Tag Archive: Tenant

Commercial evictions: how a landlord can evict a tenant

PIE does not apply to commercial evictions, but CPA might

Legislation introduced in the last few years gives residential tenants a host of rights, and landowners or landlords must follow very strict procedures to evict tenants. However, the same is not true of commercial tenants. In some case the Consumer Protection Act (CPA) may apply, but if not, the relationship is governed by contract law.

Commercial evictions - Eviction lawyers

Landlord and commercial tenant relationship

South African contract law is derived from the Roman-Dutch law of contract. A contract is defined as an agreement between two or more parties binding them in a legal commitment. It is basically a legal framework that enables individuals or juristic persons (in other words, companies or organisations) to engage in business. They can exchange resources – such as money or their time – in the knowledge that they are protected by a legal agreement that is – or should be – fair to both parties. If one party reneges on their obligations, the other party is safeguarded by law from loss or the consequences of unlawful behaviour.

A commercial lease is a form of contract. It outlines the interests of both landlord and tenant and their duties towards each other. Properly drafted, it should facilitate a harmonious relationship between the two. Unlike residential tenancies, there is no legislation specifically governing commercial leases, so a professionally prepared, written lease is essential for avoiding misunderstanding and disputes. It is the contract as defined above.

Commercial rental is normally charged per square metre, rather than a flat rate for the premises. On top of that, there is usually a cost for the landlord’s operating costs, parking, rates and taxes, body corporate levies and insurance as well as charges based on use for electricity, water, refuse collection and sewerage. These should all be specified in the lease.

Selling the lease

If a tenant moves out without notifying the landlord and sells the lease to a new business, the new tenant is an illegal occupier. A lease is a contract between two named individuals or juristic persons. A lease can be sold, but the contract with the property owner must then be renegotiated and a new lease drawn up. Whether or not this can be done will also depend on the stipulations in the original lease.

Definition of a commercial tenant

Whether or not a tenant is considered commercial is not based on the zoning of the building but on the use of it. So someone who resides in a commercial property is considered a residential tenant and is protected by PIE. By contrast, a commercial occupant is someone who “…does not use buildings and structures as a form of dwelling or shelter”. The commercial occupant could be an organisation or an individual, and the building could be a residential structure. For example, a homeowner may let a cottage on their property to a self-employed consultant to use as an office. Although the cottage is part of a residential holding, the consultant is a commercial tenant because of the way the cottage is used.

Cancellation of a commercial lease

While commercial tenants do not enjoy the level of protection afforded residential tenants by PIE, the landlord must still follow due process. If a landlord wishes to evict a tenant, they must first cancel the lease. This can be done on expiry of the lease or on the occasion of a material breach of the terms of the agreement (usually rent arrears).

Consumer Protection Act

In some instances a commercial tenant may be protected by the Consumer Protection Act (CPA). If there is a fixed term lease, Section 14 of the CPA applies. In this scenario the landlord must give 20 business days’ written notice of a breach of the lease agreement. They may then only cancel the lease if the tenant fails to rectify the breach within the 20 days.

Section 14 does not apply in the following situations:

  • If the tenant is an organ of State (municipality, state department etc.)
  • If the landlord and tenant are both juristic persons
  • Once-off leases
  • If the tenant is a juristic person with an income/turnover above R2 million per year

In these circumstances 20 business days’ notice of a breach is not required before being able to cancel the lease.

Eviction process for a commercial tenant

Commercial evictions are handled either by the High Court or the Magistrate’s Court. The case is brought by way of action or application proceedings in the High Court and by way of action proceedings in the Magistrate’s Court. The choice of court is usually determined by the lease agreement, with the jurisdiction of the Magistrate’s Court the most common. The lease agreement must first be cancelled, as discussed above, before an eviction proceeding can be brought.

Generally, commercial evictions are effected speedily. The issues surrounding residential evictions – the rights of the occupier to a dwelling and the wellbeing of vulnerable individuals – are not at stake. By contrast, in the business context the rights of the property owner to protect commercial income take priority. But this highlights the need for a rock-solid lease to be in place. This provides the legal framework within which the eviction can take place.

Commercial evictions do not only involve the removal of the tenant. Landlords have a right to claim any damages that may apply at the time of eviction, as well as rent arrears.

Who can evict?

It is worth noting that in a commercial eviction the official landlord may not necessarily be the property owner. Commercial property is often owned by a juristic person such as a large corporation or a pension fund. Therefore an agent can act as applicant in an eviction case, as long as they can prove they have the right to appear in court on behalf of the owner (this is known in law as “locus standi”).

Landlord’s hypothec – the right to repossess tenant’s equipment

A commercial tenant does not have the same attachment to a property as a residential tenant. They still have somewhere to sleep at night, and it is not that difficult to find an alternative location for a business. For that reason, there is a greater risk that a commercial tenant might abscond when the notice to quit is served. Rather than pay the outstanding rent, the tenant might just take their moveable property and run. After all, they are not losing their home.

If a landlord is concerned that the commercial tenant might do a midnight flit, an urgent application can be brought before the Court to allow the landlord to attach and secure the movable goods on the property. If the tenant then removes them it is a criminal offence.

The security a landlord holds over a tenant’s property is known as the hypothec and is actually the strongest form of security in South African law. However, once the movable goods are removed from the property the landlord has no security over or rights to those goods. Therefore if there is reason to suspect a tenant might beat a hasty retreat, the landlord must apply for the attachment of the goods urgently. This is best done with the help of an experienced attorney.

Business rescue

Occasionally a landlord might not be able to commence the eviction process, even if the tenant is in breach of the lease. A business that has fallen on hard times may enter Business Rescue. This is a process that allows a business in financial distress time for rehabilitation. During this period there is a moratorium on all legal action, so an eviction notice may not be served.

What happens if the premises are sold?

There is a principle in South African law, derived from Roman-Dutch law, called “huur gaat voor koop“, which translates as “only the lease and nothing more”. What this means for the tenant is that, in the event of a sale of the building leased by the tenant, the purchaser is obliged to honour the lease agreement. The tenant may continue to occupy the building, or their part of it, according to the terms of the lease. The tenant’s rights in this situation are stronger than the right of ownership. However, the tenant should be alert to the fact that the new owner may not wish to renew the lease, depending on their plans for the property. So a wise tenant will be on the look-out for new premises well in advance of their lease expiry.

Professional help is essential

Whether you are a commercial tenant or landlord, it’s important to have a carefully drafted lease that includes all your requirements and conditions. If both parties know exactly who is responsible for what, conflict is less likely to occur. This includes the terms of renewal, which are often left open-ended in commercial leases and can be a cause for dispute as the end of the lease period draws near. Simon Dippenaar & Associates, Inc. in Cape Town and Gauteng is a law firm of evictions specialists with extensive experience in property law. They can ensure your lease is a sound business contract that will protect you, landlord or tenant. Contact Simon on 086 099 5146 or email sdippenaar@sdlaw.co.za.

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Eviction – when your tenant is also your employee

In South Africa it is not uncommon for employees to be tenants. This is most often the case when a domestic worker or gardener occupies a cottage on the property of their employer. Usually the accommodation is part of the remuneration package, and often the employer pays the utilities and sometimes even provides food. The dual nature of the relationship can make things complicated if it becomes necessary to terminate one or other of those contracts, but in law the situation is straightforward.

We’ll look first at the simple application of the law, and then consider a couple of alternative scenarios.

Employment terminated

In the simplest scenario you terminate the employment of your domestic worker, including accommodation. You must give reasonable notice, compliant with the terms and conditions of employment (e.g. you may have agreed a contract stipulating 90 days’ notice). If you wish to terminate the employment prematurely and the Basic Conditions of Employment Act applies, you must give one month’s notice of termination. The employee is then required to vacate the premises provided, unless other provisions have been made. In the event of premature termination of a contract, the employee is entitled to accommodation for one month, or longer, according to the outstanding period of the contract.

Employment terminated, accommodation is extended

But perhaps the contract of employment is concluded, or the employee retires or is sick and unable to work. Their replacement does not wish to live on your premises and therefore the accommodation does not need to be vacated. You are happy for the former employee to remain a tenant. In this case the employee becomes a conventional tenant. You draw up a lease as you would for any other tenant. Whether you charge a rent or allow them to stay as a “grace and favour” tenant is between the two of you, but it is still advisable to have a written lease in place. Some families promise accommodation for life to a loyal domestic worker. If you have made this commitment in the past you are obliged to honour it, whether or not it was in writing.

Employment continues, lease is cancelled

On the other hand, you are very happy with your domestic worker, but your daughter is returning from varsity and wants to live in the property currently occupied by the employee. You wish to cancel the lease but retain the employee. In this case you are bound by the Rental Housing Act and the Consumer Protection Act. Firstly, you must check the lease agreement (or the employment contract, if the provision of accommodation is an integral part of that and not a separate agreement). You must then give notice in accordance with the provisions of the lease or employment contract. See our article Lease Agreement – How To End It With Dignity. If there is no specified notice period given, you must give one month’s notice (20 business days to be compliant with the CPA).

Eviction

If the tenant refuses to leave as requested, you may then resort to eviction. You must comply with all the statutory measures and procedures that apply to your situation, i.e. if the property is in an urban area, the Prevention of Illegal Eviction (PIE) applies (see our article on PIE). If the property is in a rural area and is subject to the Extension of Security of Tenure Act (ESTA), then the provisions of that Act must be followed.

Bear in mind that if you have to evict your employee from your property, you will place your working relationship under severe strain, making it difficult for you both to continue as employer and employee. Try to resolve the situation without resorting to eviction if you can. It may mean being flexible with the notice period to allow your tenant time to find alternative accommodation. Be aware that they now may have to travel a distance to work and be sensitive to how that might impact their start and finish times. Review the employment contract to reflect the new live-out status and consider the implications for total remuneration. If accommodation was provided gratis as part of the package, you will need to revisit the wage you pay. Make sure all contracts are up to date and represent fair and reasonable employment practices.

Take professional advice

If you need help with any aspect of lease agreements or employment contracts for your domestic workers, we can help. Simon Dippenaar and Associates are experts in property and contract law. We will make sure you are fully compliant with all relevant regulations. Contact Simon on 086 099 5146 or email sdippenaar@sdlaw.co.za.

 

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