We often hear clients entering Commercial Lease Agreements not knowing their full responsibilities as Commercial tenants. A review of the Commercial tenants' obligations is therefore often called for. If possible, the landlord or an attorney should go through these with the tenant before they take occupation.
To begin with, a Commercial tenant is someone who does not live in a property or uses it as a shelter, but instead uses it for business purposes, compared to a residential tenant, who lives in the property. Also, whether the property is zoned residential or not. In the end, if a person uses the property for business purposes, they are considered a commercial tenant.
With this in mind, as commercial tenants in South Africa, there are several legal duties and obligations that you are required to fulfil in order to maintain a positive relationship with your landlord and to protect your rights.
The starting point is your contract; you need to know what it provides. It is always advisable for parties entering into an agreement, especially commercial lessees in this context, to ensure that they read and analyse each clause thoroughly before signing the contract to ensure consensus. To avoid wasting time and money on excessive legal fees seeking clarity from the courts, it is also advisable to include all the necessary clauses in the contract and be worded as clearly as possible, especially those providing for remedies in case of a dispute arises.
Thereafter to, look at how the Consumer Protection Act 68 of 2008 as amended ("CPA") protects you (if it applies).
Common Law Duties
Under the Common law, a commercial tenant has a duty to pay rent and maintain the premises. This includes taking reasonable care of the property and ensuring that it remains in the same condition as when it was received, subject to reasonable wear and tear.
The Consumer Protection Act (CPA)
Commercial leases may be governed by the CPA depending on the turnover or asset value of the business. If your landlord leases a property as part of their usual business operations and your business has an annual turnover of less than R2-million or an asset value below that amount. Then the Consumer Protection Act is only applicable to commercial leases in this situation. The Act considers the landlord to be the supplier and the tenant as the consumer. Therefore, any lease agreement that does not adhere to the Act's provisions cannot be enforced by the landlord.
The CPA disallows any lease agreement (including commercial lease agreements) provisions that are unjust, unreasonable, or unfair. This means that an agreement that heavily favours the landlord to the tenant's detriment would be considered to violate the CPA. In cases of early termination of either residential or commercial leases, the CPA favours the tenant. Before this Act, landlords had the power to claim damages for the remaining lease period and could use this to pressure the tenant financially.
Section 14 of the CPA pertains to the termination, expiry, and renewal of fixed-term contracts. These contracts are limited to a maximum of two years. If the tenant, as the consumer, wishes to terminate the lease agreement, they must provide the landlord with written notice within 40 - 80 business days before the lease expires. Alternatively, the tenant may terminate the lease at any other time, provided that they provide the landlord with 20 business days' written notice. The landlord is allowed to claim a "reasonable cancellation penalty" instead of the excessive cancellation costs that were previously allowed before the enactment of the CPA.
Commercial tenants in South Africa have several legal duties and obligations to fulfil. By understanding and fulfilling these obligations, tenants can ensure a positive and productive relationship with their landlords, protect their rights, and maintain the value of the property over time. Contact an attorney at SchoemanLaw Inc for assistance in your property law needs.?
Written by Kavita Kooverjee, SchoemanLaw