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Wednesday Jul 16, 2014

Check contract before deducting costs from rent

The tenant of a residential lease is under duty to pay rent regularly, on time and in full as required by section 4 (5) (a) of the Rental Housing Act 50 of 1999.

Failure to pay rent on time or withholding rent is a material breach and may lead to the cancellation of lease, or the landlord's refusal to renew it.

In common law, a tenant has a weapon, a right to deduct from the rent (set-off) where the landlord is in default.

However, the tenant cannot rely on set-off if the lease has a clause for parties to contract out of this common-law right. It is a general practice to include a clause that restricts the tenant's common-law right to prevent any deduction or set-off.

The following are examples of such a clause:

'The monthly rental is payable monthly in advance, on or before the first day of each and every month, without deduction or set-off for any reason, at such place as the Landlord may indicate in writing from time to time or into such account as the Landlord may nominate from time to time.'

'All rental and other amounts payable by the tenant in terms of this agreement of lease shall be made without demand, free of exchange and without any deduction or set-off whatsoever.'

Should the tenant resort to deducting or setting off, the landlord can resile from (abandon) the lease for breach.

The tenant can turn to the courts or the Rental Housing Tribunals to examine such a clause. The 'without deduction or set-off' clause does not oust the jurisdiction of a court.

In TH Restaurants (Pty) Ltd v Rana Pazza (Pty) Ltd and Others 2012 (5) SA 378 (WCC), at paragraph 47, Judge James Yekiso stated that not 'all 'breaches' in the form of failure to pay, in circumstances where a contract contains a 'without deduction or set-off ' clause will, of necessity, constitute a breach entitling the other party to resile.

One can only have regard to authorities such as Moreland v Dent 1876, NLR 2 at 7 and Poynton v Cran 1910 AD 205 to appreciate that a 'without deduction or set-off ' clause does not necessarily lead to a conclusion that the exceptio defence is absolutely precluded in contracts of a bilateral nature'.

In Loch Logan Waterfront (Pty) Ltd v Carwash 4 U (Pty) Ltd and Another case, Judge Mojalefa Hans Rampai held that the relative remedy of rental remission applied to cases of minor deprivations, whereas the absolute remedy of rental withholding applied to cases of major deprivations.

The courts have jurisdiction and can use discretion to decide on the merits of each case in the context of the lease contract, the circumstances surrounding the need for repairs and the evidence of the parties.

In Poynton v Cran 1910 AD 205, the tenant signed a lease that stated that he would not be able to deduct from the rent at all, and that he would be responsible for the internal and external repairs and maintenance of the premises (a hotel).

In spite of these conditions in the lease, the landlady was under duty to ensure the property was repaired at the outset of the lease, and handed over in a tenantable condition.

The tenant did not accept the premises with the defects. If he had, then he would have had no claim, because this would have been a waiver.

In other words, having knowledge of the defects and accepting them without demand for repairs or protest results in the tenant not having the right to claim repairs or damages.

In the Poynton case, the tenant retained his right to demand that repairs be carried out, and the right to claim costs for repairs he was eventually compelled to do when the landlady failed to respond.

The landlady's failure at the outset to attend to the repairs prevented her from relying on the condition that the tenant could not charge the cost against the rental.

According to Judge Innes, the without deduction clause 'cannot relieve the landlady of her obligation to place the leased property in repair, or deprive the tenant of the remedy which the law gives him in respect of her initial default'.

It is important to seek legal advice and not to deduct or resort to setting off against the rentals.

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


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