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Everything you need to know about re-negotiating a new lease agreement

By Dr Sayed Iqbal Mohamed Time of article published Feb 5, 2020

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Durban - WHEN a lease agreement expires, the lease terms may be re-negotiated if the tenant continues to occupy the dwelling. After the fixed-period lease expires, the occupation becomes a monthly periodic lease.

Section 5 of the Rental Housing Act 50 of 1999 relates to the provisions of leases and subsection 5 deals with an expired lease.

According to this section, if the tenant remains in the dwelling, with the express or tacit consent of the landlord, a periodic lease is created.

In the absence of a further written lease, parties are bound by the same terms and conditions of the expired lease, except that at least one month’s written notice must be given of the intention to terminate the lease.

What would be the tenancy period if parties begin to negotiate a new lease after the fixed lease expires?

Let us take the case where a fixed lease has ended and parties begin to negotiate a lease for a period of five years. During negotiations, a new lease is presented to the tenant for his signature, who signs the lease but alters the provision dealing with security deposit.

The alteration is a rejection of an offer, at least in relation to the deposit. The landlord insists that he requires a deposit equivalent to two months’ rental, while the tenant is adamant that he made it clear that he was not prepared to pay a deposit. The landlord then reduces the deposit to one month’s rental. The tenant is still not willing to pay a deposit.

Can the landlord or tenant claim that a lease exists?

In Gaap Point of Sale (Pty) Ltd v Valjee NO and Others 2011 (6) SA 601 (KZD), this was precisely the argument between the parties. The judge referred to the deposit as an offer and the tenant striking off the paragraph from the lease stipulating this offer amounted to a counter-offer.

The result was that the counter- offer was a rejection of the original offer and therefore destroyed the original offer.

The landlord’s refusal to accept the counter-offer meant that there was no longer an offer and, consequently, no agreement existed between the parties.

Acting Judge Hughes-Madondo said that the applicant-tenant was seeking a declaration on a fact “that its tenancy to the premises is monthly”.

“I say a fact, because as established above, there is no lease agreement between the parties. It is common cause between the parties that prior to this dispute, the applicant was occupying the premises on a monthly tenancy because of the fact that the parties were in the process of negotiating the terms of a proposed lease agreement.

“The applicant, during these negotiations, cannot ask this court to issue a declarator in respect of its tenancy of the premises at this stage. The applicant clearly has no clear right as yet due to the ongoing negotiations.”

In Jones v Reynolds, 1913 AD 366, the landlord presented a new lease to his tenant for the remainder of the farm. The new lease was to run concurrently with the present lease at a yearly rental of £120 on the same terms and conditions.

The tenant wrote to the landlord that he accepted the lease, save for clause 9, that restricted him from sub-letting. Negotiations failed and the matter was taken on appeal where the court held that the correspondence between the parties did not constitute a contract.

In fact, the rejection of the offer and counter-offer meant that there was no agreement concluded between the parties and the tenant was a trespasser.

Chief Justice Lord de Villiers concluded that there was insufficient evidence that an agreement was entered into.

“It should not be forgotten that the plaintiff was owner of the land, and that it depended on her consent whether she would or would not let the land. She was free to impose such conditions as she chose until the agreement was actually concluded.”

While the tenant was under the impression that an agreement was concluded, the court found he failed to establish his case by failing to prove that a lease agreement existed.

The tenant, a trust in Van Huyssteen NO and another v Milla Investment & Holding Company (Pty) Ltd [2017] JOL 37997 (SCA), succeeded in its appeal against the judgment of the high court.

Abraham Johannes van Huyssteen was originally the tenant of Tekkie Town, who sold the business to the trust. He represented the trust when the landlord negotiated a new lease in 2006 and presented a counter offer to the landlord’s rental escalation and certain other provisions of the proposed new lease.

Jaco Odendaal, who represented the landlord, did not countersign Van Huyssteen’s amended offer, including the rate of the rental escalation.

It would appear that Van Huyssteen’s written counter offer did not reach Odendaal and the trust continued to occupy new and bigger premises at the old rental.

The new owner, Attfund Limited, ceded its right to Milla Investment, who sued the trust for rental allegedly underpaid, contending that the trust was bound by its counter offer.

The high court granted judgment in favour of Milla and ordered the trust to pay the sum of R1283328.49, together with interest.

The Supreme Court of Appeal overturned the high court judgment. It held that it was legally untenable to hold the trust bound to its amended offer when it did not itself wish to be so bound.

“For these reasons, both in fact and in law, the high court had erred in the manner it had applied the doctrine of quasi-mutual assent. A party who alleges a contract must prove its conclusion and the terms of that contract.

“That is so even where the asserting party has to prove a negative. In the present instance, Milla as plaintiff had failed to prove the contract it had asserted.”

Dr Sayed Iqbal Mohamed is chairperson of the Organisation of Civic Rights and deputy chairperson of the KZN Rental Housing Tribunal. He writes in his personal capacity. For advice, contact Pretty Gumede or Loshni Naidoo at 0313046451, [email protected] or [email protected]

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