were raised. 

“The pandemic, government restrictions regarding travel and the negligible income it received from September to December 2020, made it objectively impossible for Ma-Afrika to meet the full cost of rental during this time,” the spokesperson says.

“Ma-Afrika is placing a novel legal question before the Constitutional Court: to allow a tenant to raise partial remission of rent as a defence in the interest of justice at the time when a landlord seeks to evict him for non-payment of full rent, as the common law currently does not allow this defence.”

ALSO READ IT: Santam Insurance Company ordered by the Court to pay business claims

Ma-Afrika’s battle with Santam

Ma-Afrika had to fight two-years against Santam, an insurer, in order to honor its Covid-19 business interruption insurance claims. Santam paid the claims in February 2022 but Venezia Trust had already terminated the lease.

The Eastern Cape High Court found in a precedent-setting judgment in October 2020 that Santam was liable to honour Ma-Afrika’s full 18-month business interruption insurance. In October 2021, the Supreme Court of Appeal confirmed this decision.

This was a critical decision for thousands of hospitality and tourism businesses that had lost their Covid-19 business interruption insurance claims to Santam and other insurers.

The pandemic and government’s response had a devastating impact on the tourism and hospitality industry, with the average occupancy rate for the industry at only 13.08% from June to December 2020.

The sector, which employs 1.5 million people and contributes 8.6% to South Africa’s economy, almost collapsed as the country buckled under the strain of the pandemic.

ALSO READ : Tourism statistics: Bad news but good news

The hospitality industry has had a profound impact

The spokesperson for Ma-Afrika said that it was hit hard by the pandemic, unprecedented lockdown restrictions and closed its doors for several months. It was closed for months before it was allowed to reopen. This had a devastating impact on the business.

After many hospitality businesses were forced to close, the State of Disaster and any related restrictions were lifted in June. Many employees had to be retrenched.

“Ma-Afrika was determined to save jobs and deployed all available resources to ensure that its employees could survive the pandemic.”

The spokesperson says Ma-Afrika’s current appeal to the Constitutional Court is part of this effort to avoid staff retrenchments, which may well have an industry-wide effect, similar to the precedent-setting judgment against Santam.

Ma-Afrika instructed Adv Jeremy Gauntlett KC SC to be its leading silk, along with Adv G. Elliott SC, and Adv G. Samkange (instructed by Thomson Wilks Attorneys), to represent it in this matter.

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Jacky

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