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Lease

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					              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
                    Lease
Elements
(a) 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)
Ø exception: rent may be in a form of produce from the
  property in agricultural leases
                         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
                      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
                         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
                         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
                         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
                        Lease
Duties of the lessor

(a) 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
Ø   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
                          Lease
(a) Delivery of occupation (CNTND)
•   The thing let must be delivered in a proper condition
Ø   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
                     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
                      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
                         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
Ø Refusal by the lessee to vacate property (necessary
  repairs):
Lessee will be in breach & lessor may cancel the lease
                          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
Ø Why? For lessor to assist lessee in defending the eviction
  or for lessor to defend the eviction himself
Ø Failure to assist by the lessor: lessee must defend eviction
  to the best of his ability
                          Lease
Eviction by the owner (CNTND)
Ø 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
                         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
                        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
                  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
                  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)
    v Duty to maintain property let usually modified
      or excluded by agreement between the parties
                        Lease
(d) 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
                         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
                        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.
                          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
                       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
                     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
                     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:
Ø Lessee may be interdicted
Ø Lease may be cancelled
Ø Lessor may sue for damages (NB mitigation of losses in
  case of abandonment)
Ø 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
                     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
                      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
                      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
       Ø No one may be evicted from their home without
         an order of court made after considering all
         relevant circumstances
       ØNdlovu v Ngcobo (2002): Act also applies to
         lessees of residential property in arrears, holding
         over and in unlawful occupation
                     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
Ø 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
                          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:
Ø 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
       Ø No new contract comes into existence (only
                         Lease
Effect of the lessor selling the leased property (Cntnd)
Exceptions to the application of the rule:
Ø This rule is not applicable to a lease of movable property
  and an expropriation of property by the state
Ø Only applies to leases of land and buildings
Applies differently to short and long leases
v Short lease, new owner will be bound by the lease if:
Ø The new owner knew about the lease or
Ø The lessee is in control of leased property (being in
  occupation himself or through an agent or sub-lessee) or
Ø New owner is a gratuitous successor eg. property left to the
  new owner through a will
                         Lease
Effect of the lessor selling the leased property
v Long lease, new owner will be bound if:
Ø If new owner knew about lease being in place or
Ø Lease has been registered or
Ø New owner is a gratuitous successor eg property left to the
  new owner through a will
ü 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
                  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)
  Ø type and character of property being let
  Ø whether the lease agreement requires consent of the
    lessor
                      Lease
Sub-letting
   vUsual 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
   Ø Exception to the above: tacit hypothec
                        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:
Ø Lessee may claim compensation from the lessor
                         Lease
Improvements made by the lessee on the property let
  (movable property) Cntnd
Ø 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)
                        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
                      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

				
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