Law of Sale and Lease

LWSLA3

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Week 5: Lesson 1 - 2
Introduction

Topic : Lessee obligations & Lessor Remedies

What we will be covering this week:

Lesson 1: Position of the lessee in terms of third parties.

4.10 Discuss the huur gaat voor koop principle with key focus on the
relationship between the new owner and the lessee.
Week 5: Lesson 1 - 2
Introduction
Lesson 2: Rights, powers and liberties of the lessor

4.11 Explain the basic workings of:

· Subletting
· Cession
· Assignment
· Renewal of leases.
Lesson 1: Position of the lessee
in terms of third parties.
 Problem

A year later no one is

The agreements lasts 1 year interested in buying the
Your landlord signs a lease
and landlord intends to sell property and the landlord
agreement with you
the property and tenant (you) renew the
lease for a following year

What protection do you

The buyer intends to occupy
(the tenant) have? What is Within 2 months of the
the space himself and
more important: the lease lease, the landlord gets a
therefore wants the tenant
agreement or the sale buyer for the property
out
agreement?
Huur gaat voor koop

• Roman law = the new owner could evict the tenant

• Roman Dutch Law = the lease takes preference (HGVK rule) à This
still applies in SA

• Huur gaat voor koop (HGVK) = lease goes before sale

Huur gaat voor koop

What the rule is based on:

• Nemo plus iuris – the landlord cannot transfer greater rights than he
himself has to the purchaser (because of the lease, the landlord does
not have the right of occupation)

• Must protect the rights of the tenant ito the lease agreement
Huur gaat voor koop

• Default position in contract law: parties to a contract cannot create

obligations that bind third parties who are not party to a contract.

• However, a situation may arise where the landlord sells his property to a
3rd party while the lease with the tenant is still in force.

• What is more important: the lease agreement or the sale agreement?

This principle (huur gaat) means that lease takes precedence over
purchase. It was created to protect the tenure of certain leases

• What protection do you (the tenant) have? lessee’s tenure right is

protected and given precedence
Huur gaat voor koop

• in the case of a lease of immovable property, a tenant is protected against the

rights of 3rd parties which vest later in time than those rights of the tenant under
the lease.

• property is sold to a new party or ownership changes, the new owner will have to
take over the lease agreement by “stepping into the shoes of the seller”.

• The new owner will have the same obligations against the tenant as the seller did
before the sale took effect.

• Both parties, tenant and new owner are bound equally to the lease agreement
and neither can back out from it without following the rules of lease.
Huur gaat voor koop

Long Term and Short Term Leases – Introduction

• In the calculation of long & short leases you have to factor in the
renewal periods

• maxim applies for a lease of 10 years or less.

• If the new owner had no idea of the existence of the lease then he is
only bound for the first 10 years if a lease is for longer.
Huur gaat voor koop

Long Term and Short Term Leases – Introduction

• In the Genna- Wae case it was stated that both the lessee and the
purchaser are bound in terms of the lease and thus the lessee cannot
opt out of agreement as the rights of previous landlord have now
been transferred automatically to the new owner.

• The purchaser and the tenant will only be bound in terms of the
essentiala of the lease
Huur gaat voor koop

Long Term and Short Term Leases – Introduction

Exceptions to this rule

• for example in the case of a mortgage with a bank The rights of the bank
will take precedence over those of the tenant. (Kerr et al, 2014. Page 516)

• In terms of the CPA section 14 states that either party may cancel
agreement by giving 20 days’ notice at least if the lease is 24 months and
less
Huur gaat voor koop

Short lease

Onerous successor

• Person who has given value in the process of acquiring rights to a property (e.g.
purchaser)
• Ito the HGVK the purchaser is bound by a short lease over the property if:
• The purchaser was aware of the lease at the time of the sale agreement’s conclusion
• The tenant was in occupation already
• The purchaser is also bound to the option for the tenant to renew the lease up to 10
years
• Purchaser DOES acquire rights to the property but these rights are subject to the rights
of the lessee
Huur gaat voor koop

Short lease

Creditors of the landlord

• If the tenant is not in occupation of the property at the time that the landlord becomes insolvent
the creditor will be an unsecured creditor (what does this mean?)
• tenant is in occupation lease will be protected and prevail against all other creditors except for a
mortgage bond
• Rights of the bond holder arose before the tenant was in occupation
• The property is sold on auction, only if the highest bid covers the mortgage debt can the property
be sold subject to the lease
• If they are unable to make enough money off the bid to cover the bond (because no one wants to
by the property subject to a lease) then the property can be sold without the lease (the tenant’s
rights are disregarded)
Huur gaat voor koop

Short lease

Gratuitous successors

• E.g. an heir or donee

• they are bound to the lease agreement whether or not they knew
about it and irrespective of whether the tenant was in occupation
Huur gaat voor koop

Long lease

Formalities of the Leases of Land Act apply to a lease which is:

• For a period of not less than 10 years

• For the natural life of a person
• At the will of the tenant
• Renewable at the will of the lessee indefinitely
• Renewable for periods which, added to the initial period, will be more than
10 years
Huur gaat voor koop
Long lease

To bind the onerous successor for more than 10 years:

• The lease is registered against the deed of the property

• The creditor / onerous successor at the time of the transaction must know of the lease

• Heirs are bound to these leases

• the Leases of Land Act will apply unless excluded. This act states that there are no
formalities for a valid lease
Huur gaat voor koop
Legal consequences of the operation of the HGVK rule

• Previously new owner could evict the tenant and the tenant would sue the former owner
for breach

• Now the tenant is protected and the new owner is bound to the lease

• Original landlord is replaced by the new owner

• New owner has all rights and duties that the old owner had and is bound by all the
material terms of the contract

• Tenant doesn’t get to chose whether or not to be bound

Huur gaat voor koop – Video

https://www.youtube.com/watch?v=pqeUvGXaLig
 Practice Questions

Kepa entered into a lease agreement with Boipelo on the 19th of January 2018
until 31 December 2030. Kepa is relocating to Spain and is now selling the
premises although the lease only expires in 2030, the new owner Pitso wants to
evict Boipelo and her family immediately despite knowing the agreement
between Kepa and Boipelo.
1.1 Discuss whether Boipelo has any kind of remedy against Pitso.
1.2. Explain whether your answer would have been different if the new owner did
not know of the lease agreement between Boipelo and Kepa?
2.Boipelo is very angry and now wants to cancel the lease agreement immediately.
Discuss whether she can do this without falling short of the law.
Lesson 2: Rights, powers and
liberties of lessor
Powers, rights and liberties - Introduction

• parties to a lease can also decide which powers, rights and liberties
they have in terms of the lease agreement.

• We are going to distinguish between the 3 liberties that can be

granted in terms of lease - assignment of lease, cession and
subletting. (Kerr et al, 2014. Page 533)
Subletting

• Unless prohibited, a lessee is entitled to let another person use and

enjoy the property.

• power to sublet is qualified in section 4A (9) of the Rental Housing Act

• provides that a tenant may not sublet a dwelling without the consent of a
lessor of which consent may not be unreasonably withheld.

• If the lessor sublets, his contract with the other person will be known
as a sublease
Subletting

• the original lessee becoming the sub lessor and the new lessee
becoming a sub lessee

• sublease is not different from an original lease with the rights being
the same; use and enjoyment in exchange for rental.

• sub lessee cannot acquire more rights than the lessee has and can be
ejected if the lessee enters into the agreement whilst not having
power to sublease
Subletting

• the purpose of the prohibition in a lease against subletting without the

consent of the landlord is to protect the lessor from having his premises
used or occupied by an undesirable tenant - the Bryer v Teabosa
Properties case

• If lessee sublets without permission of landlord, it would be a major breach

entitling the landlord to cancel lease.

• that the clause in a lease prohibiting subletting must be clear and not
ambiguous to the lessee - Floral Displays case
Cession

• cession refers to the transfer of rights only, and not obligations

• If there is a clause in the lease referring to cessionthe lessee is bound

to that clause - Floral Displays case
Assignment

• An agreement to transfer both rights and obligations

• assignee is the person who enjoys the benefits and takes over the
obligations of the lessee.

• The lessor must consent to the assignment agreement

• if the lessee parts with all his rights to the lease and the assignee
undertakes to perform in terms of agreement and lessor consents to this,
then there is a complete delegation and assignee steps into the shoes of
the lessee. - Rolfes v Zweigenhaft case
Assignment v Subletting

https://www.youtube.com/watch?v=Hhd2ZXg4epg
 Practice Questions
Luckmore Homer leases a house from Thandani which he is using for residential
purposes. Discuss whether Luckmore will be able to sublet the premises to his
cousin Thomas if the following clause is part of the contract: ‘The tenant shall
not sublet all or any part of the premises, nor suffer or permit occupation of all
or any part thereof by any other party, without prior written consent of the
landlord, which consent shall be reasonably withheld’

1.1. Discuss the impact of the existence of an express clause prohibiting subletting
in terms of the Floral Displays case.

1.2 Explain whether your answer would be different in 1.1 if there is no such
clause in the contract.

1.3 Luckmore has heard about the Rental Housing Act and is unsure whether it
would affect subletting. Explain to him as a law student at Eduvos
Renewal of a leases

• Leases can be renewed expressly, tacitly or by implication

• Occurs before a lease is terminated (agreement to renew after lease has

terminated = a new lease agreement)

• Parties are not bound to renew on same terms as existing lease e.g. may alter
rent due to negotiation OR escalation clause in existing lease.

• When a lease has been renewed, then later terminates, you will use the date of
commencement of the original lease not the date of commencement of the
renewal period to determine the standard of condition and state of repair
Renewal of a leases

• If the parties renew the lease agreement and they do not expressly
agree on the period which the contract is renewed for then it will be
renewed on a month to month basis.

• The renewal of a lease can be implied e.g A leases a house to be for

one year from 12 June 2023. In March 2024 B visits A to pay rent. A
mentions he will be going overseas for 6 months. The B says that he
will pay the six months rent now and gives A the money, which A
accepts – in this case the renewal of the lease is implied.
Renewal of a leases
How does renewal work according to the Regulation 29 of the Rental
Housing Act?

Unless lease provides otherwise, the tenant:

• must exercise the right of renewal by giving the landowner written

notice of his/her intention to renew the lease.

• must give notice of his/her intention not less than one calendar
month before the date on which the lease would otherwise expire.
 Quiz

1. State five things you know about huur gaat voor koop. (5)

2. State the three ways in which a lease can be renewed. (3)

3. What principle did the Genna Wae case provide? (3)

4. How do an assignment and cession differ from each other. (2)

5. Explain what subletting entails. (5)