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Wednesday Sep 23, 2015

Sub-letting and assignment

Is there a difference between sub-letting and assignment? A tenant's lease agreement contains references to assignment and subletting, requiring the tenant to obtain the landlord's permission in the event the tenant intends to assign the lease, or enter into a sub-lease.

The right to sub-lease under common law was not affected by the Rental Housing Act 50 of 1999, nor the contractual obligation to obtain the landlord's written permission if that is part of the lease contract.

The tenant who concludes a sub-lease hands over a part of the leased property, or the entire property, but remains responsible for all the obligations with the (principal) landlord.

The sub-tenant acquires legal rights against the original tenant.

The tenant under the main lease is usually referred to as the original, main or principal tenant, and the sub-lease gives rise to a sub-tenant. But there is no legal relationship between the sub-tenant and the original landlord.

The tenant and sub-tenant, as landlord and tenant, have contractual rights and corresponding obligations enforceable through the rental housing tribunal or a court of law. The sub-tenant is responsible to the main tenant without acquiring greater rights.

In Ellerine Brothers (Pty) Limited v McCarthy Limited [2014] JOL 31793 (SCA), the court confirmed the legal nature of a sub-lease.

A sub-tenant cannot acquire more rights from the principal tenant than that which the tenant has.

The original lease stays in place, unaffected by the sublease. However, the sub-tenant cannot occupy beyond the period the main tenant agreed to in the original lease.

The main tenant is ultimately responsible to give vacant occupation at the end of the lease term, and would have to ensure the sub-tenant moved out.

In assignment, the tenant transfers a legal right, the lease, to another person, who then becomes the lawful tenant.

The tenant hands over the property, as well as all the rights and obligations, to another tenant, the assignee.

This gives rise to a legal relationship between the assignee as new tenant. The landlord and original tenant are divested of their rights and obligations under the lease (eThekweni Municipality v Zedek Trading 82 CC (12482/2008) [2011] ZAKZDHC).

In Talas Properties of Rhodesia (Pvt) Ltd v Abdullah (1) RLR20, the landlord turned to the court to have the assignee evicted.

The tenant, Williams, entered into a lease with Talas Properties, and later assigned the lease to Abdullah.

The landlord contended that the terms of the lease, that included assignment, be understood to mean that only rights could be transferred.

The court concluded that in the lease, read as a whole, and having considered all the arguments, it was abundantly demonstrated that the parties “in using the word 'assign' in clause 4.01, intended to give it its usual and ordinary meaning of a transference of rights and obligations.”

The ejectment was denied and Abdullah was entitled to remain in occupation.

The landlord, having agreed that in the event the court accepted that the assignment of the lease was valid, would not deny consent to the assignment.

It is important to get a written undertaking from the landlord that the lease is assigned to another tenant and that all responsibilities are discharged. Should the tenant sub-lease without the written consent of the landlord, the tenant would be in breach.

To avoid a breach, parties should include a clause in the lease that the tenant would be entitled to sub-let or assign the lease, with the prior written approval of the landlord.

Dr Sayed Iqbal Mohamed
Chairman of the Organisation of Civic Rights
Tenant Issues
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