The Termination of a Lease

The Termination of a Lease

Any lease contract creates rights and obligations for both the lessor and the lessee. The duties for the lessor include the duty to deliver the property to the lessee and in a certain condition, to maintain the property in proper condition and to ensure the lessee’s undisturbed use and enjoyment of the property. The duties for the lessee include to pay rent, to care for the property and to return the property upon termination of the lease.

The obligations created by the lease contract can be lawfully terminated in several ways. 

If the lease is for a fixed period, the lease will automatically be terminated when the period comes to an end. In some cases, the lease may be until an event occurs and will become terminated automatically upon occurrence of the specific event.  

Secondly the lease may be terminated by way of notice. This may be achieved only if the lease is for an indefinite time period. This notice may be given by either the lessor or the lessee. The notice period is usually agreed upon in the lease contract, however, if no notice period has been previously agreed upon, the notice must be for a reasonable time. The reasonableness will be determined by the circumstances of each case and lessor must be afforded a reasonable time to find another lessee. In Ngwenya v Hindley it was stated in the case of a monthly lease, one-month notice was considered as reasonable.  Prerequisites for the validity of such notice is that it must come to the knowledge of the other Party. It is also worthy to note that the notice does not require acceptance.

Further, the lease contract may be terminated should the lessor’s rights in the property be terminated. However, in certain circumstances, the extinction of the lessor title does not necessarily terminate the obligations created by the lease. The contract may remain binding between the lessor and lessee and if the lessee’s right to use and enjoy the property has been lost as a result of the lost title; the lessee may have a claim for damages against the lessor. In relation to immovable property, and in certain circumstances, the lessee is protected by the doctrine of “huur gat voor koop”. This doctrine may imply that the lessee’s use of the property is protected if the lessor sold the property before the lease had expired. The new owner would become the landlord and the obligations of the lease would begin to exist between the new owner and the lessee.

A lease would be terminated only by death of the lessor or lessee if the lease contracts so provided. In other circumstances, the obligations would continue after the death of either Party and would flow to the respective heirs.

The last topic of discussion is insolvency. If the lessor has been declared as insolvent same does not cause the termination of the lease. Section 37(5) of the Insolvency Act states that a stipulation in a lease contract that the lease shall terminate or vary, upon the sequestration of the estate, shall be null and void. However, if there is another real right over the property of a mortgagee, the Trustee of an insolvent estate may sell the property, free of the lease, if the real right of the mortgagee were to be brought into existence before the lease contract. This would take place to satisfy the preferred claim of the mortgage. In these circumstances, if the proceeds of the sale are not sufficient to cover the amount owing on the bond, the lessee may not rely on the doctrine of “huur gaat voor koop”. The lessee however is not without remedy as he may have a concurrent claim for damages against the insolvent estate.

Section 37 of the Insolvency estate provides that if the lessee has been declared  as insolvent, same does automatically terminate the lease. However, the section further provides that the Trustee may terminate the lease by way of notice and that the lessor may have a claim for damages against the estate in this event. Within three months of his appointment, if the Trustee does not notify the lessor that he desires to continue the lease, he shall be deemed to have determined the lease at the end of said three months.

Contact us if you need assistance with such a matter and we’ll be happy to help you.

 

Michelle Soutter

Practising Attorney