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Businesses leave premises over rent burdens

Tom Starkey and Srey Lux Sok / Khmer Times Share:
Sound club is one of the businesses who have decided to move out of their premises. KT

As Cambodian businesses suffer amid the pandemic, many are facing tough choices to either ask for reduced rent or are having to up sticks, in some cases losing large deposits amid existing financial turmoil.

Large clubs, international schools and even supermarkets have fallen victims to lowered income and had to face moves to downsize, or end business completely.

In a series of prevention measures implemented by the government during the initial outbreak of COVID-19 in the Kingdom, clubs, casinos, bars and schools were closed down.

Meanwhile, many residents returned to their provinces due to a lack of work in the cities, resulting in a dramatic drop in footfall for businesses that were able to continue operations. This, on top of the fact that the tourism sector has severely decreased, has had an impact across a variety of sectors.

Sound club owner Duong Chay is one such business which has decided to leave its rented premises.

During a live broadcast on his official Facebook account, he said: “I have decided to discontinue my club-related business.

“I own land and during the pandemic, I decreased what I was charging by 30 to 50 percent to help the people I am renting to during this time,” he said.

However, he was not given the same consideration.

“The landlord did not reduce the rent for the club, it is disappointing.

“Therefore, I will discontinue the business because I do not want to reopen it amid the pandemic in order to adhere to government guidelines, but also because I was given no reduction in rent. That’s what made my decision,” said Mr Chay.

The situation has also been mirrored elsewhere, with Kid Castle International School recently ending operations after citing difficulties over rent, according to recent local media reports.

In March, Prime Minister Hun Sen called for landlords to show some leniency with rent, by either reducing or delaying payments for rent to help support businesses. However, some landlords have still insisted on full-rent payments.

Tennants, whether commercial or private, currently have limited legal options regarding their ability to ask for reduced rent.

One option for businesses however, is in Article 606 of the Civil Code, known as “force majeure”.

The code reads: “If a lessee who has leased land with a view to profit receives less profit than the amount of the rental by reason of force majeure, he or she may demand that the rental be reduced to the amount of such profit.”

Force majeure is defined as an event which occurs not from the will of any party and is insuperable and unpredictable.

Two cumulative conditions must be fulfilled in order to validly claim rent reductions. The tenant must have either leased land (this may exclude scenarios where the tenant only rents the premises or building) and must have received less profit than the rent amount due to a force majeure event.

However, attempting to force such a legal position would be difficult, therefore common understanding between landlords and tenants to reach a mutual agreement on renting discounts or delays would be much preferred. As the pandemic’s financial implications continue to impact in the Kingdom, such common understanding is needed to help Cambodia back on to its feet.

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