Contract of Lease

1. Contract of Lease Definition: • A contract where one party (lessor) grants to another party (lessee) the temporary use and enjoyment of a thing in exchange for payment (rent) Elements (essential requirements): • Temporary use and enjoyment of the property leased & duration of the lease • The thing or property let • The rent payable

2. Lease Elements • Rent • Agreement to provide for payment of rent • must consist of a sum of money and be fixed (or incorporate a standard by which it can ascertained) • exception: rent may be in a form of produce from the property in agricultural leases

3. Lease (b) Temporary use & enjoyment • Lessee temporarily acquires right to use & enjoy fruits of the property • Does not include lessee’s taking away substance of the property (alienating) See Bozzone case p 170

4. Lease (c) Duration of the lease • Time period has to be agreed upon bcs the use & enjoyment is temporary • It will last for the duration agreed by the parties or can be terminated by notice if so agreed • Failure to agree on duration: periodic lease – weekly, daily, monthly etc – can be terminated by a reasonable notice e.g monthly lease requires a month notice

5. Lease (c) The property let • Can be movable or immovable • Must be identified or identifiable Formalities • Generally no need for formalities except e.g: • Long lease (10 years or more) • Upon request by tenant

6. Lease Statutory regulation of leases of dwellings (p 172-173) Rental Housing Act - Regulates the relationship between the lessors & lessees where the leased property is to be used as a dwelling - also defines responsibility of government in the rental housing market - Act also provides for the establishment of Rental Housing Tribunals

7. Lease Duties of the parties to the lease agreement (initially, during the subsistence of the lease & termination) • Both parties incur duties upon conclusion of valid lease: • Commencement • Subsistence • Termination

8. Lease Duties of the lessor • Delivery of occupation • Lessor must deliver the property including everything necessary for the due and proper enjoyment of the lessee at the agreed time & place • Absence of express agreement: within reasonable time • Long lease – delivery includes co-operation of the lessor in its registration • Breach of the duty entitles the lessee to remedies for breach of contract • May include claim for damages over & above other remedy

9. Lease • Delivery of occupation (CNTND) • The thing let must be delivered in a proper condition • Agreement silent on condition of the thing upon delivery: • Property to be delivered in the condition that it was at the time of agreement Hunter v Cumnor Investments (p 176): > Lessor obliged to handover leased property in a condition reasonably fit for the purpose which it is let & lessor remains liable throughout the term of the lease to maintain the premises in that condition • Failure: breach of contract

10. Lease (b) The duty to afford beneficial use and enjoyment • The lessor has the duty to give the lessee the beneficial use and enjoyment of the property for the purpose for which it was let > Lessor must not interfere or allow any interference with the lessee’s use of the property NB Fourie v Potgietersrusse Stadstraad p 178 (grazing) See NB other cases p 178 - 179

11. Lease (b) The duty to afford beneficial use and enjoyment (CNTND) • The lessee will be entitled to a remission in rental if the use & enjoyment of the property is limited (Ntshiqa case p 179) • Note also s 4 of Rental Housing Act (privacy rights of the lessee: lease of dwellings) • No liability for the interference with use and enjoyment not attributable to lessor’s conduct • Lessor must ensure that the lessee is not evicted by someone with a superior title

12. Lease Right of inspection & to attend to repairs • The lessor has a right to enter & inspect the leased property & to enter & do the necessary repairs to the property • The right of inspection must be exercised in a reasonable manner after reasonable notice (Rental Housing Act) • Necessary repairs which cannot be done while the lessee is in occupation > the lessee is required to leave the property for repairs to be done • Refusal by the lessee to vacate property (necessary repairs): Lessee will be in breach & lessor may cancel the lease

13. Lease Eviction by the owner • Where lessor is not the owner: Threat of eviction to the lessee by the owner of the property amounts to breach of lessor’s duty to afford undisturbed use & enjoyment of the property let • The lessee must inform the lessor of the threatened eviction • Why? For lessor to assist lessee in defending the eviction or for lessor to defend the eviction himself • Failure to assist by the lessor: lessee must defend eviction to the best of his ability

14. Lease Eviction by the owner (CNTND) • Failure to inform the lessor or to defend threat of eviction by the lessee where it can be shown that he would not have been able to successfully defend the eviction because of lessor’s defective title: lessor will be in breach Remedies for breach of duty to afford undisturbed use & enjoyment of property • Lessee may claim specific performance in the form of an interdict restraining lessor from disturbing lessee & or claim damages • Serious breach of a duty: lessee entitled to cancel & may claim damages

15. Lease Remedies for breach of duty to afford undisturbed use & enjoyment of property (CNTND) • Breach not so serious or lessee elects not to cancel the lease > lessee would be entitled to a pro rata remission of rent proportionate to the diminished use & enjoyment of the property & may also claim for damages

16. Lease (c) The duty keep the property in a condition reasonably fit for the purpose of the lease (property maintenance) • The lessor has the duty to: • to keep the property in a condition reasonably fit for the purpose for which it is let • may include attendance to structural flaws, dilapidations, etc. which prevent enjoyment • The lessor is not liable for damage to the property caused by the lessee’s negligence NB see serious breach of this duty in The Treasure Chest v Tambuti Enterprises p 176-177

17. Lease Remedies for breach of lessor’s duty to maintain property let • Lessee may cancel the lease if breach of duty is so serious that the lessee cannot be expected to continue with the lease (notification of state of disrepair important) • Breach not so serious or lessee elects not to cancel: – lessee may claim reduction in rental proportionate to the reduced use & enjoyment caused by state of disrepair

18. Lease • Breach not so serious or lessee elects not to cancel: (CNTND) – Lessee may repair & claim the cost of the repairs from the lessor or deduct the costs from rental due to the lessor NB Harlin Properties v Los Angeles Hotel p 177 • May claim damages for any consequential loss (foreseeable) • Duty to maintain property let usually modified or excluded by agreement between the parties

19. Lease • The duty to pay taxes • Unless provided otherwise in the agreement, the lessor is liable for all taxes and charges imposed by public bodies in respect of the property • Parties may agree as to who will pay taxes and other charges but this will not affect statutory liability • Lessee is liable for all consumption charges such as electricity and water

20. Lease Duties of the Lessee (a) The duty to pay rent • The lessee has the primary duty to pay rent in arrears unless agreed otherwise • Rent must be paid at the agreed time & place • Lack of agreed place: payment to be made where the lessor is located • Parties may also agree on the method of payment • Lessee may be in breach if fails to pay in accordance with the agreement

21. Lease (a) The duty to pay rent (CNTND) • failure to pay rent or to pay in a correct manner may entitle lessor to: • Claim specific performance (rent) and any consequential damages • cancellation of the lease (non-payment) • Lessee must be given sufficient notice to remedy the breach • Cancellation: lessor to also apply for ejectment of the lessee • Lessee is entitled to refuse to pay rent if he is prevented from using the property by an exceptional, unforeseen and uncontrollable event e.g riot, flood,etc.

22. Lease The landlord tacit hypothec • Lease of immovable property > lessor also has a tacit hypothec over the movable property of the lessee, sub-lesees & third parties on the leased property as security for payment of outstanding rent • Remedy automatically arises as soon as tenant is in arrears • Also terminates automatically as soon as rental is paid • Items covered by the hypothec include: see p 182 • Perfecting the hypothec > landlord must attach the property by obtaining a court order which prevents the lessee from removing the property from the leased premises

23. Lease The landlord tacit hypothec (cntnd) • Prevention by the lessor amounts to taking the law into one's hands NB Frank v Van Zyl 183

24. Lease (b) Duty of care & use the property for the purpose for which it was let • Lessee must exercise proper care which a reasonable person would in using his own property • Lessee must also use the property only for the purpose for which it is let > Purpose not agreed: will be that which the property has been used for in the past or that which is clear from the property itself • Lessee must not cause a nuisance on the property Burns v D and G (Pty) Ltd p 276 (Sharrock) • However, living an immoral life in private does not per se constitute misuse of the premises Lomax v Killarney of Durban (Pty) Ltd p 276 (Sharrock)

25. Lease (b) Duty of care & use the property for the purpose for which it was let (Cntnd) • Breach of duty including where lessor abandons the property let: • Lessee may be interdicted • Lease may be cancelled • Lessor may sue for damages (NB mitigation of losses in case of abandonment) • s 4 of the Rental Housing Act: makes provision for lessor to claim compensation for damage to the property caused by a tenant, member of tenant’s household or visitor

26. Lease (c) The duty to restore the property to the lessor on termination of the lease • The lessee must, upon termination of the lease, return the property in the same condition as he received it • However, unless agreed otherwise, the lessee is not liable for: • reasonable wear and tear • damage to the property not caused through the fault of the lessee or members of his household or agents

27. Lease (c)The duty to restore the property to the lessor on termination of the lease (Cntnd) • Failure to return the property on expiry of the lease or failure to return it in the same condition, lessor may claim: • an order of ejectment of the lessee and – Damages or loss caused by the holding over (usually amount of rent) or specific performance with respect to repair of the property

28. Lease (c)The duty to restore the property to the lessor on termination of the lease (Cntnd) • Prevention of Illegal Eviction and Unlawful Occupation of Land Act 19 of 1998 • No one may be evicted from their home without an order of court made after considering all relevant circumstances • Ndlovu v Ngcobo (2002): Act also applies to lessees of residential property in arrears, holding over and in unlawful occupation

29. Lease Renewal • A lease agreement is renewed if on termination of existing lease parties agree that it will continue • Renewal is not the continuation of old lease • Terms, duration and rental amount might be different • Parties may expressly renegotiate new terms or impliedly agree that the lease with continue on same terms

30. Lease Effect of the lessor selling the leased property • In the event that the lessor: sells or donates the property or dies and ownership of the property changes during the subsistence of the lease: • The ‘huur gaat voor koop’ applies (hire goes before purchase) – The successor steps into the shoes of the lessor – The lessor’s rights and duties accrue to the successor – The lessee remains bound by the lease despite the change of lessors • No new contract comes into existence (only substitution of the lessor)

31. Lease Effect of the lessor selling the leased property (Cntnd) Exceptions to the application of the rule: • This rule is not applicable to a lease of movable property and an expropriation of property by the state • Only applies to leases of land and buildings Applies differently to short and long leases • Short lease, new owner will be bound by the lease if: • The new owner knew about the lease or • The lessee is in control of leased property (being in occupation himself or through an agent or sub-lessee) or • New owner is a gratuitous successor eg. property left to the new owner through a will

32. Lease Effect of the lessor selling the leased property • Long lease, new owner will be bound if: • If new owner knew about lease being in place or • Lease has been registered or • New owner is a gratuitous successor eg property left to the new owner through a will • But new owner will be bound for the first ten years of the lease if lease has not been registered and the lessee is in control of the leased property

33. Lease Sub-letting • A sub lease is a contract whereby the lessee lets the property to a third party (sub-tenant or sub-lessee) • It does not create a contract between the lessor and the third party • It is subject to the main lease – if the former is defective, the latter will also be affected (sub-lease) • Determining whether the lessee is able to enter into a sub-lease (factors to consider) • type and character of property being let • whether the lease agreement requires consent of the lessor

34. Lease Sub-letting • Usual practice: include clause limiting lessee’s power to sub-let or clause stating that lessor’s consent to sub-letting will not be unreasonably withheld • However allowing another person to occupy premises gratuitously is allowed • The lessee and sublessee incur same rights and obligations as lessor and lessee respectively • No relationship between original lessor and sublessee • Exception to the above: tacit hypothec

35. Lease Improvements made by the lessee on the property let (movable property) • The lessee may remove useful and luxurious improvements made to the property provided it can be done without damaging the leased property • If improvements cannot be removed without damaging the property or lessee has not removed useful improvements at the end of the lease or improvements are necessary improvements: • Lessee may claim compensation from the lessor

36. Lease Improvements made by the lessee on the property let (movable property) Cntnd • The amount claimable would be the increase in the value of the property or actual cost of improvement (whichever is the lesser) • Lessee has the right to retain possession of property until compensated • No compensation for luxurious improvements • Necessary improvement: one which is made to protect and preserve the leased property (may not be removed)

37. Lease Improvements made by the lessee on the property let (movable property) Cntnd • Useful improvement: one which improves the property and increases the value but not needed for the protection and preservation of leased property • Luxurious improvement: one which is not necessary or useful but add to the value of leased property

38. Lease Improvements made to immovable property • The lessee is entitled to compensation for improvements done with the permission of the owner (express or implied) • Lessee will get nothing if cannot remove improvements done without permission or cannot remove improvements without damage to property or chooses not to remove improvements • No right to retain property as security while waiting for payment of compensation • Confusion whether same principles apply to urban leases Termination of lease agreement: see p 191