Real Estate Law

April 9, 2018March 30, 2020

Consumer Protection Act – application of notice periods and who is a consumer

An update from STBB attorneys highlights a case decided by the western Cape High court in March 2018.

Of relevance to landlords is that co-occupants enjoy the same rights under the CPA as tenants, and that provided 20 days notice of breach (allowing rectification) is given to the tenant / co occupiers the lease agreement can be cancelled if the breach is not remedied in the allowable time period,

the court was asked to decide if;

A co-occupant is a ‘consumer’ and could invoke the provisions of the Consumer Protection Act (CPA).
The landlord was required to specify to the tenants that they had 20 days to remedy their breach or was it only necessary to afford a tenant 20 days within which to remedy the breach, before a lease may validly be cancelled.

The court decided that given the facts

The co occupant was a consumer and was covered by the CPA
There is no requirement, express or implied, that the consumer must be expressly notified of the fact that he has 20 business days to remedy his defect. The letter of cancellation can be delivered after the full 20 business days have elapsed after notice was properly delivered.

See STBB summary of judgement for more info

February 2, 2016April 1, 2020

Managing late payment on a lease

The logical first step to obtain redress after a tenant defaults on its rental obligations is to contact them within 24 hours and council them as to reasons for the default. In any event a letter recording the default and the discussion regarding the rectification of the late payment should be sent within 48 hours.

Depending on the outcome of the initial discussion the default should be managed on a daily basis until resolved. If payment has not been made within 96 hours of the due date the tenant should be notifed of the landlords intention to invoke the breach clause in the agreement. They must be reminded that in the event that the breach is not resolved it could result in the tenant being evicted. Once the late payment extends beyond 120 hours the mater should be handed over to an attourneys to begin recovery proceedings and to finalise the notice of breach as soon as possible. The attourneys will in all likelihood send the tenant a letter of demand requesting the immediate payment of all rental owed. In some situations, for example, prior to instituting claims in the Small Claims Court, a letter of demand is a necessary prerequisite to issuing summons for the recovery of rental. However, regardless of whether it is legally required, there are several reasons to always issue a letter of demand prior to instituting litigation:

In many situations, the threat of legal proceedings may be enough for the tenant to simply pay the amount owed. Alternatively, it may lead to them contacting you to work out payment arrangements and a plan for them to vacate the premises. In either case, the expensive and time-consuming process of litigation is avoided.

Even if the matter is not resolved by issuing the letter of demand, there are important cost consequences to consider. In the case of Havenga v Lotter, 1912 T.P.D. 395 it was noted: “It is perfectly true that a person who feels aggrieved may take out a summons immediately. He need send no letter of demand; but if he omits to send a demand, and a tender is made upon the summons, then he is not entitled to the costs of the summons”. Therefore, if you want to recover the unnecessary costs you had to incur prosecuting your action against the tenant, a letter of demand will often be a prerequisite to such right of recovery. Now, having stressed the importance of a letter of demand, the question arises as to how to go about actually drafting the letter of demand? In almost all cases, it us recommend that an attorney draft the letter of demand, following a full and analytically involved review of the dispute. While other entities, such as debt collectors, may claim to offer the same service, there are several drawbacks to employing the services of anyone other than a qualified attorney to assist:

The only person who can institute litigation on your behalf and represent you in a court of law is a qualified attorney.
A letter of demand coming from someone without this power, such as a debt collector, would not carry the same level of seriousness, especially to a clever tenant which knows the real limitations of the debt collectors powers of recovery.
There are often numerous strategic and legal issues to consider when drafting a letter of demand, even if the matter appears on its face to be fairly simple. For example, an attorney, after having reviewed the lease agreement and after having considered the law, would be able to advise you on additional options, such as – for example, cancelling the lease agreement and re-claiming occupation of the leased premises – as well as various other issues, such as the potential to assert a hypothec over the tenant’s property. Tenants also often come up with a myriad of defences and reasons why they are not obligated to pay rent.
A qualified attorney will be able to quickly sift through these and determine whether they have merit or not. Aware of the superior knowledge a qualified attorney has, a tenant will definitely think twice before relying on unsupportable arguments.
The purpose of the letter of demand is to obtain the most favourable settlement for you. A qualified attorney, with a thorough knowledge of the law, coupled with excellent analytical skills, is more likely than anyone else to be able to draft a letter of demand which convinces a defaulting tenant that it is in his interests to settle the matter immediately without having to go through the legal process.

November 23, 2015April 1, 2020

Fixtures and fitting – what goes and what stays?

Information courtesy of the RE/MAX.co.za blog

Often when disputes arise between buyers and sellers, it is regarding an item of the home that was seen as a fixture, but was removed during the home sale process.

According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, it is for this reason that sale agreement between the two parties, otherwise referred to as the offer to purchase, needs to be clear regarding all aspects relating to the sale of the home. “It is not uncommon for a homeowner to have installed certain items in their home that they intend to take with them when they move. Even if the item is regarded as fixture, a seller is within their rights to take the item, provided the buyer is aware of the fact and is in agreement,” says Goslett. “Alternatively, if the agreement of sale excludes any specific item, the seller is entitled to remove it, which again points to the importance of ensuring that the sale agreement that covers all aspects clearly.”

He notes that disagreements occur when the sale agreement is vague and does not list the specific fixtures that will remain in the property. According to Goslett, the seller should prepare a list itemising exactly what is to be sold with the house prior to listing the property with an estate agent. “The list should be incorporated into the mandate to sell so that the agent can point out to potential buyers any items that will be removed by the seller at a later stage,” he says.

When it comes to fixtures and fittings, the general rule is that when a buyer purchases a property, they receive the land, the permanent physical improvements such as any buildings erected on the land, along with all items that are permanently attached to the improvements or buildings that are erected on the land. This includes all upgrades, fixtures and fittings of a permanent nature. This is why it is best to define what is regarded as permanent nature. According to Goslett, there are three aspects to consider when defining whether a fixture or fitting is of permanent nature:

- The first aspect to establish is the intended nature and purpose of the item when it was attached. Is the item attached to the land or a structure erected on the land and does this item intend to serve the land on a permanent nature?

- How was the item attached? If the item is attached to the degree that removing it would cause damage to the structure or land that it is attached to, then the item should remained fixed and be considered permanent.

- The owner’s intention when attaching the item should be taken into account. If the intention of the owner was to permanently attach the item, then that should be given consideration.

According to Goslett, if an item is bolted, cemented, sown or planted and has taken root it is generally regarded as permanent. He points out that a contentious issue can arise when it comes to structures such as Wendy houses, pergolas or other similar structures. Goslett says that the seller should provide the buyer with plans if the structures are permanent and will remain on the property.

To avoid any confusion or disputes at a later stage, Goslett says that a basic clause regarding the fixtures and fittings should be included in the agreement of sale.

The clause should be similar to the following: The property is sold inclusive of all existing fixtures and fittings of a permanent nature, which the seller warrants are his/her exclusive property, fully paid for and in working condition, including but not limited to: the existing garden, trees, shrubs, plants, curtain rails, rods, pelmets, fitted carpets, the light fittings, stove and/or oven, hanging mirrors, towel racks, shelves, as well as special tap fittings, removable kitchen units, tennis court net, fireplace grate/blower, fitted kitchen storage units, awnings, post box, burglar alarm system, doorbell/knocker, the television aerial and accessories (if applicable), pool filter, pump and all cleaning equipment including automatic pool cleaner (whether fixed or movable, if applicable), swimming pool equipment, inner and outer door keys. “The more specific the clause is the better. This is to ensure that nothing is left open to interpretation by either party.

Taking the time and effort to include all fixtures when the sale agreement is drafted will help to avoid any frustration that could arise later on,” says Goslett, who notes that while there might be a verbal agreement between the two parties, if the agreement has not been reduced to writing it is very hard to prove anything at a later stage should the need arise. “Before placing their home on the market, a seller needs to carefully consider exactly what they are intending to include in the sale and perhaps remove items before the home is opened to buyers,” says Goslett, “However, if it is not feasible to remove the items beforehand it is imperative that there is an open channel of communication and the seller’s intentions are made clear to buyers from the outset. This will ensure that conflict is avoided by both parties,” he concludes.

November 12, 2015April 1, 2020

Unfair Rental Practice Regulations

The Rental housing act includes a reference to Unfair Practice Regulations. These are published from time to time by the provincial minister of housing.

A copy of the current regulations is available here. Unfair Practice Regulations

Disputes arising from a breach of these regulations should be referred to the Rental Housing Tribunal (RHT). There is some disagreement as to wether the RHT is required to hear these disputes or if a party can approach a court directly. It seems for the time being better to take all disputes to the RHT first before approaching the courts to resolve any disputes.

Unfair_Practice_and_Exclusive_Jurisdiction_Rental_Housing_Tribunal

August 6, 2015April 2, 2020

What happens if a party to a sale passes away before transfer?

Sellers and Purchasers are unlikely to ever encounter this situation but it is handy to know where you stand in the event that you do.

If the Seller passes away after the offer has been accepted the sale agreement remains valid and should be upheld by the executor of the sellers estate.

If the Purchaser passes away, the executor of the estate has the option or choice to proceed with the purchase or not.

In any event the transfer is likely to be delayed somewhat while the executor is appointed and paperwork is set in order.

June 23, 2015April 2, 2020

Ownership of exclusive use areas – sectional title

When purchasing or selling a sectional title property there are often Exclusive Use rights attached or claimed to be part of the sale.

Owners sometimes believe they have an Exclusive Right to use a piece of garden or a parking bay only to find that the “right” does not exist or is inadequately recorded. This can have a fundamental impact on the value of a section. It is therefore important to ensure that one understands exactly how Exclusive Use rights are secured.

Exclusive Use of a particular area in a sectional title scheme can be recorded or defined in a number of ways, they are listed below.

Please consult a legal adviser with sectional title experience if necessary.

1. Notarial Deed – Exclusive Use rights recorded / transferred by notarial deed can’t be unilaterally removed. They can be sold, generally together with the sale of a sectional title unit or in certain instances they can be sold separately to the owner of another section.

2. Rule 27A – Exclusive use rights recorded in terms of 27A can be less secure than those on a notarial deed. Depending on the wording of the rule, changes may require unanimous consent of all the unit holders before a right can be altered. However if the wording does not require it then the voting rules of the Body Corporate (BC) would apply. An exclusive use right could under these circumstances be removed by a simple majority vote of members in a properly constituted meeting.

3. Right allocated by the Body Corporate – These are rights to use a part of the common property allocated by the BC or the trustees. These can be changed at anytime (provided the due process as defined in the BC rules is followed) normally by a decision of the trustees. Rights allocated in this manner obviously have less value than those allocated by Notarial Deed or a well written Rule 27A.

When purchasing a sectional title unit make sure you understand how the Exclusive Use rights are recorded. Avoid the unhappiness and stress related to finding out that your rights are not as secure as you had thought and the value of your investment is eroded.

Your sale agreement should make specific mention of the Exclusive Use rights transferred by notarial deed. Other Exclusive Use rights need not be specifically mentioned as long as the agreement includes ANY other Exclusive Use rights attached to the section.

June 17, 2015April 2, 2020

Rental Housing Tribunal (RHT)

Despite the RHT having been in existence since 2001 some landlords and tenants that are unaware of its services.

This is a pity because the tribunal provides an invaluable service to all participants in the rental market.

It is essentially a free dispute resolution service staffed by independent professionals. They investigate cases reported by either landlords or tenants. They mediate and facilitate a resolution of the dispute and if necessary they conduct hearings and make findings.

They should be the first point of call if a dispute arises that can not be resolved by the parties concerned. Visit this website for more information.

May 4, 2015April 2, 2020

Early Termination of Lease Agreements

Prior to the commencement of the Consumer Protection (CP) Act, in April 2011, the law of contract and the common law covered the issue of when and how a tenant went about cancelling a lease agreement.

Prior to April 2011; both parties were pretty much bound by the terms of the lease agreement and this was very weighted in favour of landlords and against tenants.

Landlords often refer to an early cancellation of a lease agreement by the tenant as “a breach of contract.” This is not the case.

In terms of the Consumer Protection Act, tenants have the RIGHT to cancel their leases, as long as they do so while fulfilling ALL the cancellation criteria or requirements. Tenants who do this must do so in writing and must give at least 20 days’ notice. The rental for those 20 days is payable by the tenant; and they must pay same; pro rata, if applicable, to the landlord for that period. This action DOES NOT amount to a breach of contract.

Once the landlord or his agent have received the written notice of cancellation, they should make a note of the date on which the lease is now due to end; and should start advertising immediately for a new tenant for the property. This responsibility lies squarely on the shoulders of the landlord or his agent to find a new and suitable tenant. The costs of so advertising however should also be noted, as these costs can be charged to the tenant, as part and parcel of the “reasonable penalty” that the landlord is entitled to hold the tenant responsible for; as a result of the early cancellation of their lease agreement.

Although the landlord is entitled, in terms of the Act, to hold the tenant liable for a “reasonable penalty” fee for early cancellation of the lease; this does not and is not meant to be used to penalise tenants; but rather is intended to allow the landlord to recoup any losses she may have suffered as a result of the early cancellation of the lease agreement; and the tenant vacating before the lease has run its course.

The costs that may be included in such a penalty would for example include the credit check costs for a prospective new tenant; and any other reasonable incidental costs relating to the new tenant and which have been reasonably incurred by the landlord in finding that replacement tenant; such as advertising costs and would also include the rental lost by the landlord if and during the period that the property was to stand vacant. It is not however a carte blanche penalty which the landlord can simply impose as he sees fit; eg 3 months’ rent. That will not be acceptable to the Rental Tribunal. It must be based on her actual financial damages. It has justifiably been described as” a penalty which cannot be charged upfront. They can only be calculated once a new tenant has been found and the landlord cannot gain financially or benefit from the tenants cancellation penalty costs. He is simply reimbursed.”

On this basis; penalty clauses in lease agreements which purport to agree a cancellation penalty in advance will simply not hold up in court.

The inconvenience for a landlord caused by an early cancellation will no doubt be both annoying and time consuming; but it is clear that a tenant has the RIGHT to cancel a lease. The landlord is only then entitled to recover his actual loses in an early cancellation penalty clause.

The CP Act is however vague in that it does not define a “reasonable penalty;” and only states that a reasonable penalty may be charged for early cancellation. In practice however and in SA Law; a person who suffers damages as a result of another person’s actions is only ever entitled to recover those damages which he has actually sustained; and can prove. In practice also; it normally does not take more than a month to find another tenant.

This begs the question: what, exactly, can the landlord charge? Unfortunately the Regulations as they stand do not provide a convenient, easy formula for calculating the penalty. Thus, pending the publication of a few nuggets of wisdom from South Africa’s panel of judges, the calculation of cancellation penalties remain the subject of debate and negotiation. Presumably, the landlord will be able to claim reimbursement for lost rental for the time the property stands empty while the landlord finds a new tenant. A word of caution: this does not mean that the landlord can rest on his laurels and allow time to quietly slip away without searching for a new tenant, expecting the tenant to reimburse him in the process. The Act requires the landlord to “act diligently” in finding a new tenant, thereby mitigating loss all around. As things stand, though, it appears that it will not be possible to calculate the cancellation fee with certainty upfront.