File picture: James White
File picture: James White

RENTAL WATCH: The dos and don’ts surrounding sub-letting

By Dr Iqbal SAyed Mohamed Time of article published Mar 17, 2020

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RENTAL WATCH: There are instances when tenants may want to sub-let the rental property. Is the tenant obliged to get the landlord’s consent before he or she enters into a lease with a sub-tenant?

Is there a difference between sub-letting and assignment?

A tenant’s lease agreement contains references to assignment and sub- letting, requiring the tenant to obtain the landlord’s permission in the event the tenant intends to assign the lease, or enter into a sub-lease.

The right to sub-lease under common law was not affected by the Rental Housing Act 50 of 1999, nor the contractual obligation to obtain the landlord’s written permission if that is part of the lease contract.

The tenant who concludes a sub-lease hands over a part of the leased property, or the entire property, but remains responsible for all the obligations with the (principal) landlord.

The sub-tenant acquires legal rights against the original tenant, who becomes her or his landlord.

The tenant under the main lease is usually referred to as the original, main or principal tenant, and the sub-lease gives rise to a sub-tenant. But there is no legal relationship between the sub-tenant and the original landlord.

The tenant and sub-tenant have contractual rights and corresponding obligations enforceable through the rental housing tribunal or a court of law. The sub-tenant is responsible to the main tenant without acquiring greater rights.

In Ellerine Brothers (Pty) Limited v McCarthy Limited [2014] JOL 31793 (SCA), the court confirmed the legal nature of a sub-lease. A sub-tenant cannot acquire more rights from the principal tenant than that which the tenant has. The original lease stays in place, unaffected by the sub-lease. However, the sub-tenant cannot occupy beyond the period the main tenant agreed to in the original lease.

The main tenant is ultimately responsible to give vacant occupation at the end of the lease term, and would have to ensure the sub-tenant moves out.

In assignment, the tenant transfers a legal right, the lease, to another person, who then becomes the lawful tenant. The tenant hands over the property, as well as all the rights and obligations, to another tenant, the assignee. Assignment as an act of alienation divests a tenant of his or her rights against a landlord by substituting a third party as the landlord’s creditor (see Ummi Properties (Pty) Ltd v Cowsta Beleggings (Pty) Ltd [2010] JOL 25103).

Assignment gives rise to a legal relationship between the assignee as new tenant. The landlord and the original tenant are divested of their rights and obligations under the lease (eThekweni Municipality v Zedek Trading 82 CC [2011] ZAKZDHC).

In Talas Properties of Rhodesia (Pvt) Ltd v Abdullah (1) RLR20, the landlord turned to the court to have the assignee evicted. The tenant, Williams, entered into a lease with Talas Properties, and later assigned the lease to Abdullah.

The landlord contended that the terms of the lease, that included assignment, be understood to mean that only rights could be transferred. The court concluded that in the lease, read as a whole, and having considered all the arguments, it was abundantly demonstrated that the parties “in using the word ‘assign’ in clause 4.01, intended to give it its usual and ordinary meaning of a transference of rights and obligations”.

The ejectment was denied and Abdullah was entitled to remain in occupation. The landlord, having agreed that in the event the court accepted that the assignment of the lease was valid, would not deny consent to the assignment.

A sub-lease does not affect the contractual relationship between the lessee and the lessor in the sense that the lessee remains the latter’s creditor and debtor. In Floral Displays (Pty) Ltd v Bassa Land & Estate Co (Pty) Ltd 1965 (4) SA 99 (A) Judge Miller stated that whatever rights the sub-lessee may acquire, he acquires from the tenant by virtue of the agreement of lease concluded by them; his rights do not derive from the landlord. But, when the tenant cedes or transfers his rights under the lease to a third party, he divests himself of such rights by a dispositive act which can in no sense be said to be the same as the act by which he sub-lets the premises.

It is important to get a written undertaking from the landlord that the lease is assigned to another tenant and that all responsibilities are discharged. Should the tenant sub-lease without the written consent of the landlord, the tenant would be in breach.

To avoid a breach, parties should include a clause in the lease that the tenant would be entitled to sub-let or assign the lease, with the prior written approval of the landlord. The following clause should be negotiated between the tenant and landlord so that both parties are protected: “The tenant shall be entitled to sub-let the property with the written consent of the landlord, which consent shall not be unreasonably withheld.”

The landlord is protected in this instance because the tenant cannot sub-let without the written consent. The tenant is not prevented from sub-letting but this right is not unrestricted because the landlord’s written consent is necessary. Should the landlord refuse, the onus is on the tenant to prove that the landlord acted unreasonably by denying sub-letting (Ummi Properties (Pty) Ltd v Cowsta Beleggings (Pty) Ltd [2010] JOL 25103).

According to Professor AJ Kerr, should the landlord refuse the right to sub-let, the tenant has the option of applying to the courts for the declaration of rights. Alternatively, he or she can sub-let and defend any action brought against him or her by showing that the landlord’s withholding consent to sub-let was unreasonable.

Dr Sayed Iqbal Mohamed is the 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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