The effect of the moratorium on property owners during business rescue

Abstract

A burning issue in South African company law is the encroachment of the business rescue provisions of the new Companies Act 71 of 2008 on the rights of landlords and other property owners. A landlord who has concluded a contract of lease with a company, frequently finds himself in an unenviable position if the company goes into business rescue. The company often remains in occupation of the leased premises during business rescue and, if this is done without the payment of rent, the business rescue endeavour is effectively driven at the landlord’s expense. The focus of this two-part series of articles is on the two chief predicaments facing the property owner who finds its property in the possession of a company under business rescue, namely, the recovery of the property by the property owner; and the ongoing payment of rent and other recurring charges. This article discusses the moratorium in business rescue with a specific focus on its effect on the property owner. A critical analysis of recent judicial decisions on the moratorium is included, together with a discussion of the legal position in comparable foreign jurisdictions. The second article will focus on the safeguards and protective measures for property owners during the business rescue process. It will be published in the following issue of this journal.