The South African law of lease is an area of the legal system in South Africa which describes the rules applicable to a contract of lease (or letting and hiring, Lat locatio conductio, Afrik huur en verhuring). This is broadly defined as a synallagmatic contract between two parties, the lessor and the lessee, in terms of which one, the lessor, binds himself to give the other, the lessee, the temporary use and enjoyment of a thing, in whole or in part, or of his services or those of another person; the lessee, meanwhile, binds himself to pay a sum of money as compensation, or rent, for that use and enjoyment. The law of lease is often discussed as a counterpart to the law of sale.
South African law, like its Roman counterpart, recognises three forms of the contract of lease:
locatio conductio rei, or renting or hire of a thing, movable or immovable; locatio conductio operarum, or employment contract or hire of labour between an employer and an employee; and locatio conductio operis, or contract for the supply of services, like the construction of a building, between an employer and independent contractor.
So much in their incidents do these differ, however, that they are best regarded as three different types of contract. This entry is concerned with the first of the three, or what is known in English law as, and commonly called in South Africa, the contract of landlord and tenant.Bradfield and Lehmann Sale & Lease 136.
Nature of the contract In dealing with a contract of lease, one has to distinguish between a lease of movable property (motor vehicles and office equipment) and a lease of immovable property. The lease of movable property is subject to the provisions of the National Credit Act (NCA).
Definition In terms of the NCA, a lease is an agreement in terms of which
temporary possession of any movable property is delivered to or at the direction of the consumer, or the right to use any such property is granted to or at the direction of the consumer, payment for the possession or use of that property is made on an agreed or determined periodic basis during the lifetime of the agreement; or deferred in whole or in part for any period during the lifetime of the agreement; interest, fees or other charges are payable to the credit provider in respect of the agreement or the amount that has been deferred; and ownership of that property, at the end of the term of the agreement, either passes to the consumer absolutely; or passes to the consumer upon satisfaction of specific conditions set out in the agreement.
This definition has changed or departed from the common law, because in a contract of lease there has always been an expectation that, at the end of the terminal period, the goods will be returned in the same condition as they were received.
A contract of lease of a movable is treated in the same way as an instalment agreement. The NCA does not apply in respect of lease of immovable property; the common-law rules governing such contracts have been left intact.
Part C of the NCA,ss 8-11. dealing with the various categories of credit agreements, excludes a lease of immovable property from these categories. This means that a credit agreement does not include a lease of immovable property. It also means that the definition of a contract of letting and hiring of immovable property remains the same.
Most sources describe the contract of lease as one whereby one party (the lessor) undertakes to grant to the other (the lessee) the temporary use and enjoyment of a thing in return for the latter's undertaking to pay rent. This definition differs from the one contained in the NCA. Some commentators on the Act have observed that it has in fact blended the lease of movables with a sale, and that this could create the problem of determining which naturalia of the contract will apply.
In terms section 8(4) of the NCA, if the agreement provides that ownership will always remain with the lessor, the agreement is not a lease for the purposes of the NCA. It will, however, be a credit transaction in terms of section 8(4)(f), and will therefore be subject to the NCA, provided that a fee, a charge or interest is payable.
A lease in terms of which the lessee pays rent which does not include a fee, charge or interest, and in terms of which ownership remains with the lessor throughout, will not be subject to the NCA. A contract in which a lessee hires property permanently is not a lease; it is another type of contract.
See the case of Mutual Construction Co v Komati Dam Joint Venture.
Bilateral juristic act The contract of lease is a bilateral juristic act: It gives rise to rights and duties between the parties. There are several statutes applicable to the contract of lease. The parties must be mindful of the relevant statutory provisions when drafting the lease. The rights and duties afforded by legislation may not be waived. For example, section 5(3) of the Rental Housing Act (RHA) sets out certain rights and duties, while section 5(4) states that such provisions may not be waived by either party, as they are for the mutual benefit of both parties. The contract of lease will be deemed to include these provisions. Such provisions include the provision that, before the tenant takes occupation, there must be a joint inspection of the leased premises for defects and the right to privacy.
The contract of lease may be entered into orally, expressly or impliedly. One must bear in mind the provisions of the RHA, especially with regard to what constitutes a "dwelling," as this includes a shack. If the tenant requests that the contract be reduced to writing, the landlord has no choice in the matter and must comply.
The tenant has the right not to have the property searched and seized except in terms of a law of general application.Soffiantis_v_Mould.
Synallagmatic contract The tenant is still protected by the common law naturalia. The exceptio non adimpleti contractus, whereby a defendant may avoid his obligations to the plaintiff based on poor performance by the plaintiff, still applies.
See the case of Pete's Warehousing and Sales CC v Bowsink Investments and Ntshiqa v Andreas Supermarket.
Huur gaat voor koop As noted above, in Roman law the contract of lease (locatio conductio) had three forms: the locatio conductio rei, the locatio conductio operis and the locatio conductio operarum. Roman-Dutch law adopted this position, and it is still in force in South Africa. The modern contract of lease is therefore the Roman locatio conductio rei, the rental or hire of a thing.
Contrary to Roman law, however, is that in South Africa prevails the Roman-Dutch doctrine of huur gaat voor koop (“lease trumps sale”). The lessee has under a lease only a personal right against the lessor, allowing him to demand possession of the leased property (res locata). Once the lessee takes possession of the res, he acquires a limited real right erga omnes in the res for the duration of the lease and will thereafter be protected by the maxim huur gaat voor koop. For long leases, every successor-in-title of the lessor is automatically bound by the lease, but for short leases, the successors are not bound until the transfer of the res has been registered, irrespective of whether they are aware of its existence. The lessee's protection under the rule is conditional on payment of the rent for the unexpired term of the lease to the new lessor. The rule applies only to material terms; it therefore covers the option to renew a lease but does not bind the new lessor in respect of an option to purchase.
Lease and other branches of the law Law of property and lease A lease is a property right which can either be ceded.
Contracts of sale and loan and lease The NCA has blended the lease of movables with a sale. The rules of a contract of sale are sometimes applied in terms of a contract of lease, as where, for example, a third party fixes the sale or rental price. The rules of a contract of loan are also sometimes applied in terms of a contract of lease.
In NBS Boland Bank v One Berg River Driver and Others, the court held that, save, perhaps, where a party is given the power to fix his own prestation, or to fix a purchase price or rental, a stipulation conferring upon a contractual party the right to determine a prestation is unobjectionable. This does not mean that an exercise of such a contractual discretion is necessarily unassailable; it may be voidable at the instance of the other party. It is a rule of the common law that, unless a contractual discretionary power is clearly intended to be completely unfettered, an exercise of such a discretion must be made arbitrio bono viri. The discretionary powers vested in mortgagees in terms of mortgage bonds conferring upon the mortgagees the right unilaterally to increase the original rate of interest payable by the mortgagor must therefore be subject to the aforesaid inherent limitation. Such a provision in a mortgage bond is therefore valid.
In this case, in Van Heerden DCJ's obiter dictum, he noted that it is conceivable, albeit unlikely, that a stipulation may be so worded that an absolute discretion to fix a prestation is conferred on one of the parties. In these circumstances, it is unnecessary to express a view as to whether such a stipulation will be invalid as being in conflict with public policy, or whether the fixing of the prestation may only be assailed when it is done in bad faith.
See also the case of Benlou Properties v Vector Graphics.
Source of rules and proof of contract's existence The main source of the rules pertaining to the contract of lease is the common law, as modified by the Constitution, and the rules creating statutory naturalia. Examples of such statutes are ESTA, PIE, Land Reform Labour Tenants Act, RHA and NCA. Note the case of Pete's Warehousing, noted above.
Regarding the common law in terms of competing leases, see the case of Croatia Meat v Millennium Properties. In these circumstances, it is noted that one must apply the rules of contract.
See also the cases of De Jager v Sisana, Schmidt v Dwyer and Southernport Developments v Transnet.
Essentials of the contract A lease is formed by agreement between the parties that one of them is
to let or to give the other the use of ascertained property at a fixed or fixable rent.
Agreement on use and enjoyment Undistrubed use and enjoyment of property is known by the Latin term commodus usus. According to Karin Lehmann, the word "use" encompasses both
jus utendi, the right of using the property; and jus fruendi, the right to gather and enjoy the civil and natural fruits of the property.
The lessee does not, however, obtain jus abutendi: the right to take any of the substance of the leased property. Consequently, so-called mining leases, which allow the lessee to mine for and keep minerals, are not true leases. Nor is a contract allowing a person to cut timber on a farm, unless the trees are self-generating.
See Drymiotis v Du Toit1969 (1) SA 631 (T). and Business Aviation Corporation v Rand Airport Holdings.
Where premises are let for the purpose of conducting business, the commodus usus includes the fact that the lessor may not do anything which might impact negatively on the business. The lessee's right to commodus usus is one of the naturalia of a contract of lease. Where the profitability of the lessee's business has been reduced, the lessee's commodus usus has been impaired.