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Thursday Sep 25, 2014

At expiry, a property lease changes

When a tenant continues to occupy the dwelling after the fixed period lease ends, the occupation becomes a monthly periodic lease.

Section 5 of the Rental Housing Act 50 of 1999 relates to the provisions of leases and subsection 5 deals with an expired lease.

According to this paragraph, if the tenant remains in the dwelling, with the express or tacit consent of the landlord, a periodic lease is created.

In the absence of a further written lease, parties are bound by the same terms and conditions of the expired lease, except that at least one month's written notice must be given of the intention to terminate the lease.

What would be the tenancy period if parties begin to negotiate a new lease after the fixed lease expired?

Let us take the case where a fixed lease had ended and parties begin to negotiate a lease for a period of five years. During negotiations, a new lease is presented to the tenant for his signature, who signs the lease but alters the section dealing with security deposit.

The alteration is a rejection of an offer, at least in relation to the deposit.

The landlord insists that he requires a deposit equivalent to four months rental, while the tenant is adamant that he made it clear that he was not prepared to pay a deposit.

The landlord then reduces the deposit to one month's rental. The tenant is still not willing to pay a deposit.

Can the landlord or tenant claim that a lease exists? In Gaap Point of Sale (Pty) Ltd v Valjee NO and Others; 2011 (6) SA 601 (KZD), this was precisely the argument between the parties. The judge referred to the deposit as an offer and the tenant striking off the paragraph from the lease stipulating this offer amounted to a counter-offer.

The result was that the counter-offer was a rejection of the original offer and therefore destroyed the original offer.

The landlord's refusal to accept the counter-offer meant that there was no longer an offer and, consequently, no agreement existed between the parties.

In Jones v Reynolds, 1913 AD 366, the landlord presented a new lease to his tenant for the remainder of the farm. The new lease was to run concurrently with the present lease at a yearly rental of £120 on the same terms and conditions.

The tenant wrote to the landlord that he accepted the lease save for clause 9, that restricted him from sub-letting.

Negotiations failed and the matter was taken on appeal, where the court held that the correspondence between the parties did not constitute a contract. In fact, the rejection of the offer and counter-offer meant that there was no agreement concluded between the parties, and the tenant was a trespasser.

Chief Justice Lord de Villiers concluded that there was insufficient evidence that an agreement was entered into.

'It should not be forgotten that the plaintiff was owner of the land, and that it depended on her consent whether she would or would not let the land. She was free to impose such conditions as she chose until the agreement was actually concluded.'

While the tenant was under the impression that an agreement was concluded, the court found he failed to establish his case by failing to prove that a lease contract existed.

Dr Sayed Iqbal Mohamed
Chairman, Organisation of Civic Rights
Tenant Matters
Daily News


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