Lease agreements: non-fulfilment of conditions

When can this cause a lease to lapse?

Have you recently signed a lease or business agreement? Did it come into effect immediately? Perhaps it did, but it depends on the terms of the contract. Some contracts only become active once certain requirements are met. These are called “suspensive conditions” and, if they are not fulfilled, the entire contract may be null and void.

A recent High Court case, Intergame Properties (Pty) Ltd and Others v GO2 H2O (Pty) Ltd, provides valuable lessons on how suspensive conditions work, what “reasonable time” means, and why acting too quickly can have serious financial consequences.

The background

In 2020, Intergame and its co-applicants entered into two lease agreements with GO2 H2O, a company planning to operate a bottled water business on Intergame’s land. The leases included water rights, zoning for a factory, and servitudes for access roads. Both leases were subject to a series of suspensive conditions, including:

• Obtaining all necessary licences and permits under South African law
• Extending a water use licence from the Department of Water Affairs
• Registration with the South African National Bottled Water Association (SANBWA)
• Installing a water flow monitoring system
• Securing rezoning and business rights for the factory
• Appointing a land surveyor and registering servitudes

Once these conditions were in place, the leases were due to become fully operational.

What was in dispute

Intergame argued that the suspensive conditions had not been met within a reasonable period and the leases had therefore lapsed automatically. GO2 H2O disagreed and said it had already taken significant steps towards compliance, such as installing monitoring equipment and obtaining provisional approvals. GO2 H2O also claimed that the landlord forcibly evicted it from the property before the process could be completed, which made further compliance impossible.

The central questions before the court were: 1. Were the suspensive conditions unfulfilled within a reasonable time? 2. If so, did the landlord prevent fulfilment by evicting the tenant?

What the court said

The court identified several key principles.

1. “Reasonable period” depends on the nature of each condition. The leases did not specify an exact timeframe for compliance. The landlord’s blanket assertion that all conditions had to be met within five months was unsupported by evidence. The court noted that processes such as rezoning under SPLUMA or amending a water use licence under the National Water Act can easily take 12 months or more. A one-size-fits-all five-month rule was therefore unreasonable.
2. Each condition must be assessed individually. What counts as a reasonable period to install a monitoring system may differ greatly from the time needed to obtain government permits. The landlord failed to provide evidence showing what would be reasonable for each condition.
3. You cannot benefit from your own obstruction. The tenant alleged that it was forcibly and unlawfully evicted from the premises in July 2021, making further progress impossible. The court found this explanation plausible and accepted it for purposes of deciding the application. Citing a long-established principle, the judge reaffirmed: “If it is the fault of the person in whose favour the condition is inserted that the condition cannot be fulfilled, the law considers the condition to have been fulfilled as against him.” In other words, a landlord who prevents a tenant from complying cannot later rely on that non-compliance to escape the lease.
4. Disputed facts cannot be resolved on paper. The court held that, because serious factual disputes existed (especially about the eviction), the application was not suited to final relief on affidavit.

The outcome

The court dismissed the landlord’s application and ordered it to pay the tenant’s costs. In summary, the landlord failed to prove that the suspensive conditions were not fulfilled within a reasonable period. It also failed to show that the alleged five-month period applied to those conditions. Any outstanding approvals required by the tenant could not be secured because of its unlawful eviction, which the court accepted as a reasonable explanation.

Key takeaways for landlords and tenants

Be specific about timelines. If a lease depends on conditions being fulfilled, clearly define deadlines in writing. Avoid vague phrases like “within a reasonable time”. Understand what each condition requires. Licences, rezoning and environmental approvals all have different statutory processes and timelines. Act in good faith. A party who blocks or delays the other’s performance cannot later claim the contract has lapsed. Don’t rely on assumptions. A clause about operational deadlines (for example, “the plant must be operational in five months”) does not automatically apply to suspensive conditions. 

Suspensive conditions are not mere formalities. They determine whether a lease takes effect or not. Misunderstandings about their timing or effect can have costly consequences. Landlords and tenants should ensure all conditions are clearly drafted, realistic and fairly enforceable. Where conditions depend on external approvals, patience and cooperation are often required from both sides.

For further information

If you are entering into a commercial lease involving complex approvals, zoning or environmental requirements, our property law team can help you structure and negotiate your agreement to avoid disputes later.

Contact one of our attorneys on 086 099 5146 or simon@sdlaw.co.za. Simon Dippenaar & Associates, Inc. is a law firm of specialist property lawyers in Cape Town, Johannesburg and Durban.

SD Law – Simon Dippenaar & Associates Inc.

Attorneys, Notaries & Conveyancers

SD Law is a Cape Town law firm with a strong practice in divorce and family law, urgent eviction matters, antenuptial contracts, liquor licence applications and selected commercial disputes. Clients instruct us when the matter is urgent, high-stakes or strategically sensitive, and when they want direct, clear legal advice backed by practical litigation experience.

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