Default Retention Periods for Adverse Listings

TPN no longer accepts requests to delete TPN or TransUnion defaults unless the default details are factually inaccurate.

TPN is a credit bureau registered in terms of the National Credit Act No.34 of 2005 (NCA), which engages in the business of a credit bureau. One of the primary objectives of the NCA is to regulate the businesses of credit bureaus. One of the ways in which the NCA achieves this objective is by prescribing what information a credit bureau may receive, compile and report; and by prescribing the retention period for the different categories of information.

The Credit Bureau Association (CBA) of which TPN is a member issued a policy directive which is now in force:

“It was resolved by the legal and compliance committee of the CBA that adverse consumer credit information supplied by non Credit Provider Association members shall be displayed for the maximum period from the date of event, as prescribed for the said categories of consumer credit information, in terms of regulation 17 of the General Regulations Issued in terms of the National Credit Act No.34 of 2005 (NCA); effective from 1 June 2011.”

 Retention Periods for Credit Bureau Information

National Credit Act - Regulation 17 (1) 

 National Credit Act - Section 70(2)(d)

A registered credit bureau must-

…

(d) retain any consumer credit information reported to it for the prescribed period, irrespective of whether that information reflects positively or negatively on the consumer;

Conclusion

TPN members are able to load Adverse Listings (defaults) against their customer’s credit profiles on both the TPN and TransUnion databases. Prior to loading these default listings the TPN member is legally required to give the consumer 20 business days’ notice of intention to list. 

Should the consumer settle the debt prior to the 1 or 2 year retention period; the TPN member must update the consumer’s default record to “Account settled in full”.

TPN and TransUnion will no longer accept a request to delete defaults unless the default details are inaccurate.

If you would like more information, please read our artcile https://blog.tpn.co.za/2023/04/a-guide-to-adverse-listings.html

The National Credit Act (NCA) does not apply to lease of immovable property. However, when a Property Practitioner or landlord engages with a credit bureau the Property Practitioner or landlord will need to comply with the NCA, for example when:

• performing a credit check on a tenant (consent is required)
• loading a default (blacklisting) against the tenant (20 business days' notice of intention to list is required)

NCA

Section 8 Credit Agreement

(2) An agreement, irrespective of its form, is not a credit agreement if it is -

...

(b) a lease of immovable property

When a consumer defaults on their credit or any other agreement, one of the supplier’s rights is to load an adverse (default) listing against the consumer’s credit profile.

Before loading the default the supplier must:

·         Send the consumer a letter of demand

·         The letter of demand must specifically mention the “supplier’s intention to load a default”

·         The supplier must wait 20 business days’ before listing the default (and may only list in the account was not settled in full).

Business Days: when calculating the 20 business days – the date the letter was sent does not count, Saturdays, Sundays and SA public holidays do not count.

NCA

Regulation 19

(4)   All sources of information as set out in section 70 (2) of the Act and Regulation 18 (7) must give the consumer at least 20 business days’ notice of its intention to submit the following adverse [default] information concerning that person to a credit bureau:

(a)   Classification of consumer behaviour, including classifications such as ‘delinquent’, ‘default’, ‘slow paying’, ‘absconded’ or ‘not contactable’;

(b)   Classifications related to enforcement action taken by the credit provider. Including classifications such as handed over for collection or recovery, legal action, or write-off.

NCA

Regulation 17

The lease agreement may specify the amount of interest that is payable on arrear amounts. This amount must be reasonable and not contravene the provisions of any applicable legislation.

When it comes to lease agreements, we recommend that the amount of interest chargeable on arrear rental amounts be specified in the lease agreement as 2% per month, compounded, up to a maximum of 24% per annum. The reason for this is due to the fact that, although lease agreements do not fall within the ambit of “incidental credit agreements” as defined in the National Credit Act 34 of 2005 (“NCA”), they “mirror” incidental credit agreements in many respects. Thus, utilising the maximum prescribed rate of interest set in respect of incidental credit agreements is a good benchmark when trying to determine what is reasonable when charging interest on arrear rental amounts. 

If the lease agreement is silent on the issue of interest chargeable on arrear rental, then the provisions of the Prescribed Rate of Interest Act, No 55 of 1975 (“PROIA”) will apply. In terms of the PROIA, as of 8 January 2016, the maximum amount of interest will no longer be a fixed rate but rather the repurchase rate, determined from time to time by the South African Reserve Bank (SARB), plus 3,5%.

In a nutshell, therefore:

Your lease agreement may specify the amount of interest payable on arrear amounts, in which case we recommend a rate of 2% per month up to a maximum of 24 % per annum. If your lease agreement is silent, the PROIA will apply. 

Please see TPN's video on the Unfair Practises for more information.

Yes, the Consumer Protection Act applies to all transactions for the supply goods or services in South Africa. This includes residential and commercial (office, retail and industrial) leases. There are some exclusions: when the tenant is the state or a juristic entity whose asset value or annual turnover is greater than R2 million.

CPA

Definitions

 ‘ service ’ includes, but is not limited to-

…

(e)

…

(v) access to or use of any premises or other property in terms of a rental

Section 5 Application of the Act

( 2)    This Act does not apply to any transaction-

(a)    In terms of which goods or services are promoted or supplied to the State;

(b)    In terms of which the consumer is a juristic person whose asset value or annual turnover, at the time of the transaction, equals or exceeds the threshold value [R2 million] determined by the Minister in terms of section 6

…

Please see TPN's video on the Consumer Protection Act for more information.

Only if a tenant signed a lease agreement as a result of direct marketing, may the tenant cancel the lease agreement within 5 business days of signing the lease agreement without a penalty charge.

Direct marketing includes: posting flyers under the front door or in the post box of homes

Direct marketing does not include: adverts listed on the Internet, in magazines or newspapers, on the shop window, flyers at traffic lights.

Consumer Protection Act

Section I Definition

Direct Marketing means to approach a person, either in person or by mail or electronic communication, for the direct or indirect purpose of promoting or offering to supply, in the ordinary course of business, any goods or services to that person.

Please see TPN's video on the Consumer Protection Act for more information.

The CPA applies to

·          Lease agreements, where the tenant is the consumer and the landlord is the supplier

·          Mandates, where the landlord is the consumer and the Property Practitioner is the supplier

The consumer must be a natural person or a juristic person whose asset value or annual turnover is less than R2 million.

Consumer Protection Act

Section 1 Definitions

The CPA applies to every transaction for goods or service;

Where a:

Transaction means “in respect of a person acting in the ordinary course of business an agreement between or among that person and one or more other persons for the supply or potential supply of any goods or services in exchange for consideration.

Services includes “the provision of access to or use of any premises or other property in terms of a rental”

Consumer in respect of any particular goods or services means “a person to whom these goods or services are marketed in the ordinary course of the suppliers business”

Exclusions

Refer to: Who does the Consumer Protection Act not apply to?

Please see TPN's video on the Consumer Protection Act for more information.

Where a lease agreement is signed by a tenant whose asset value or annual turnover is greater than R2 million then the CPA does not apply. Or when the tenant is an organ of the State the CPA does not apply.

Consumer Protection Act

Section 5 Application of the Act

(2) The CPA does not apply to transactions supplied to

(a)    The State

(b)    A consumer who is a juristic person whose asset value or turnover is greater than R2 million

(c)    Exemptions granted by the Minister

(d)    Credit Agreements

(e)    Employment contracts

Please see TPN's video on the Consumer Protection Act for more information.

A tenant may cancel the lease early; but the landlord or Property Practitioner may charge a reasonable penalty.

In determining the reasonable penalty, the landlord or Property Practitioner will take into account in loss of rent; commission paid, or marketing costs.

The landlord / Property Practitioner would have to indicate to the tenant how the penalty is calculated ie: loss of rent, commission or advertising costs. (example: the landlord would not be able to charge the tenant for loss of rent if a suitable replacement tenant was placed with no rent actually lost by the landlord).

Note the exclusions :

Leases or renewals entered into prior to 1 ^st April 2011

Where the tenant is

·          the State

·          a juristic entity whose asset value or annual turnover is greater than R2 million

·          where both the landlord and tenant are juristic entities

Consumer Protection Act

Section 14:   Expiry and renewal of fixed term agreements

(2)

  (b)

     (i) the consumer may cancel that agreement-

       (bb) at any other time, by giving the supplier 20 business days’ notice in writing or other recorded manner and form, subject to subsection 3 (a) and (b);

(3) Upon cancellation of a consumer agreement as contemplated in subsection (2)(b)-

   (a) a consumer remains liable to the supplier for any amounts owed to the supplier in terms of that agreement up until the date of cancellation; and

   (b) the supplier-

      (i) may impose a reasonable cancellation penalty…

(4) The Minister may, by notice in the Gazette, prescribe-

  (c) the manner, form and basis for determining the reasonableness of credit and charges contemplated in subsection (3)

Regulation

Section 5: Maximum duration for fixed-term consumer agreements

(2) For the purpose of section 14 (3), a reasonable credit or charge as contemplated in section 14 (4) (c) may not exceed a reasonable amount, taking into account-

   (a) the amount which the consumer is still liable for to the supplier up to the date of cancellation;

   (b) the value of the transaction up to cancellation;

   (c) the value of the goods which will remain in the possession of the consumer after cancellation;

   (d) the value of the goods that are returned to the supplier;

   (e) the duration of the consumer agreement as initially agreed;

   (f) losses suffered or benefits accrued by the consumer as a result of the consumer entering into the consumer agreement;

   (g) the nature of the goods or services that were reserved or booked

   (h) the length of notice of cancellation provided by the consumer;

   (i) the reasonable potential for the service provider, acting diligently, to find an alternative consumer between the time of receiving the cancellation notice and the time of the cancelled reservation; &

   (j) the general practice of the relevant industry

(3) Notwithstanding sub regulation (2) above, the supplier may not charge a charge which would have the effect of negating the consumer’s right to cancel a fixed term consumer agreement as afforded to the consumer by the Act

Please see TPN's video on the Consumer Protection Act for more information.

The term 'business' cannot be given a meaning other than that used in the Consumer Protection Act. Issues such as the regularity and number of leases which the landlord enters into are simply irrelevant.

The courts have consistently stated that the definition of "business", as used in one context, should not be transplanted and thus used in an entirely different context.

For this reason, the usage of the word "business", as used in one context, has not been accepted as its meaning in other contexts (nor should it be).

The Supreme Court of Appeal has stated in Commissioner for the South African Revenue Service v Tiger Oats Ltd [2003] 2 All SA 604 (SCA), that:

"We were referred to various judicial expositions of the meaning of expressions such as carrying on business and the like but there is little point in reviewing them. As always, context is everything when the meaning of language needs to be ascertained. As Mason CJ, Gaudron and McHugh JJ said in Re Australian Industrial Relations Commission Ex parte Australian Transport Officers Federation [1990] HCA 52; (1990) 171 CLR 216 at 226, 'of all words, the word 'business' is notorious for taking its colour and its content from its surroundings ... ' "

Similarly, in Minister of Law and Order v Patterson 1984 (2) SA 739 (A), the Appellate Division criticized attempts to rely on the dictionary meaning (and meaning used in case-law) to define "business", as used in another context. It stated:

"The answer to this question depends on how broad a meaning is to be ascribed to the word 'business' in the definition of 'business tenancy' in the two counter-inflation orders. The word 'business' is an etymological chameleon; it suits its meaning to the, context in which it is found. It is not a term of legal art and its dictionary meanings as Lindley LJ pointed out in Rolls v. Miller, ((1884) 27 Ch. D. 71 at 88) embrace 'almost anything which is an occupation, as distinguished from a pleasure -anything which is an occupation or duty which requires attention is a business...'".

Lord Diplock proceeded to hold that the "activities of government" carried on in the leased premises by servants of the Crown could properly be described as “business", and that "in exercising the functions of government the civil servants of the Crown were all carrying on a single business on behalf of the Crown." There can be little doubt, I think, that the meaning that was assigned to the word 'business' in the aforesaid case is not the ordinary, or usual, meaning of the word, and it is therefore somewhat surprising that the court a quo should have been content to base its finding as to the meaning of the expression "carries on business" in sec. 28(1)(a) of the Magistrates' Courts Act on Lord Diplock's judgment ..."

This has always been our law, as explained above.

The Consumer Protection Act has a definition section which itself gives meaning to the term "business".

In his work " The Interpretation of Statutes" at 112, Du Plessis G writes:

"In a statute where such a definition clause occurs, the words and phrases it contains acquire, for purposes of that particular statute, a technical meaning which often deviates from their ordinary meaning in colloquial speech. It therefore follows that such words and phrases are as a rule not to be understood in their ordinary sense, but in accordance with the meaning ascribed to them by the definition clause."

The meaning ascribed to the term "business" in the Consumer Protection Act is "the continual marketing of any goods or services ..."

In light of the conclusiveness of the definition section, it is inappropriate to give the term any other meaning. In fact, some factors which would usually be taken into account in determining whether activity is business (such as a profit motive) are irrelevant under the CPA.

Indeed, section 5(8)(b) of the Consumer Protection Act provides that "The application of this Act in terms of subsections (1) to (7) extends to a matter irrespective of whether the supplier ... operates on a for-profit basis or otherwise"

I will now turn to the correct definition of "ordinary course of business", as contained in the Consumer Protection Act.

It is clear that the Consumer Protection Act must be interpreted purposively to achieve its objective, namely the protection of consumers. On this approach, it is unlikely that it was intended to exclude a large number of consumers from its ambit.

Some authors have rightfully recognised the need for the term "business" to be given a wide interpretation in relation to the Consumer Protection Act.

For instance, Robert Sharrock, has written that whenever a person lets property to supplement his income, the lease is subject to the CPA provisions, regardless of whether he earns his salary primarily elsewhere.

Sharrock points out that the test for determining if a contract falls within the ordinary course of a particular business is whether the making of the contract falls within the scope of that business and whether ordinary businesspersons would have concluded the contract. It is irrelevant whether that particular businessperson regularly entered into such a contract.

In contrast, other commentators, rely on tax-law cases for a narrower interpretation of the word "business".

Reliance on these cases is seriously flawed.

The Consumer Protection Act lays down a simple test for determining whether any particular activity constitutes "business" by merely requiring continuity. Many other factors must be looked at for determining whether any activity is "business" in tax-law cases, including the nature and scope of the activities, the presence or absence of the profit motive and the intention of the person engaging in the activity, over and above the question of continuity.

The Consumer Protection Act also states that regard should be had to "foreign law", when interpreting its ambit.

Other jurisdictions, notably the United Kingdom and Australia, have recognised the need for a broader interpretation of the word "business" in consumer protection legislation, so that it covers leasing agreements generally.

Daniel Dovar, writing in the Solicitors Journal (UK), commented on the applicability of the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations) to leases by explaining "The supplier must enter into the contract as part of their course of business. This should usually be easy to satisfy in tenancy cases, as rarely will property be let other than in the course of business."

The Office of Fair Trading in the United Kingdom has also published a "Guidance on unfair terms in tenancy agreements" (September 2005), which states that "The guidance assumes that, in general, landlords can be considered 'suppliers' and private tenants 'consumers' for the purposes of the Regulations."

In contrast, the Law Reform Commission (UK) has explained that where the element of continuity is absent, for instance, where the landlord is merely "letting their home temporarily while waiting for a better opportunity to sell it or while working in another area", the Regulations would not apply.

Similarly, in Australia, it has been recognised that the Tribunal has jurisdiction under the Fair Trading Act, Australia's version of the Consumer Protection Act.

For example, it has been stated:

"As between the tenants and the landlord, there is no doubt that the Tribunal has jurisdiction to decide any dispute, not only under RTA but also under FTA because by letting the rented premises to the tenants the landlords were conferring a right upon them in trade or commerce and so were supplying services to them as purchasers of the services." (Winter v Buttigieg [2004] VCAT 2430 (10 December 2004) [62])."

Likewise, in another case it was explained:

"A landlord or owner supplies “services” (as defined by s 3 of the Fair Trading Act) to a tenant or resident, who is a “purchaser” of those services, and so a dispute between landlord and tenant or between owner and resident is a “consumer and trader dispute”(formerly called a “fair trading dispute”) which under Part 9 of the Fair Trading Act the Tribunal has jurisdiction to hear and determine" (Annoted RTA, quoting from Zeus and Ra Pty Ltd v Nicolaou (2003) 6 VR 606).

In a final case it was confirmed:

"It appears that sections 107 and 108 of the Fair Trading Act 1999 bestow a general landlord and tenant jurisdiction on this Tribunal. They give the Tribunal power to determine fair trading disputes which are defined as disputes between the suppliers and purchasers of goods and services. Services are defined in s.3 of the Act to include interests in real or personal property, and supply is defined to include grant. It follows in my view that whether or not the Retail Tenancies Reform Act applies to these premises the Tribunal has jurisdiction in a general sense to deal with a dispute between the landlord and tenant in the present circumstances." (Zeus and Ra Pty Ltd v Nicolaou (2003) 6 VR 606)."

Consequently, on the proper approach and understanding of what the “ordinary course of business” means, the Consumer Protection Act DOES apply to virtually all leases

Please see TPN's video on the Consumer Protection Act for more information.

Sections 54 and 55 of the Consumer Protection Act 68 of 2008 (“CPA”)  states that a consumer is entitled to the provision of quality goods and services which are safe and free from defects. This definition clearly includes the electrical installation in the property. One of the ways to prove that an electrical installation is safe is for the owner to be in possession of an Electrical Compliance Certificate (“ECC”).

In terms of the Electrical Installation Regulations of the Occupational Health and Safety Act, promulgated in March 2009: “… every user or lessor of an electrical installation, as the case may be, shall have a valid certificate of compliance for that installation…”

If you live in your own home you are the ‘user’, if you rent your home to a consumer you are the ‘lessor’ and if you are a third party who rents a property on behalf of the lessor, you are  the ‘Property Practitioner’. It is therefore clear that as a lessor or a Property Practitioner, there is a legal responsibility on you to provide the tenant with a valid ECC. The ECC serves as proof that the property is safe and free from defects insofar as any electrical installation is concerned. The provision of the ECC to the tenant also cements the fact that the landlord or the Property Practitioner, as the case may be, is taking all necessary steps to ensure compliance with the provisions of the CPA.

The Rental Housing Act (RHA) applies to all residential leases. It provides the facilitation of sound relations between tenants and landlords.

RHA definitions

Please see TPN's video on the Rental Housing Act for more information.

A lease agreement can be verbal or in writing, but if the tenant demands a written lease the landlord must reduce the lease to writing.

It is recommended that a lease is in writing as this prevents disputes arising between the tenant and landlord.

RHA

Section 5 Provisions pertaining to the lease

(1)    A lease between a tenant and a landlord, subject to subsection (2) need not be in writing…

(2)    A landlord must, if requested thereto by a tenant reduce the lease to writing.

Please see TPN's video on the Rental Housing Act for more information.

RHA

Section 5 Provisions pertaining to leases

(3)     

(a)    The landlord [or agent] must issue the tenant with a written receipt for all payments received by the landlord [or agent] from the tenant

(b)    Such receipt must be dated and clearly indicate the address … and whether payment has been made for rental arrears, deposit or otherwise and specify the period for which the payment is made

Please see TPN's video on the Rental Housing Act for more information.

If the landlord holds the deposit

The deposit must be held in an interest bearing account and the landlord must refund the deposit with interest. 

RHA

Section 5 Provisions pertaining to leases

(3)     

(d)    The deposit contemplated in paragraph (c) must be invested by the landlord in an interest-bearing account with a financial institution and the landlord must subject to paragraph (g) pay the tenant such interest at the rate applicable to such account which may not be less than the rate applicable to a savings account with that financial institution and the tenant may during the period of the lease request the landlord to provide him or her with written proof in respect of interest accrued on such deposit, and the landlord must provide such proof on request: Provided that where the landlord is a registered estate agent as provided in the Estate Agency Affairs Act, 1976, the deposit and any interest thereon shall be dealt with in accordance with the provisions of that Act.

Estate Agency Affairs Act

Section 32   Trust account of and investment of trust moneys by estate agent

(1) Every estate agent shall open and keep one or more separate trust accounts, which shall contain a reference to this section, with a bank and such estate agent or his or her employee, as the case may be, shall forthwith deposit therein all trust money held or received by or on behalf of such estate agent and the name of such bank and the number of each such trust account shall forthwith be notified to the board.

(2)

(a) Notwithstanding the provisions of subsection (1), any estate agent may invest in a separate savings or other interest-bearing account opened by him with any bank, building society or any institution or class of institution designated by notice in the Gazette by the Minister in consultation with the Minister of Finance, any moneys deposited in his trust account which are not immediately required for any particular purpose.

(b) Any savings or other interest-bearing account referred to in paragraph (a), shall contain a reference to this subsection.

(c) Interest on moneys deposited in a trust account referred to in subsection (1), and on moneys invested in terms of paragraph (a), shall, subject to the express terms of the mandate in question [ lease ], which shall be in writing, be paid to the [Estate Agents Fidelity Fund ] fund by the estate agent concerned.

Please see TPN's video on the Rental Housing Act for more information.

If there are no damages, the deposit must be refunded within 7 days of expiration of the lease.

If there are damages, the deposit must be refunded within 14 days of restoration of the property. Damages includes all amounts for which the tenant is liable under the lease such as arrear rent or utilities, the final utility bill, reasonable cost for repairs for damages, replacing lost keys etc. In most cases the landlord / Property Practitioner will have to wait for the final utility accounts before refunding the deposit.

The tenant has a right to copies of the receipts of payments incurred by the landlord for the repairs.

Please also refer to section on incoming and outgoing inspections

RHA

Section 5 Provisions pertaining to the lease

(3)     

(g)    on the expiration of the lease, the landlord may apply such deposit and interest towards the payment of all amounts for which the tenant is liable under the said lease, including the reasonable cost of repairing damage to the dwelling during the lease period and the cost of replacing lost keys and the balance of the deposit and interest, if any, must then be refunded to the tenant by the landlord not later than 14 days of restoration of the dwelling to the landlord;

(h)    the relevant receipts which indicate the costs which the landlord incurred, as contemplated in paragraph (g), must be available to the tenant for inspection as proof of such costs incurred by the landlord;

(i)      should no amounts be due and owing to the landlord in terms of the lease, the deposit, together with the accrued interest in respect thereof, must be refunded by the landlord to the tenant, without any deduction or set-off, within seven days of expiration of the lease;

Please see TPN's video on the Consumer Protection Act for more information.

Both the tenant and the landlord or Property Practitioner must perform the joint incoming and outgoing inspection. Failure to perform both joint inspections is deemed an acknowledgement that the property was handed back in good order.

RHA

Section 5 Provisions pertaining to the lease

(3)     

(e)    the tenant and the landlord must jointly, before the tenant moves into the dwelling, inspect the dwelling to ascertain the existence or not of any defects or damage therein with a view to determining the landlord’s responsibility for rectifying any defects or damage or with a view to registering such defects or damage, as provided for in subsection (7);

(f)     at the expiration of the lease the landlord and tenant must arrange a joint inspection of the dwelling at a mutually convenient time to take place within a period of three days prior to such expiration with a view to ascertaining if there was any damage caused to the dwelling during the tenant’s occupation thereof;

…

(j)      failure by the landlord to inspect the dwelling in the presence of the tenant as contemplated in paragraphs (e) or (f) is deemed to be an acknowledgement by the landlord that the dwelling is in a good and proper state of repair, and the landlord will have no further claim against the tenant who must then be refunded, in terms of this subsection, the full deposit plus interest by the landlord;

(k)    should the tenant fail to respond to the landlord’s request for an inspection as contemplated in paragraph (f), the landlord must, on expiration of the lease, inspect the dwelling within seven days from such expiration in order to assess any damages or loss which occurred during the tenancy;

…

(o)    should the tenant vacate the dwelling before expiration of the lease, without notice to the landlord, the lease is deemed to have expired on the date that the landlord established that the tenant had vacated the dwelling but in such event the landlord retains all his or her rights arising from the tenant’s breach of the lease;

Please see TPN's video on the Rental Housing Act for more information.

In terms of The Rental Housing Act:

(6)     “A lease contemplated in subsection (2) must include the following information:

(a)    …

(b)    …

(c)     The amount of rental of the dwelling and reasonable escalation , if any, to be paid in terms of the lease;”

The tenant and landlord can agree on the period of the lease (fixed term or monthly) and reasonable escalation. The escalation is not limited to a per cent of the rent or time period (ie: 6 monthly or 12 monthly) – the limitation is the “reasonableness”

Please see TPN's video on the Unfair Practises for more information.

Please see TPN's video on the Unfair Practises for more information.

Landlords are often tempted to take to extreme measures when it comes to defaulting tenants. In a moment of frustration, it can be very tempting to arrange for electricity or water supply to be suspended, change the lock on the front door, or even to remove certain items from the leased premises, just to give tenants the nudge that they need to perform their obligations. Unfortunately, however, all of the current consumer-friendly legislation aside, in terms of the South African common law, it is unlawful under any circumstances for a landlord to interfere with a tenant’s “peaceful and undisturbed” use of the leased premises, unless correct legal procedure is followed. Such an act is termed “spoliation” and can have very serious consequences for the landlord.

The premise behind spoliation is that it is illegal to “take the law into one’s own hands”, regardless of whether the reason behind such action is based on a valid, lawful claim or not. Where an act of spoliation occurs, a tenant has a number of remedies at his or her disposal, including counter-spoliation and applying to either the Rental Housing Tribunal or the Courts for urgent relief.

In the case of counter – spoliation, the tenant may legally immediately take action to remedy the situation, such as restoring water or electricity supply or re-entering the premises, thus defeating the purpose of the actions of the landlord.  The most widely utilised remedy available to tenants, however, is to apply for an urgent interdict, known as a mandament van spolie. In the case of a residential lease, this can be done through the Rental Housing Tribunal or through the Courts. In the case of a commercial lease, only the Courts may be approached for relief. The application is done on an urgent basis, meaning that it can be heard in a matter of days. In coming to its decision, the Court will not take into account the underlying circumstances, only whether the tenant was in peaceful and undisturbed possession of the premises and/or goods at the time, and whether the landlord followed due legal process when taking any action. As such, the landlord will invariably be on the back foot from the outset. Furthermore, where application is made to Court and the Court finds in favour of the tenant, it may order that the landlord pay the tenant’s legal costs which, given the urgency of the application, will invariably be substantial.

In the case of a commercial lease in particular, the tenant may suffer substantial damages as a result of not being able to operate its business. In such an instance, the tenant will be entitled to claim such damages from the landlord. Furthermore, where a landlord locks a tenant out of the premises, in addition to constituting spoliation, the lock-out can also be deemed to be an eviction, and therefore amount to an infringement of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act No 19 of 1998 (“PIE”).

Ultimately, therefore, as frustrating as it may be, it is always advisable to adhere to correct legal process. TPN is always willing to guide clients in the right direction, so as to ensure that the situation is resolved in the correct manner.

Please see TPN's video on the Unfair Practises for more information.

The Roman maxim “huur gaat voor koop” forms an integral part of property law in South Africa and has important implications for both landlords and tenants, particularly given that it applies to both individuals and juristic entities.

The premise behind the maxim is that those rights which vest first should trump those rights which vest later in time. In the case of a landlord/tenant relationship, this means that where a landlord sells a property that is the subject of a lease agreement, the tenant’s rights are protected and the purchaser of the property may not cancel the existing lease agreement or evict the tenant. Essentially, therefore, the purchaser “steps into the shoes” of the seller and will be bound by all of the material terms of the lease agreement.

The word “material” is of great importance. The purchaser will only be bound by those terms which directly govern the relationship between the tenant and the landlord. Ancillary terms, such as a right of first refusal in the event that the landlord wants to sell the property, will not bind the new owner of the property. Furthermore, given that the maxim is only intended to protect the tenant’s rights, it will not come to the aid of Property Practitioners. In the event that the new owner of the property no longer wishes to make use of the services of a managing property practitioner or pay Property Practitioner’s commission, he will be perfectly within his rights to cancel the Property Practitioner’s mandate.

The maxim will automatically apply in the event that a property is sold, unless the lease agreement specifically stipulates that it will not apply. In such an instance, the provisions of the lease agreement will trump the common law, and the lease agreement can be cancelled if the property is sold, provided that the tenant is given a reasonable notice period. The maxim will also not apply to properties that are sold in execution, as in such an instance the rights of the bank will trump those of the tenant.

Insofar as rental is concerned, the rental will only be payable to the purchaser once transfer has been affected and the title deed has been registered in the name of the purchaser. The purchaser’s rights only start running from this point and, as such, the purchaser will not be able to claim any arrear rental from the tenant. Similarly, it is only at this point that the tenant’s deposit must be transferred into the account of the purchaser.

It is important that landlords and tenants are fully aware of their common law rights from the outset, so as to avoid any misunderstandings and disputes arising during the subsistence of the lease agreement.