Landlord’s tacit hypothec and recovering rental arrears
Your questions answered about using the tacit hypothec to recover unpaid rent
Rental arrears are every landlord’s nightmare. Unpaid rent is the most common reason for breach of the lease agreement and the motive behind most eviction orders. But evicting the defaulting tenant only solves half the problem. It may enable you to replace them with a paying tenant, but it doesn’t recover your lost rent. You could sue the tenant for the amount owing, but if they don’t have it in the first place, litigation might only wind up costing rather than paying you money. Is there another solution? You could use the landlord’s tacit hypothec. What is this?
The "landlord’s hypothec" is a common law protection remedy landlords can use to collect rental arrears from tenants. This provision allows a landlord to sell the tenant’s movable goods that are on the leased premises if the tenant fails to pay the rent. A landlord may choose to invoke the hypothec because it can be more effective than a rent interdict summons. Understandably, tenants will not want to see their possessions impounded and may respond more urgently to this threat than to an interdict for payment of arrears.
When does the hypothec take effect?
The hypothec theoretically exists from the date the tenant occupies the leased premises. However, it only becomes legally enforceable when a court order is obtained. Before a court order is granted, the tenant can remove the movable goods from the premises at any time (even after the issue of any summons). The hypothec lapses when the goods are removed from the property, whether or not the person who removed the goods was aware of the hypothec.
Once the hypothec is enforced, it gives the landlord preference over other creditors, should the tenant declare insolvency.
How to obtain a court order against the tenant
To obtain a court order, a landlord must serve a rental interdict summons on the tenant. A landlord may also choose to attach the tenant’s movables. If a third party’s goods are on the property, and they have not taken reasonable steps to protect their property from the landlord’s hypothec, the courts will assume the goods were brought onto the leased premises with the implied knowledge and consent of the third party, making them subject to the hypothec. However, a recent case suggests that arbitrarily depriving a third party of their property is unconstitutional.
Exclusions
Any goods purchased with a hire purchase agreement are excluded from the landlord’s hypothec. Movable property over which a special notarial bond has been registered is also excluded from the hypothec, unless the hypothec was enforced before the notarial bond was registered.
Last resort
The reality is that the tacit hypothec is more useful as an incentive to encourage the tenant to pay the outstanding rent than it is a meaningful means of compensation. It is unlikely you will be able to take possession of goods worth the amount you are owed, not to mention the hassle of having to sell them. But faced with a recalcitrant or irresponsible tenant, the hypothec can give the landlord some leverage in the battle to recover unpaid rent. However, we always recommend keeping the lines of communication open. Negotiate with your tenant if they appear to be in financial difficulty before eviction or invoking the hypothec are the only options.
For further information
SD Law is a law firm in Cape Town and Johannesburg with specialist eviction lawyers. If you need help with troublesome tenants, are seeking an eviction order, or just want advice on lease agreements or other aspects of tenant relations, contact Cape Town attorney Simon Dippenaar on 086 099 5146 or email sdippenaar@sdlaw.co.za.