The courts have handed down two decisions that affect the enforcement of commercial leases.
On March 25 this year, the Supreme Court of Appeal heard a case involving Monyetla Property Holdings and IMM Graduate School of Marketing.
The landlord had cancelled the lease because the tenant had not been paying rent. The lease contained a clause requiring the tenant to continue paying rent while occupying the premises, irrespective of any dispute between the parties, including one regarding the landlord’s right to terminate the lease.
Despite the landlord cancelling the lease, the tenant continued to operate from the premises. The landlord successfully sued for eviction and payment of unpaid rental up to the date the tenant vacated the premises.
More than three years after cancelling the lease, the landlord went back to court to ask that it be awarded the money it would have received had the tenant not defaulted — namely, the rent that would have been due by the tenant from the date they vacated the premises until the date the original lease would have expired.
The court ruled that the landlord’s claim arose on the date of the cancellation of the lease and not the date the tenant vacated the premises, so it had prescribed.
This judgment enforces the obligation of the landlord, upon cancellation of a lease, to claim all the damages that flow from the tenant’s breach as this is the moment at which the claim for recovery of such damages arises, irrespective of whether the tenant remains in occupation or not.
Any payments made by the tenant after the cancellation should then be deducted from the landlord’s damages as finally calculated. It is important that commercial landlords understand that their claims therefore arise from the date of cancellation and that recovery of such damages must be instituted within three years of the cancellation.
A case decided by the high court in Cape Town on April 14 this year involved a landlord who went to court to get permission to stop supplying electricity to a defaulting tenant. The landlord carried the responsibility to pay the municipality. The court said the landlord was entitled to terminate the electricity supply to the respondent’s premises and issued an order to this effect. The court found that, in continuing to pay for the electricity supplied to the building as a whole, the landlord was in effect subsidising the respondent’s business, a situation that could not be allowed to continue.
Although it is not clear whether the court’s reasoning is based upon principles of delict, contract or enrichment, the judgment does confirm that, under appropriate circumstances, a landlord may obtain legal sanction to terminate the supply of a utility to a tenant’s premises where the tenant is in breach.
The judgment does not entitle commercial — and less so, residential — landlords simply, on their own accord, to terminate supply of a utility. Legal sanction to do so must first be obtained.
Nick Muller is director of dispute resolution at Cliffe Dekker Hofmeyr