The Proposed Rental Amendment Act Cause for concern? Or a positive move?

(As featured on: The Real Estate Investor Magazine April 2019 by Cape Town law firm SDLAW*)

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The Rental Housing Act 50 of 1999 governs the relationship between landlord and tenant. However, practical and statutory weaknesses have made it difficult to enforce. Enter the Rental Housing Amendment Act 35 of 2014. The Amendment Act increases the rights of tenants and obligations of landlords and firms up the rules regarding inspections, deposits, the condition of a property and what should be included in the lease.

While the long-anticipated Amendment Act is yet to be gazetted, what is certain is that both landlords and tenants will be required to comply with the provisions of the Act within six months of it coming into effect.

Both landlords and tenants are therefore advised to take the time to familiarise themselves with the provisions of the Amendment Act.

Tenants: your rights are already protected by the Rental Housing Act, common law, and the Consumer Protection Act, but make sure you understand your rights and obligations under the revised Act.

Landlords:  if you do not comply with the Act you could face a fine or up to two years in prison, and although imprisonment is unlikely, it is a possibility.

While this threat of criminal liability for non-compliance has sparked concern, the legal certainty the Amendment Act provides should improve landlord/tenant relationships. The clarity and security of well-defined lease agreements could also stimulate foreign investment with its concomitant spin-offs.

So, make sure you understand the Amendment Act as well as your rights and responsibilities. As long as you comply with the legislation, there is no reason to worry.

The Amendment Act in a nutshell

• The new legislation requires landlords to provide tenants with a written lease agreement. Verbal agreements will no longer be binding. ‘Get it in writing’ has always been sage advice. It still is.

• Properties must be ‘habitable’. This is defined as a dwelling that is structurally sound and suitable for living in, has adequate space, and provides protection from the elements and access to basic services such as water and electricity.

• Property owners are also entitled to ensure that their property is treated with respect and the Act protects landlords from tenants who cause malicious damage to a rental property.

• The landlord must place the tenant’s deposit in an interest-bearing account and repay the deposit plus interest within seven days of the lease expiring.

• The onus is on the landlord to inspect the property with the tenant at the start of the lease. Any defects or damage not rectified by the landlord must be listed and attached to the lease agreement. If a joint inspection does not take place, the property is assumed to be in good condition and the landlord may not later withhold the deposit for repairs or damages.

• The landlord cannot cut off utilities and services due to non-payment. Only the municipality has the right to do so.

• A landlord cannot lock a tenant out of the property without a court order. This rule gives the tenant security of tenure and makes sure that the landlord follows procedure if there is a grievance.

• Tenants are entitled to privacy and, while landlords can inspect the property from time to time, unannounced ‘spot’ inspections are not permissible. Sufficient advance notice is required.

What about existing lease agreements?

When it is finally gazetted, the Rental Housing Amendment Act will apply immediately to new lease agreements and landlords will have six months to bring existing agreements in line with the new legislation. What is not clear is how non-compliance will be enforced and whether, for example, a verbal agreement becomes null and void. And if so, from what point in time?

The bottom line

The Rental Housing Amendment Act 35 of 2014 attempts to remedy shortcomings of the Rental Housing Act 50 of 1999, improve landlord/tenant relationships and provide better protection for tenants.

Historically some landlords have exploited desperate tenants by renting out sub-standard properties. The Amendment Act spells out standards for rental housing – a significant step towards improving the quality of housing accessible to the most vulnerable in our society.

Although the landlord’s obligations are more onerous under the Amendment Act, the legislation protects the landlord’s property interests as well and going forward tenants will have to comply with certain revised terms and conditions in their lease agreements. This will weed out the ‘good’ tenants from the ‘bad’.

Get compliant now

The Amendment Act makes it a criminal offence to not have a written lease agreement. So, if you don’t have a written agreement in place, now is the time to draft one. Six months sounds long but as you know, time flies. And for the tenants out there, make sure you are au fait with your rights and obligations too.

Contact us

Don’t wait until the last minute to comply with the Rental Housing Amendment Act. Cape Town Lawyers Simon Dippenaar & Associates Inc. are property law experts and act for both landlords and tenants. Call us on +27 (0) 86 099 5146 or email sdippenaar@sdlaw.co.za if you need help drafting a lease agreement or for any property-related matters. One of our Cape Town Attorneys will contact you back.

*SDLAW aka Simon Dippenaar & Associates Inc. is a law firm of specialised eviction attorneys in Cape Town, and now Johannesburg, and Durban offering specialised eviction services to both landlords and tenants across South Africa.

Commercial evictions: how a landlord can evict a tenant

PIE does not apply to commercial evictions, but CPA might

Originally published at Cape Town Attorneys SDLAW

Legislation introduced in the last few years gives residential tenants a host of rights, and landowners or landlords must follow very strict procedures to evict tenants. However, the same is not true of commercial tenants. In some case the Consumer Protection Act(CPA) may apply, but if not, the relationship is governed by contract law.

Landlord and commercial tenant relationship

South African contract law is derived from the Roman-Dutch law of contract. A contract is defined as an agreement between two or more parties binding them in a legal commitment. It is basically a legal framework that enables individuals or juristic persons (in other words, companies or organisations) to engage in business. They can exchange resources – such as money or their time – in the knowledge that they are protected by a legal agreement that is – or should be – fair to both parties. If one party reneges on their obligations, the other party is safeguarded by law from loss or the consequences of unlawful behaviour.

A commercial lease is a form of contract. It outlines the interests of both landlord and tenant and their duties towards each other. Properly drafted, it should facilitate a harmonious relationship between the two. Unlike residential tenancies, there is no legislation specifically governing commercial leases, so a professionally prepared, written lease is essential for avoiding misunderstanding and disputes. It is the contract as defined above.

Commercial rental is normally charged per square metre, rather than a flat rate for the premises. On top of that, there is usually a cost for the landlord’s operating costs, parking, rates and taxes, body corporate levies and insurance as well as charges based on use for electricity, water, refuse collection and sewerage. These should all be specified in the lease.

Selling the lease

If a tenant moves out without notifying the landlord and sells the lease to a new business, the new tenant is an illegal occupier. A lease is a contract between two named individuals or juristic persons. A lease can be sold, but the contract with the property owner must then be renegotiated and a new lease drawn up. Whether or not this can be done will also depend on the stipulations in the original lease.

Definition of a commercial tenant

Whether or not a tenant is considered commercial is not based on the zoning of the building but on the use of it. So someone who resides in a commercial property is considered a residential tenant and is protected by PIE. By contrast, a commercial occupant is someone who “...does not use buildings and structures as a form of dwelling or shelter”. The commercial occupant could be an organisation or an individual, and the building could be a residential structure. For example, a homeowner may let a cottage on their property to a self-employed consultant to use as an office. Although the cottage is part of a residential holding, the consultant is a commercial tenant because of the way the cottage is used.

Cancellation of a commercial lease

While commercial tenants do not enjoy the level of protection afforded residential tenants by PIE, the landlord must still follow due process. If a landlord wishes to evict a tenant, they must first cancel the lease. This can be done on expiry of the lease or on the occasion of a material breach of the terms of the agreement (usually rent arrears).

Consumer Protection Act

In some instances a commercial tenant may be protected by the Consumer Protection Act (CPA). If there is a fixed term lease, Section 14 of the CPA applies. In this scenario the landlord must give 20 business days' written notice of a breach of the lease agreement. They may then only cancel the lease if the tenant fails to rectify the breach within the 20 days.

Section 14 does not apply in the following situations:

• If the tenant is an organ of State (municipality, state department etc.)

• If the landlord and tenant are both juristic persons

• Once-off leases

• If the tenant is a juristic person with an income/turnover above R2 million per year

In these circumstances 20 business days’ notice of a breach is not required before being able to cancel the lease.

Eviction process for a commercial tenant

Commercial evictions are handled either by the High Court or the Magistrate's Court. The case is brought by way of action or application proceedings in the High Court and by way of action proceedings in the Magistrate's Court. The choice of court is usually determined by the lease agreement, with the jurisdiction of the Magistrate's Court the most common. The lease agreement must first be cancelled, as discussed above, before an eviction proceeding can be brought.

Generally, commercial evictions are effected speedily. The issues surrounding residential evictions – the rights of the occupier to a dwelling and the wellbeing of vulnerable individuals – are not at stake. By contrast, in the business context the rights of the property owner to protect commercial income take priority. But this highlights the need for a rock-solid lease to be in place. This provides the legal framework within which the eviction can take place.

Commercial evictions do not only involve the removal of the tenant. Landlords have a right to claim any damages that may apply at the time of eviction, as well as rent arrears.

Who can evict?

It is worth noting that in a commercial eviction the official landlord may not necessarily be the property owner. Commercial property is often owned by a juristic person such as a large corporation or a pension fund. Therefore an agent can act as applicant in an eviction case, as long as they can prove they have the right to appear in court on behalf of the owner (this is known in law as "locus standi").

Landlord's hypothec – the right to repossess tenant's equipment

A commercial tenant does not have the same attachment to a property as a residential tenant. They still have somewhere to sleep at night, and it is not that difficult to find an alternative location for a business. For that reason, there is a greater risk that a commercial tenant might abscond when the notice to quit is served. Rather than pay the outstanding rent, the tenant might just take their moveable property and run. After all, they are not losing their home.

If a landlord is concerned that the commercial tenant might do a midnight flit, an urgent application can be brought before the Court to allow the landlord to attach and secure the movable goods on the property. If the tenant then removes them it is a criminal offence.

The security a landlord holds over a tenant’s property is known as the hypothec and is actually the strongest form of security in South African law. However, once the movable goods are removed from the property the landlord has no security over or rights to those goods. Therefore if there is reason to suspect a tenant might beat a hasty retreat, the landlord must apply for the attachment of the goods urgently. This is best done with the help of an experienced attorney.

Business rescue

Occasionally a landlord might not be able to commence the eviction process, even if the tenant is in breach of the lease. A business that has fallen on hard times may enter Business Rescue. This is a process that allows a business in financial distress time for rehabilitation. During this period there is a moratorium on all legal action, so an eviction notice may not be served.

What happens if the premises are sold?

There is a principle in South African law, derived from Roman-Dutch law, called "huur gaat voor koop", which translates as "only the lease and nothing more". What this means for the tenant is that, in the event of a sale of the building leased by the tenant, the purchaser is obliged to honour the lease agreement. The tenant may continue to occupy the building, or their part of it, according to the terms of the lease. The tenant's rights in this situation are stronger than the right of ownership. However, the tenant should be alert to the fact that the new owner may not wish to renew the lease, depending on their plans for the property. So a wise tenant will be on the look-out for new premises well in advance of their lease expiry.

Professional help is essential

Whether you are a commercial tenant or landlord, it's important to have a carefully drafted lease that includes all your requirements and conditions. If both parties know exactly who is responsible for what, conflict is less likely to occur. This includes the terms of renewal, which are often left open-ended in commercial leases and can be a cause for dispute as the end of the lease period draws near. Cape Town law firm Simon Dippenaar & Associates, Inc. in Cape Town and now Gauteng and Kwazulu Natal is a law firm of Cape Town eviction attorneys with extensive experience in property law. They can ensure your lease is a sound business contract that will protect you, landlord or tenant. Contact Simon on 086 099 5146 or email sdippenaar@sdlaw.co.za. One of our Cape Town Lawyers will contact you back.

Request a commercial lease agreement template

Further reading:

Eviction process: how, when and why

Tacit hypothec - right of a landlord over property

Consumer Protection Act and rental agreements explained

Drafting of contracts

When and how you can evict a tenant

A tenancy agreement is, before anything else, a contract, says Cape Town attorney Simon Dippenaar.

The landlord and tenant are engaged in a contractual, business relationship, regardless of whatever else they may be in other areas of life.

To protect the asset the property represents, the landlord at some point may have to take action that is unpopular with the tenant.

Cancellation vs. eviction

It's important to understand the distinction between cancelling a lease and evicting a tenant, says Dippenaar. They are not one and the same thing.

A lease cancellation is the conclusion of a civil contract between two individuals, for a valid reason.

Eviction is a legal process that must be conducted via the courts and requires an attorney. A landlord cannot evict a tenant without going through due process of law.

The eviction process

Assuming there is a written lease agreement in place, a breach of the conditions of the lease might lead a landlord to want to cancel the lease.The breach might concern living habits, such as excessive noise, keeping pets without the requisite permission, or failing to maintain the property in a reasonable state. The most common cause of lease cancellation is rent arrears.

Of all these transgressions, failure to pay rent has the most severe economic consequences for the landlord, but may attract the most leniency, because the tenant may have lost their job or suffered some other financial misfortune beyond their control.

Because the law knows that a rented property is someone's home, it provides protection to tenants. Several pieces of legislation ensure that an unscrupulous landlord cannot put a tenant out on the street without warning.

The law is particularly sympathetic to vulnerable people, such as children, the elderly, disabled people, or woman-headed households.

Cancelling a lease

The landlord must give the tenant notice of the breach and a chance to rectify it. In the case of rent arrears an opportunity must be given to make good the rent due.

This is done by way of a warning in writing, giving the tenant a specified amount of time in which to remedy the breach. The time frame will be determined by the terms of the lease, or if not specified it will be 20 working days, in accordance with the law.

If there is no written lease, the landlord must give a full calendar month's notice. If the tenant pays up (and does not repeat this breach month after month), the matter is finished and harmony is restored. Remember that a calendar month's termination means from the beginning to the end of the same month. Therefore if it is the third of January and the landlord wishes to terminate the agreement, the termination would only apply at the end of the following month, i.e. the end of February, and not the end of January. This is so a full month can elapse and the termination takes effect at the end of a month.

However, if the breach is not remedied, the next step is a letter of cancellation served on the tenant by the landlord. In some cases the lease may have expired but the tenant still occupies the premises with the landlord's consent on a month-to-month basis.

This may happen if a tenant is looking to move house or waiting on a job offer that includes relocation. In this case the landlord must give the tenant one calendar month's written notice of cancellation.

Eviction 

With luck, the tenant vacates the property at the end of the notice period. If so, the landlord is free to find another tenant who can pay the rent.

However, should the tenant disregard the lease cancellation, the landlord may have no choice but to start the eviction process.

The landlord must apply to the court to have an eviction notice served by the sheriff on the tenant – who is now considered an unlawful occupier rather than a tenant.

A court date is set and a deadline given for filing an opposing affidavit if the unlawful occupier wants to oppose the eviction.

If the court is satisfied that the case for eviction is sound, the tenant or unlawful occupier will be given time to vacate the property.

Only if, despite this process, they fail to vacate the property within the specified period, will the sheriff will be authorised to remove them and their belongings from the property. The cost of this will be borne by the tenant.

The landlord may not change the locks, physically remove personal property, or behave in a threatening way toward the tenant, however recalcitrant the tenant may be.

Only the sheriff may take any physical action against the tenant. A landlord who takes matters into their own hands may find themselves facing serious consequences.

* Simon Dippenaar is a Cape Town attorney at Cape Town law firm Simon Dippenaar & Associates now also in Johannesburg and Durban of specialised eviction attorneys.

Original article published on FIN24.

Eviction – when can a landlord cancel a lease?

As we are always at pains to stress, eviction law is there for the protection of all parties' interests. Just as no one wants to see a family unnecessarily or unfairly made homeless, landlords also have the right to receive a fair rent, on schedule, for the use of their property, and to expect their property to be properly maintained and well looked after.

In this post we will look at a landlord's right to cancel a lease and to claim damages. In the next post we will look at the tenant's right of remission of rent, that is, the right to set off rent payable against compensation due by the landlord.

Lease cancellation – breach of lease

If a tenant fails to pay rent, and there is reason to suspect that the tenant may not pay future rent, the landlord may cancel the lease. However, it is not as simple as that. Whether or not the court grants the cancellation depends on the wording of the lease. For cancellation to be justified, the failure to pay must represent a major breach of the lease. And for that to be upheld, the lease must contain a forfeiture clause, i.e., an indication that prompt payment is of major importance. The wording might include "time is of the essence of the contract".

If the lease contains a forfeiture clause, the landlord is permitted to cancel the lease on the first occasion when the tenant fails to pay rent. However, if the landlord regularly accepts late payment, they cannot then use this as a reason for cancellation, because they have given their tacit approval in the past. In this case the landlord must give the tenant prior notification if they intend to cancel the lease.

Don’t forget the CPA

Bear in mind that the Consumer Protection Act (CPA) requires “residential landlords” to give tenants 20 business days’ notice of the need to vacate a property. According to section 14 of the CPA, If your tenant is in material breach of the lease, you can’t cancel the lease without giving 20 business days’ notice, and you can’t cancel the lease if the breach is rectified within those 20 days. The Rental Housing Act does not contain such a prescriptive clause, but the CPA takes precedence over other legislation. See Consumer Protection Act & Rental Agreements Explained for more information.

Month-to-month or open-ended leases

The landlord must give the tenant "reasonable" notice of termination of the lease. A calendar month’s notice would satisfy the 20 business days required by the CPA and would be considered reasonable. Remember that a calendar month's termination means from the beginning to the end of the same month. Therefore if it is the third of January and the landlord wishes to terminate the agreement, the termination would only apply at the end of the following month, i.e. the end of February, and not the end of January. This is so a full month can elapse and the termination takes effect at the end of a month.

Public housing

Different rules apply when the lease is for public housing. Recent case law established that to terminate a public housing lease agreement on just one month’s notice would be oppressive and unconstitutional. Therefore, a tenant of public housing should be afforded the chance to rectify a breach prior to lease cancellation.

Implied leases

If a lease expires and the tenant continues to pay rent, and the landlord continues to accept it, they have effectively created a new, implied lease. There are also certain fixed-term leases that become implied month-to-month leases after expiry, in terms of the CPA. By law, the payment and acceptance of rent after the official end of the lease implies that a new lease has been agreed.

Damages

Landlords are allowed by law to claim damages in lieu of unpaid rent, in addition to cancelling the lease. The landlord may claim the rent for any period prior to cancellation and damages for the period thereafter, i.e. if the landlord is deprived of rental income due to an inability to immediately find an alternative tenant . The landlord may accept payment of rent prior to cancellation, and can still lawfully proceed with the cancellation. If the landlord accepts rent after cancellation for any period the tenant remains in the property, this does not mean that the landlord has revoked the cancellation. This is called "holding over". This might happen if, for example, a landlord gives a tenant a grace period to find alternative accommodation, but does not wish to retain the tenant permanently.

The law regarding damages is technically complex and it is impossible to cover all the variations in this short article. If you have questions about damages relating to an existing lease or the costs involved with eviction give us a call and we will investigate your specific circumstances.

Municipal charges – surety

Property owners should note that they cannot sell a property without a clearance certificate from the local authority, stating that all municipal service fees, surcharges on fees, property rates and other municipal taxes, levies and duties have been paid – for two years preceding the date of application of the certificate. Any outstanding charges take precedence over a bond registered against the property.

What this means in practice is that landlords act as sureties for tenants, because property owners are held liable for the municipal accounts of the tenants. Furthermore, local authorities don't go out of their way to collect debts from account holders because, ultimately, owners can be compelled to settle the accounts when there is a sale of the property at a later date. Thus the terms of the lease are critical; they should ensure the monitoring of the tenant’s payment of municipal charges, and allow for forfeiture clauses and damages in case of default. There is an argument for asking for a larger deposit, i.e. more than one month's rent, in light of the risks involved, and this should not be considered unfair practice in terms of the Rental Housing Act.

Take professional advice

Eviction law must be navigated with care and professional expertise. If the proper process is not followed, you can find yourself in breach of the Rental Housing Act, PIE or the CPA. Cape Town Attorneys Simon Dippenaar and Associates are experts in property law and we act for both landlords and tenants, so we understand the legislation from both sides. We will help you manage your rental property and tenant relations efficiently and in full compliance with all relevant regulations.

Contact Simon on 086 099 5146 or email sdippenaar@sdlaw.co.za.