Category

Lease Agreement

Apr 02
0
Commercial lease

Misrepresentation in commercial contracts (including your lease)

By | Lease Agreement

What to do if you’ve been led up the garden path

Before any contract is signed, there are usually discussions about the arrangement or agreement being made between two parties. The purpose of the contract is to capture the details and formalise them, so everyone understands their responsibilities and expectations. Signing the contract is often seen as a formality, especially if the negotiations have been amicable and the two parties seem to have a good rapport. For that reason, it may not be scrutinised as carefully as it should be. What happens if you have an understanding about the conditions of a contract, for example a lease, and you later discover the terms you thought applied are not actually included in the contract?

For example, perhaps you enter into a lease agreement believing the furniture is included in the rental amount. After six months, the landlord demands the furniture back. You assume you are covered by the lease agreement but, when you review it, you realise there is no explicit clause confirming the inclusion of the furniture. What can you do?

False or misleading statements

The lease is not the watertight “get out of jail card” the landlord may think it is. A landlord may not rely on a lease clause limiting their liability for representations if they have made false or misleading statements to a prospective tenant before entering into a lease. This is known as misrepresentation. Whether fraudulent, negligent or innocent, misrepresentation arises when a party has been tempted or lured into entering into a contract by the other party’s misrepresentation of facts. If your initial discussions led you to believe the furniture was included in the rental, the landlord is guilty of misrepresenting the reality. However, it’s equally possible that you misunderstood the landlord, who was in fact acting in good faith.

The primary issue is the disparity between the written lease agreement and the actual intentions of the parties. Determining the true intentions can be murky and requires looking beyond the written agreement to the actions of the parties. 

Material misrepresentation

To pursue a claim for damages, you must establish that misrepresentations were made when you entered into the lease agreement. In contract law, honesty and transparency are critical principles. A key concept in contractual agreements is “material misrepresentation”. Misrepresentation is defined in law as “an untrue statement of representation concerning an existing fact or state of affairs which is made by one party to the contract with the aim, and result, of inducing the other party into concluding the contract.” The misrepresentation may be about the qualities or characteristics of the subject of the contract.

Misrepresentation may render a contract voidable if: 

  • A misrepresentation has been made
  • The misrepresentation was made by one contracting party to another
  • The misrepresentation was unlawful
  • The misrepresentation induced the parties to enter into the contract

Types of misrepresentation

There are three types of misrepresentation: 

  • Intentional misrepresentation – a person makes a statement, which is known to be false and without regard for whether it is true or not, with the intent to deceive. The deceived party may claim damages and decide whether or not to uphold or rescind the contract
  • Negligent misrepresentation – a person makes a statement they believe to be true but they fail to exercise reasonable care or competence to communicate information that is true or correct. The party aggrieved party may have a claim for damages or may choose to rescind the contract
  • Innocent misrepresentation – a person makes a statement neither fraudulently or negligently. In these circumstances the aggrieved party will not have a claim for damages but may have the choice to uphold or rescind the contract

Remedial action 

Someone who has been misled into contracting by the misrepresentation of the other party, as in the example of the lease and the furniture, has a number of options to remedy the situation: 

  • They may seek to have the contract rescinded or set aside, essentially undoing the agreement and returning the parties to the position they were in before the contract was entered into. In the case of a lease agreement where the tenant has taken occupancy of the property and it is their home, this could be tricky.
  • Where the innocent party suffered financial loss due to the misrepresentation, they may seek monetary compensation from the party responsible for the misrepresentation. In our example, there may not be a literal financial loss, but it could be argued that returning the furniture would place the tenant in the position of having to make a financial outlay to replace it, and monetary compensation may be helpful.
  • In cases where damages are inadequate, the court may order specific actions, compelling the party responsible for the misrepresentation to fulfill their contractual obligations as originally agreed upon. In our example, this would mean leaving the furniture in the property for use by the tenant (which would probably be the simplest and most effective solution).

Burden of proof

For a misrepresentation claim to succeed, the following elements must be proven: 

  • The statement or conduct of the one party was false and was made either intentionally or negligently
  • The misrepresentation induced the other party into entering into the agreement
  • The misrepresented fact was significant enough that it influenced the innocent party’s decision to enter the contract
  • The innocent party reasonably relied on the misrepresentation when entering into the contract

In our example, it would be necessary to establish the true intentions of the parties upon entering into the lease agreement. If it could be established that the true intention was to provide the furniture and the landlord is now refusing to do so, there could be a possible claim of misrepresentation. 

For further information

We’ve used this simple example to illustrate the concept of misrepresentation and what to do about it. In our experience, misrepresentation can happen by either landlord or tenant. It is also a salient reminder to scrutinise a lease agreement or any contract before signing it! 

Simon Dippenaar & Associates, Inc. is a law firm of specialist eviction lawyers in Cape Town, Johannesburg and Durban. We help landlords and tenants maintain healthy working relationships. If you think you are a victim of misrepresentation and you are disadvantaged or distressed by it, contact one of our attorneys on 086 099 5146 or simon@sdlaw.co.za for a confidential discussion today. We’ll help you put things right.

Further reading:

Jul 10
1
Rights responsibilities in rental housing

Tenants’ rights and landlords’ responsibilities

By | Eviction notice, Evictions, Lease Agreement, PIE, Rental Housing Act

What South African law says about eviction

The relationship between property owner and occupier should be a happy one. After all, it offers a reciprocal and mutual benefit. One earns a passive income from an owned asset, and the other enjoys a home to live in, without the weight of responsibility that come with property ownership. Unfortunately, the relationship is not always friendly. Friction can emerge as a result of unpleasant behaviour by either party. Landlords can be unresponsive or unreasonable. Tenants can be disrespectful or negligent. South African law contains multiple pieces of legislation governing rental housing, and both landlords and tenants are accorded rights that protect them. They are also assigned responsibilities they must uphold. But the balance tends to lean towards tenants’ rights and landlords’ responsibilities. In this article we examine them both.

Understanding tenant’s rights

The South African Constitution gives people certain inalienable rights. How do they apply to tenants?

Right to fair treatment in law

A landlord cannot evict a tenant without going through the correct legal procedures. Unfortunately, some landlords take it upon themselves to involve municipal law enforcement to evict tenants. The Prevention of Illegal Eviction from and Unlawful Occupation of Land Act No 19 of 1998 (PIE) is a key piece of legislation in South Africa that regulates the process of eviction. It was enacted to protect both property owners and tenants, ensuring that evictions are carried out in a fair and lawful manner.

The courts take eviction law very seriously. Failure to follow the correct process could result in a heavy fine for the landlord, as well as damages payable to the tenant. In the worst case scenario, the landlord could end up in jail, facing serious criminal charges.

Right to adequate housing 

The Constitution recognises the right to adequate housing as a basic human right. No one’s property may be taken away from them and no one may be evicted from their home without a court order. This means a landlord must apply to court before evicting a tenant from their property.

The court must be satisfied that there is alternative accommodation available to the tenant before ordering the eviction. This can be state housing, as the state has a duty to provide housing to all its citizens. If the tenant has occupied the property for over six months, PIE does not allow the tenant to be evicted without having first secured alternative accommodation.

Right to legal representation

The law gives a tenant the right to defend against an illegal eviction if a landlord forces them to leave the premises without appropriate notice. Ownership does not give a landlord the right to evict a tenant without following the correct procedure.

Tenants have the right to legal representation during the eviction process. If a tenant cannot afford a lawyer, they can seek assistance from Legal Aid South Africa or a pro bono attorney. Further information regarding Legal Aid is available online or from the Registrar of the High Court.

Understanding landlord responsibilities

Landlords have a set of responsibilities towards their tenants. Legislation is motivated in part by past abuses and rental housing law ensures tenants cannot be exploited or unfairly treated.

General obligations

The landlord has the responsibility to:

  • Deliver the property to the tenant for their use and enjoyment. The landlord must provide everything necessary for the tenant to use and enjoy the property, for example, keys, remotes, etc. 
  • Maintain the property in good order and condition for the duration of the lease agreement. Correspondingly, the tenant should report any defects in the property to the landlord.
  • Ensure the tenant’s undisturbed use and enjoyment of the property, i.e., the tenant’s privacy.

Following legal procedures

The PIE Act clearly defines the procedure the landlord must follow to evict a tenant. A property owner must not take the law into their own hands, for example by cutting the electricity or water supply to the property or intimidating the unlawful occupier into vacating the property. A landlord can only consider eviction in the event of a breach of the lease agreement which the tenant has failed to rectify. If the lease is coming to its natural end and the landlord does not wish to renew it, they simply give the tenant notice to quit per the terms of the lease agreement. This is not eviction. However, if the tenant breaches the agreement, the steps in the eviction procedure are:

1. Notify the tenant of the breach.

  • The landlord must issue a warning to the tenant in writing, giving them a specified amount of time to remedy the breach. This time frame is determined by the terms of the lease. Unless otherwise specified, it is 20 working days, in accordance with the Consumer Protection Act (CPA). The CPA is designed to protect consumers in various transactions, including rental agreements. It sets out specific requirements for notice periods and other aspects of the landlord–tenant relationship. If there is no written lease, the landlord must give a full calendar month’s notice. If the tenant rectifies the breach, the matter is finished.
  • If the breach is not remedied within the designated time, the landlord notifies the occupier in writing that the lease is to be cancelled and gives the occupier reasonable time to vacate the property.
  • The notice period required to cancel the lease, like the time allowed to remedy the breach, is dictated by the lease. If no time frame is stipulated, or in the case of a verbal lease, a minimum of one calendar month’s notice is required (end of the current month to the end of the following month).

2. Apply for a court order.

  • If the occupier fails or refuses to vacate the property, despite being given adequate notice, the landlord may approach the court to start the eviction procedure.
  • The court provides the landlord with a date and time for the eviction hearing.

3. Serve notice on the tenant 

  • Written notice of the eviction hearing must be personally served on the unlawful occupier of the property, as well as on the local municipality. 
  • This notice must be served by the sheriff at least 14 business days before the eviction hearing in court. 
  • The notice must indicate the date and time of the eviction hearing, the circumstances surrounding the eviction, and the unlawful occupier’s right defend themselves.

4. The hearing. 

  • At the eviction hearing the court will hear the matter and make a decision whether or not to grant the eviction order. The occupier may defend the eviction. The court will consider factors such as children, elderly or disabled tenants, and woman-headed households, and the availability of suitable alternative accommodation when granting the eviction order. In certain circumstances an order may be granted but “stayed” – delayed – to give the occupier more time to find another home.

Respecting tenant’s rights

Landlords must respect the rights of tenants during the eviction process. Harassment or intimidation of tenants is not permitted.

The landlord is not allowed to enter the tenant’s premises or remove doors to speed up the eviction process. The provisions of the Rental Housing Act are clear on the rights of tenants. The tenant’s rights include the right not to have:

  • Their person or home searched
  • Their property searched
  • Their possessions seized, except by court order

Balancing rights and responsibilities

Evictions are complex processes that require a careful balance between the rights of tenants and the responsibilities of landlords. It is also important to be mindful of ethical considerations, as South Africa has an acute housing shortage at present and a fragile economy. It is always better to try to resolve disputes through negotiation and, if necessary, mediation. Seeking an eviction order through the courts should be the last resort. 

For further information

Simon Dippenaar & Associates, Inc. is a law firm of specialist eviction lawyers in Cape Town, Johannesburg and Durban. We help landlords and tenants maintain healthy working relationships. Contact one of our eviction attorneys on 086 099 5146 or simon@sdlaw.co.za if you need help with tenants’ rights or landlords’ responsibilities. 

Further reading:

Jun 20
1
Rent control

The history of rent control

By | Lease Agreement, PIE, Rent, Rental Housing Act

Rent control no longer exists, but tenants are still protected  

If you are a tenant, you know that South Africa’s rental housing market is in crisis. Anyone who has tried to find a property to rent in Cape Town recently will tell you they’ve been one of a dozen prospective tenants to view a property in one afternoon, often trailing around multiple properties with the same group of contenders. When they finally find a place they like, they are one of three or four candidates (or more!) to submit an application to rent. Landlords have their pick of tenants, and tenants often wind up bidding for a property – offering more than the advertised rental – just to secure a desirable property. Those with limited budgets struggle to find suitable accommodation, or wind up moving far from friends and family to secure affordable lodgings. It’s not easy for landlords either. Despite the competition for tenancies in Cape Town, in other parts of South Africa it can take months to find tenants. 

The economy is in crisis, and rental arrears are common. Landlord–tenant disputes often wind up in the eviction courts. Rental housing legislation and the Consumer Protection Act give tenants indisputable rights, but rental housing is still a minefield. Landlords also have rights, along with responsibilities. Do they have the right to put up rents, and to what extent? What does the law say about rent control? We look at the rules and regulations governing rent and rent increases in South African law.

What is rent control?

Rent control is a law placing a maximum price, or a “rent ceiling,” on what landlords can charge tenants. Rent controls may sound desirable, from a tenant’s perspective at least, because the ceiling is usually set below market level. But economists agree (a rare occurrence!) that rent controls are destructive. They generally reduce the amount of housing available, even in uncontrolled zones. There is rarely enough supply of rent-controlled properties to meet demand, and excess demand must then be met by noncontrolled properties. This demand pushes rents up in noncontrolled areas, and the average price of rental housing winds up being higher than it would be with no rent controls. The other effect of rent controls is to reduce supply, because landlords unaffected by controls fear the controls might eventually reach them, and don’t put their properties on the rental market. New investment into rental housing is often diverted to other ventures, leading to a deterioration in housing stock. Therefore, while rent control might sound like a good strategy for tenants, it does not result in a healthy rental housing market.

Rent control in South Africa

The place most famous for rent control is New York City. But South Africa also had rent controls in the past. When and why was rent control implemented – and abolished? 

Historically, South Africa passed rent control legislation to protect tenants from exorbitant rent increases and evictions which were a result of the acute housing shortage that existed around the time of the Second World War. Initially, the aim was to provide some security of tenure for existing tenants, along with a limited number of grounds for eviction. Property owners did not appreciate these restrictions and viewed the legislation as an infringement of their common law rights. For example, common law allowed landowners to terminate a month-to-month lease by giving one month’s notice. However, the courts declared that the one-month notice period was to be interpreted as “not later than the first day of the month to be effective for that month”, which meant the actual notice period could be longer than 30 days. Another example was the restriction placed on landowners by the Rent Control Act 80 of 1976 regarding notice to vacate, i.e.:

  • Three months’ notice if the dwelling was required for personal occupation
  • Six months’ notice if required for renovation, giving the tenant the first right to re-occupy the dwelling
  • 12 months’ notice if the landowner  intended to demolish the dwelling

Landowners also had to satisfy the High Court that the demolition or reconstruction was in the public interest and the Minister of Housing had granted permission. 

As a result, landlords campaigned to overturn rent control and these restrictions. Their efforts were broadly successful and rent controls were subsequently limited to dwellings built and first occupied on or before October 20, 1949. Any tenant, regardless of income, who occupied this category of dwelling was “protected” by the provisions of the Rent Control Act. Tenants whose dwelling did not fall into this category, but who were occupants at the time the dwelling was de-controlled, still enjoyed the “protection” of the rent control legislation if their income was within a specific income band.

Eventually, rent control ceased to apply to any dwelling built after 1978-1980 and all dwellings in “white” residential areas were eventually phased out of rent control by the early 1990s.

How is rent governed now? 

Residential leaseholders are no longer “protected” under Rent Control legislation. The Rental Housing Act of 1999 provided a “cooling off” period of three years for tenants who were living in rent-controlled dwellings. On July 31 2003, rent control ceased to exist, enabling landlords to increase rentals without restriction and removing the requirement to apply to a statutory body (the now-defunct Rent Boards) for an increase. 

Self-governing market

The Rental Housing Act does not dictate the rate by which a landlord may increase the rent each year. However, the amount of increase and the frequency with which the increase can occur should be clearly set out in the lease agreement. It is usually one year, and corresponds to the date of lease renewal. The landlord may not attempt to increase the rent during the lease period unless the lease contains a clause permitting it. Furthermore, the landlord may not increase the rent excessively, i.e., above market rates (the rate one can expect to pay for a similar property in the same area). The market has been left to govern itself.

Rents are generally increased by 8-10% per annum. Rental income is not pure profit for a landlord. Property owners bear the operating costs of municipal rates, insurance, maintenance and repairs, and interest rate movements if the property is mortgaged. In the current inflationary environment, landlords have to ensure their annual recalculation maintains their rental at a viable level, while also remaining cognisant of the cost pressures their tenants are facing.  

A balancing act

The abolishment of rent control was welcomed by landlords, but removed an element of financial protection from low-income, previously disadvantaged tenants. The Constitution ensures a right of access to adequate housing and a right to occupy land with legally secure tenure. However, the lack of legislative restrictions on property rents means that some tenants struggle to find suitable affordable rental housing options. As a result, they have been forced to occupy properties that are outside their budget, thus increasing the likelihood of defaulting on their rental payments and, by extension, increasing the chance of eviction. Where there is limited supply of housing stock and excess demand, as in Cape Town, the market tends to push prices up. Most experts agree that rent control is not the solution. But the current housing crisis in South Africa demonstrates there is a severe need for more affordable housing to be available. 

Meanwhile, if you need help

At SD Law, we are a law firm of specialist eviction lawyers in Cape Town, Johannesburg and Durban. We can’t change legislation or influence market forces, but we can help both landlords and tenants with rental housing matters, including reaching mutually acceptable agreements regarding rent and other conditions of occupancy. If you need assistance with a dispute or want advice on any aspect of rental housing or landlord–tenant relations, contact one of our eviction attorneys on 086 099 5146 or simon@sdlaw.co.za.  

Further reading: