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 lessees 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)
• gt 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
• gt Lessor must not interfere or allow any
  interference with the lessees 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 lessors 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 gt 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 lessors 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 lessors 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 gt 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 lessees negligence
• NB see serious breach of this duty in The
  Treasure Chest v Tambuti Enterprises p 176-177

17
Lease

• Remedies for breach of lessors 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 gt 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 gt 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
• gt 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
  tenants 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 lessors 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 lessees
  power to sub-let or clause stating that lessors
  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