May 2020 | By

The potential impact of COVID-19 on leases in The Bahamas

Former United States Supreme Court Justice Thurgood Marshall once said, History teaches that grave threats to liberty often come in times of urgency, when constitutional rights seem too extravagant to endure.”[1]

Recently, the Government of The Bahamas announced an ambitious rental assistance programme to assist tenants who have been economically affected by COVID-19 and are unable to satisfy their contractual obligation to pay rent. According to the Prime Minister of The Bahamas, tenants who qualify for the programme would have the following benefits during the months of April, May and June 2020 [2]:

  • 40% of rental payment postponed
  • tenants would have 12 months to pay back the 40% of postponed rent; and
  • landlords would be barred from evicting tenants or disconnecting electricity or water supplies during such period.

In order to qualify for the programme, tenants must [3]:

  • be a citizen or legal resident of The Bahamas;
  • be renting a residential property and paying a monthly rent of  $2,000.00 or less;
  • provide proof that their employment or income stream has been impacted by the COVID-19 pandemic; and      
  • not have rental arrears prior to April 2020.

It should be noted that such programme has no impact on commercial leases or residential rentals over $2,000.00 per month. Thus, landlords in such circumstances could distrain for rent or proceed to have tenants evicted [4].

EMERGENCY POWERS

As governments around the world grapple with the impact of COVID-19 and its legal implications, some legal pundits have questioned the legality/constitutionality of rental assistance programmes which abrogate contractual rights. The impact of states of emergency on lease agreements is well documented. In the United Kingdom, during World Wars I and II, legislation was enacted which essentially modified obligations arising under lease agreements. In 1916, the (Emergency Powers) (Amendment) Act, 1916 was enacted, which allowed tenants to apply to the court for leave to have their tenancies terminated. The court had an absolute discretion to terminate a lease notwithstanding any provisions within the lease dealing with termination. Further, termination of the lease could take place on such notice or terms that the court deemed fit [5]. See Revill v. Bethel [1918] 1 K.B. 638.

Similarly, according to the Courts (Emergency Powers) Act, 1939, also enacted in The United Kingdom, landlords were barred from taking possession of property or recovering rent during a state of emergency without leave of the court [6]. In the English Court of Appeal decision of Re Affairs of Kirby [1944] K.B. 2139, Scott LJ said the following in interpreting the Act [7]:

“….both legal proceedings and measures of self-help available to landlords for recovery of rent or of possession of land for non-payment of rent are forbidden without leave of the court, and the effect of that Act was to create in the tenant a quasi-right to possession and to immunity from rent or mesne profits which continued so long as the court did not give the landlord leave to proceed by either road – courts or self-help.”

See also the Court of Appeal decision in Humberston Estates Limited v Allen et al [1941] 2 K.B. 317.

In 1941, the United Kingdom enacted the Liabilities (War-Time Adjustment) Act, 1941 which had the effect of suspending the execution of a landlord’s judgment for possession. The purpose of the Act was intended to be a middle course for debtors who were indebted to creditors as a result of World War II, without imposing the harsh stigma of having such persons adjudged bankrupt [8].

In many constitutional democracies, such as The Bahamas, the state has powers to authorise measures which are reasonably justified during the subsistence of a state of emergency [9]. Given the broad scope of Article 29(2) of the Bahamian Constitution, these measures could include the implementation of a rental assistance programme. 

PUBLIC SAFETY AND HEALTH IMPLICATIONS

The rental assistance programme foreshadowed by the Government of The Bahamas is clearly important to the public health and safety of the community and reasonably justified during the COVID-19 pandemic. If landlords can evict tenants with no or limited income, jurisdictions like The Bahamas would likely see a sharp increase in homelessness. As a result, governments would have to open shelters to accommodate such persons, where social distancing would be impractical.

If an outbreak were to occur at a shelter the public health impact could be cataclysmic, leading to a surge in COVID-19 cases and creating broader challenges. In fact, governments like The Bahamas may be forced to take the draconian step of compulsorily acquiring properties to house homeless persons [10].

Notwithstanding the emergency powers available to states, jurisdictions like The Bahamas must ensure that they do not act capriciously. It is incumbent on The Bahamas and other jurisdictions to enact legislation giving effect to rental assistance. Any abrogation of rights under a lease should be done through the enactment of robust legislation and not a policy.

In the absence of legislation, any attempt by the Government to implement and enforce such programme would be illegal. Presently, no legislation has been enacted in The Bahamas giving effect to the rental assistance programme.

FUTURE CONSIDERATIONS

In the wake of COVID-19, jurisdictions globally will have to re-evaluate laws relating to landlords and tenants. Nations should consider enacting legislation similar to those previously mentioned in this article in order to protect the interests of both landlords and tenants. Lastly, landlords should consider including terms within lease agreements specifically relating to states of emergency.

CONCLUSION

During a state of emergency, governments can implement rental assistance measures which allows for statutory modification of rights under a lease. However, such actions must not be undertaken in a cavalier manner and well considered legislation ought to be enacted in support of the same.

Download our Newsletter here: COVID-19: LXP INSIGHTS 

PDF version (ILO): What impact could COVID-19 have on leases? 

 

For further information on this topic please contact Ramonne Gardiner.

 

References

[1] Skinner v. Ry. Labor Executives Ass’n, 489 U.S. 602, 635 (1989) (Marshall, J., dissenting); [2] House of Assembly Communication: COVID-19 Response by The Most Hon. Dr. Hubert Minnis dated 27th April 2020 (p37-44); [3] ibid[4] Pursuant to paragraph 24 of Notice 4 Re Extension of the Emergency Powers (COVID-19) (No.2) Order dated 31st March 2020, all civil trials in the Magistrate Court are suspended until 2 working dates after the state of emergency is lifted; [5]  s.2; [6] S.1(2); [7] Page 217; [8] ibid[9] Article 29(2) of The Bahamian Constitution; [10] Article 27(1a) of The Bahamian Constitution.

 


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