What is a Lease Agreement?
A lease agreement is a legal document that governs the rental of residential or commercial property. It serves as a contract between a landlord and a tenant/lessee in South Africa and outlines the essential terms, responsibilities, and obligations of both parties throughout the duration of the lease.
Typically drawn up before the commencement of tenancy, the lease agreement includes information such as the names of the landlord and tenant, the property address, the monthly rental amount, deposit required, duration of the lease , and any additional special conditions.
In South Africa, the Rental Housing Act governs the agreements between landlords and tenants/lessees. It removes the common law power from landlords to unilaterally amend or add new conditions to the lease without the tenant/lessee’s consent. However, exceptions may exist for agreements between a landlord and a juristic person (in other words a company, close corporation or a trust) in which the tenant/lessee has assets of at least R2 million at the time when the lease agreement is signed.
Essential Components of a Lease Agreement
A lease agreement is a legally binding contract between a lessor (owner of the property) and a lessee (occupier of the property). For a lease agreement to be valid and enforceable, it must include the names of the lessor and lessee (or entities), the rental amount, the term of occupation and a description of the property to be leased. Additional clauses can be included providing for specific obligations of the parties such as the payment of utilities, it being a lease for a business purpose or terminating upon receipt of notice by either party. The lease agreement can also be registered against the title deed to the property so as to provide notice of the lease agreement to third parties. In accordance with the Alienation of Land Act, a lease agreement with a period of longer than ten years (inclusive of the options to extend the lease) must be in writing, signed by the lessor and the lessee and any improvements to the property effected by the lessee will not vest in the owner of the property unless the lease is registered against the title deed.
Forms of Lease Agreements
Understanding Lease Agreements in South Africa
The type of lease you enter into will depend on what exactly you wish to achieve by letting or leasing out your premises. In South Africa the following types of leases are common: residential leases, commercial leases and short-term leases. Larrett Residential Property Group is an agency that deals in both commercial and residential property in Gauteng and knows just what you require whether you are leasing out or renting a property.
Residential Lease Agreements
In South Africa a residential lease is governed by the Rental Housing Act, 1999. This piece of legislation was enacted to protect the weaker party, being the tenant or the consumer. Residential leases can be for any term, whether it be for a fixed period or otherwise. The standard lease term when renting out property in South Africa is 12 months and the basic standards for a written rental agreement are as follows: The OSR (Office of the Consumer Protector) requires that you provide a copy of a residential lease to a prospective tenant who requests it. If your lease term is longer than 3 years it will need to be in the Deeds Office. Your further obligations as a landlord when renting out property in South Africa will depend on your circumstances and the specifics of your particular situation. A rental agreement is an important legal document which you need to get right. At Larrett Residential Property Group we are here to help you with this.
Commercial Leasing
Commercial leases are usually entered into between two commercial or business entities and may be for a fixed period or for the life of the business. All inclusive rentals are not the order of the day. It will often involve a negotiation between the parties to determine the nature of the costs due, whether the landlord will pay or whether all expenses will be for the tenant’s account. Two of the biggest issues that humans face are death and taxes. When it comes to tax on a commercial lease, the rule of thumb is that the landlord will pay. However, the tenant needs to investigate this as the burden sometimes falls on you. When it comes to death it is inevitable.
Short term leases
These leases include accommodation that you might provide to someone for a short duration, such as a holiday home, beach house or ski chalet. They are provided on the basis of mutual trust and in good faith. A standard short term lease will require: Inverse proportion is the operative word in short term leases. The shorter the duration the amount you ask for as a deposit will be more compared to a fixed term lease. In many cases the rental amount will include security and cleaning costs and other provisions such as use of a telephone. A holiday home is something most of us dream about, visit occasionally and fail to spend as much time in it as we would have liked. What do we hope to achieve? Some peace and quiet and time with family, friends and our loved ones that fall in love with the view or valley. A beach house does the trick for some and a chalet or cabin up country does it for others. The Rental Housing Act does not regulate short term leases. What you see is what you get (or not). Rental agreements are an important tool to safeguard your interests whether you are the landlord or the tenant.
Legal Aspects and Compliance with the Law
In South Africa, lease agreements must be written and contain various details for them to be enforceable in a court of law. Section 5 of the Rental Housing Act 1999 (the RHA) requires lease agreements to be recorded in writing. The RHA aims to balance the rights and responsibilities of both landlords and tenants and lays a minimum framework within which all leases must fit. The Minimum Information Regulations (MIR) give effect to the RHA by prescribing the minimum contents thereof based on the specific circumstances of each tenant.
Some of the mandatory provisions that should be included in a lease agreement are: the full names, identity numbers and contact details of the landlord and tenant; the street address of the property leased; the nature (fully furnished or not) and extent of the premises leased; the rental amount (including additional charges or costs); the date(s) on which the rental becomes payable; the date of commencement of the lease and the termination date thereof; information relating to the deposit to be paid by the tenant (if any), the condition of the property as recorded on an inventory checklist (also to be signed by both parties), whether or not the property is subject to a rental housing tribunal jurisdiction, the landlord’s consent to have pets kept on the property and lastly, it must include the signature of both parties, and the signature (stamp) of the witness. Some standard lease agreements include additional provisions, but these need not be compulsory. The fact that the MIR was promulgated indicates that the drafters were considering the RHA and how it should fit within the framework of the common law.
Certain minimum legislative requirements apply to rental housing leases and tenancies, including the RHA, the Consumer Protection Act 2008 and the Basic Conditions of Employment Act, 1997.
Rights and Obligations of Tenants and Landlords
The rights and responsibilities of the landlord and tenant are determined by agreement, which is governed by the common law. Additional rights and obligations are laid down in the Rental Housing Act 1999 (RHA) and other legislation. The Rental Housing Act has perhaps been the most effective legislation as it has various advisory boards which have the power to inspect premises, settle disputes and recommend policy changes to government.
One of the more positive developments brought about by the RHA has been that any agreement of lease may no longer be excluded from the integration process because it has not been recorded. All lease agreements that last for a period of less than two years can now be oral. Often, tenants and landlords agree the rental and living conditions, such as maintenance, and how the deposit will be handled, but pay little attention to the rest of the lease terms. This does not remove this lease from the lease agreement registration process; therefore, all tenants whose leases are 24 months or less must ensure that their lease agreements are recorded with the local Rental Tribunal.
To protect landlords from any future claims that the contract was never recorded, it is best practice that even if a lease is less than 24 months , that the contract be recorded in compliance with the RHA. In addition, all lease agreements for longer than two years must be provided to the Rental Tribunal with the registration fee within 7 days of the date of conclusion. If the parties fail to provide the contract to the Rental Tribunal within 7 days, it will be unenforceable.
One of the most common issues is the non-payment of rent. This is due to the fact that a significant amount of tenants may not have the monetary means to pay the full rental or have not been permitted by the landlord increase their rental. The non-payment of rent is usually the basis of many contested eviction applications.
The failure of the landlord to maintain and effect repairs to the home could result in a reduction in the rental amount until the building has been properly repaired. Tenants can also terminate the lease when there are problems with facilities and they are left unfixed; the tenant can terminate the lease on the grounds of non-use of the facility. Tenants also have the right to demand that the landlord restore the premises to its original condition and in the event that the tenant replaces or repairs anything, he or she can deduct the cost of replacing or repairing the thing from the next month’s rental.
How to Draw Up a Lease Agreement
When entering into a lease agreement, it is important to get a lease agreement drafted that is legally binding and tailored to your particular needs. When drafting a lease agreement you need to ensure that it complies with the necessary requirements of South African law and protects your rights. There are requirements for a lease agreement to be valid in South Africa: A lease agreement should set out exactly what you are leasing and for how long, the rent that is required, when rental is to be paid, how much will be paid for utilities such as electricity, water and gas, and who is responsible for maintenance of the property. You should ensure that you receive and keep a copy of the lease agreement signed by both the lessor and lessee. It is advisable that you should also get legal advice on the lease agreement before you sign it to ensure that it is legally valid and protects your rights. An expert could assist you to draft a lease agreement to cater for your unique requirements and to protect your rights. It is important to ensure that the lease agreement includes all provisions required in terms of the requirements of a lease agreement outlined above and that the provisions are clear and unambiguous. It is advisable that you should get legal advice on the lease agreement before you sign it to ensure that it is legally valid and protects your rights. An expert could assist you to draft a lease agreement to cater for your unique requirements and to protect your rights.
Disputes and Ways to Resolve Them
Common disputes between lessor and lessee in a lease agreement includes: late payment, no payment, disturbing of peace, damage to property or a tenant that is violating by-laws.
Late payment
Generally, this clause is contained in the lease and stipulates that a penalty clause should apply if the rent is not paid on time. Further, the client should ensure they have a rental guarantee which will cover the outstanding rental due to them in the event that the tenant does not pay their rental and utilities.
No payment
If the rent is not paid, then litigation is the normal remedy available to the lessor to enforce the terms of the agreement. The lessor can institute an eviction application in terms of PIE or ejectment proceedings in terms of the magistrates court. The lessor must give the lessee the requisite notice period after default before instituting those proceedings. Further, if the lessor wants to claim for an amount due and that amount is over R12 000.00 then the lessor can issue a summons for the outstanding amount.
Disturbing of peace
Generally, clauses are inserted into the lease that the lessee must not disturb or cause to disturb their neighbours. Should the lessee be causing a disturbance the lessor should contact the lessee to put them on terms and afford them an opportunity to rectify the situation. If the lessee continues to disturb the neighbours, a complaint can be logged with the SAP instigating criminal proceedings against the lessee. Further, the lessor can institute an eviction application in terms of PIE or ejectment proceedings in terms of the magistrates court.
Damage to property
The client’s property is listed on the property schedule in the lease and capital improvements that have been incorporated into the property should be inspected at the commencement and at the end of the lease. The client should take photographs of the property before it is let to a tenant and at the end of the lease. If there is damage to the property and either the parties cannot agree on the costs to fix the damage and/or the damage is not being repaired by the tenant then litigation may be the remedy available to the lessor against the lessee.
Termination and Renewal of a Lease Agreement
Lease agreements in South Africa usually have a period attached to them. Once the period has expired the landlord expects his property back and the tenant needs to find alternative premises. The easiest and most equitable way to regulate the return of the leased property and the tenant vacating the property is to extend the lease for a further term upon the same terms as before.
A lease agreement can only be terminated by either agreement, effluxion of time or cancellation (which can be for any number of reasons).
In the case of a mutual agreement to terminate the lease, no notice is required and the parties agree to terminate the lease without any further obligations to each other.
A lease agreement can be terminated due to effluxion of time in which case the lease will simply end on the term expiry date.
Lease agreements are usually automatically renewals if this option has been agreed to between the parties. If a lease comes to an end and there is no automatic renewal provision and no agreement between the parties for further extension, the tenant is obliged to vacate the property if the lease agreement has come to an end.
If the landlord wishes to extend the lease agreement for a further period, he must give the tenant notice in terms of the lease agreement within the time stipulated in the agreement . If this is not done then the lease will be regarded as having renewed for the same period by virtue of tacit agreement, which by default, will be for a short duration.
The landlord cannot simply overlook the expiry date. He must timeously inform the tenant that he does not wish the lease agreement to continue and the parties cannot arbitrarily continue with the lease agreement. The only way in which the parties can be bound is if they sign a new lease agreement containing the same or different terms.
Notice periods vary from lease to lease although 3 months is generally accepted. However, to hold a tenant to only 3 months rather than a short term lease may be unreasonable.
An end of lease inspection is simply a requirement that the premises be inspected and reflect a condition that is satisfactory to both parties.
The tenant is required to pay for the costs of painting, repairs and cleaning of the property once a landlord gives permission and as long as these costs are in accordance to the norms of the property sector. The court will not grant a landlord an order for improvements or alterations that he has not requested in writing.