Legal Duties – What Commercial Landlords need to know
The most important common law duties of landlord’s are the following:
- The landlord must make the property available to the tenant. He must also ensure that the tenant is not evicted.
- The landlord must not disturb the tenant in his enjoyment of the property. For example, the landlord cannot simply enter the premises at any time.
- He must maintain the property in a condition that is fit for the purpose for which the property is let. He must also maintain the property.
- He must pay the taxes relating to the premises, for example, municipal rates and taxes, and stamp duty on the lease.
Generally, however, landlords and tenants enter into comprehensive agreements that regulate their rights and duties. Often these agreements either limit or do away with the common law duties of landlords. When concluding a lease agreement, a landlord should consider at least the following:
- What is the amount of the rent? Will the rent escalate or is it fixed for the period of the lease? Should the tenant pay a deposit?
- Will the tenant also pay charges relating to the premises? For example, in some leases the tenants are liable for the “operating costs” of the premises such as municipal rates and taxes, cleaning, security and insurance.
- Will the tenant maintain the premises and pay the costs of maintenance?
- (NB) Who will pay the stamp duty on the lease? It is common for tenants to pay this. Bear in mind that, with effect from 1 April 2007, leases for a period of less than 5 years attract no stamp duty.
- What is the period of the lease? Should there be a provision allowing for renewal of the lease?
Generally, landlords carry more risk under a lease than tenants. For this reason, landlords should protect themselves by inserting the following provisions into any lease agreement:
- Landlords should restrict the use of the premises to the activities that the tenant may carry on. For example, if the premises are in an office block the tenant should be prohibited from using it for a restaurant.
- Tenants should be prohibited from sub-letting the premises or transferring the lease. This will prevent the landlord from being stuck with a tenant she does not know.
The lease agreement should provide for what happens if the tenant breaks the agreement by, for instance, not paying rent in time. The landlord must ensure that he can enter the premises at any time. The lease should say that the landlord is not liable for defects in the premises.
The landlord should ensure that the tenant does not make permanent improvements to the premises without the landlord’s consent. The landlord should also ensure that the tenant waives her common law lien over any improvements and that the tenant ensures that all builders waive their common law liens.
Letting property can be a complex process. Landlords should ensure that they obtain sound legal advice before they let any property.
AUTHOR: Alex Abercombie, Hofmeyr, Herbstein & Ginwhala, ALLIANCE GROUP
“Information courtesy of the Alliance Group Property Investor Guide, available at all Alliance Group offices nationwide. To find out more, call 0861 ALLIANCE, or visit www.alliancegroup.co.za to download an electronic version“