Rental lease agreements: How ‘real’ is the security in respect of rental?

BY BY BARDINE HALL (BA LLB) - AUGUST 16, 2016

The common law recognises a landlord’s real right to secure the rental due by a tenant. This real right is referred to as the landlord’s tacit (implied) hypothec and provides special protection to a landlord to ensure that rental can be collected. It comes into operation by law and need not be agreed to by the parties or be expressly provided for in the lease agreement.

The hypothec secures the lessee’s obligation to pay the rent in terms of the lease agreement by allowing the landlord to attach the movable property on the leased premises and to sell it to secure outstanding rental that is owing to the landlord. The landlord must first obtain an interdict to restrain the tenant from removing the movable goods or a court order for attachment of the goods before the goods can be sold.

Although the landlord has this special protection, there are some pitfalls to take note of including the following:

1.     the hypothec does not apply to goods removed from the premises before the landlord applied for a court interdict or order of attachment;

2.     movable goods belonging to third parties can also fall under the hypothec but there may be some exceptions (this aspect may be reviewed by our Constitutional Court as the arbitrary attachment of a third party’s property may be unconstitutional);

3.     if the tenant granted and registered a special notarial bond over the specified movables on the leased premises to secure another debt and the bond is in possession of a third party, the landlord’s hypothec will not apply in respect of these movable items, (section 2 of the Security by Means of Movable Property Act, 1993 (Act 57 of 1993); and

4.     if the movables relate to an instalment agreement as defined in the National Credit Act, 2005, the landlord’s hypothec will not apply in respect of these movable items, (section 2 of the Security by Means of Movable Property Act, 1993 (Act 57 of 1993).

The landlord’s rights can be strengthened by including specific provisions in a lease agreement. These provisions include disclosure of third party property that will be held on the premises and an undertaking by the tenant not to grant a special notarial bond in respect of its movables. Surety could also be obtained in cases where the tenant is a juristic person.

Consult our team at Goldberg & de Villiers Inc, the Directors in our Property Law Department, namely Adri Ludorf, Tracey Watson-Gill and Nicolas Mitchell, assisted by Bardine Hall and a team of highly-qualified paralegals, who will gladly assist you to ensure that your lease agreement provides adequate protection of your rights.

For more information; Contact Adri Ludorf or Tracey Watson-Gill or Nicholas Mitchell on 041 501 9800

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