Landlords vs. tenants
 
Presenter: Lindsay Williams  Guest(s): Samantha Wirthel 

Classic Business Day gets Samantha Wirthel from law firm Bell Dewar & Hall on the line about a landmark judgement that gives tenants the right to stay on where they make improvements to the property

LINDSAY WILLIAMS: As a student in London one signed an agreement with the landlord for about six months - there was some kind of law in the UK that if you were there for over six months you had the right to squat. So all these hairy lefty socialists occupied places in Mayfair, and it was untenable. Of course landlords are not getting it their own way so much in South Africa anymore - a Supreme Court of Appeal decision on a 1658 Dutch law has curtailed landlord’s powers over the properties they have rented out. Samantha, let’s start with the law - can you tell us about this judgement?

SAMANTHA WIRTHEL: The crux of the judgement handed down by the Supreme Court of Appeals is that - unless the lease provides otherwise - if the tenant improves the property if these improvements are necessary for maintenance or use, then at the expiry of the lease the tenant has an enrichment lien and can remain in the property until his claim has been satisfied or dealt with.

LINDSAY WILLIAMS: That’s quite interesting. How did that come about - is there a particular case?

SAMANTHA WIRTHEL: Yes, the case that was heard at the Supreme Court of Appeal was Business Aviation Corporation and Rand Airport Holdings - where Business Aviation had improved the property to such an extent that at the expiry of the lease they continued to occupy the property until such time as their claim had been dealt with.

LINDSAY WILLIAMS: So they wanted to stay in, and when the landlord said they must make way for a new tenant they argued they’d improved the premises the Court of Appeal found in their favour?

SAMANTHA WIRTHEL: They went through several court cases - then it got to the Supreme Court of Appeal that held that they were entitled to stay on in the property until their claim had been dealt with.

LINDSAY WILLIAMS: While we are waiting for the landlord to come on the line what sort of implications does this have for the market? Does it affect new leases and old leases? What’s the situation?

SAMANTHA WIRTHEL: I think certainly some old leases could be affected. The importance going forward for landlords particularly is that they have a clause in their agreement - whereby the tenant specifically waives its rights to remain in the property after the expiry of the lease if they think they have a claim.

LINDSAY WILLIAMS: Do you think then that this is open to abuse? I’m just thinking of the example of a maybe unscrupulous tenant that’s going to be kicked out in three months time - they want to stay therefore they can start to improve the premises and take advantage of this new ruling?

SAMANTHA WIRTHEL: They may try and take advantage, but they will bump their heads eventually - the improvements have to be done in good faith, and they have to be necessary and useful improvements. If the tenant puts in a swimming pool because that’s what they want at that moment - that may be deemed not to be necessary or useful, or improve the market value of the property. That is really the crux - you’ve got to improve the market value of the property going forward.

LINDSAY WILLIAMS: It sounds as though you are going to do quite well as a representative of the legal profession - a few disputes will come up. If you look at it from both sides do you think both the landlord and tenant’s rights are being protected here?

SAMANTHA WIRTHEL: I think this court case re-focuses everyone - so landlords and tenants re-look at their leases and talk these things through upfront, dealing specifically with improvements. Almost in every single lease improvements are attended to by the tenant in terms of maintenance. I think the importance of this case is that both parties sit down and discuss these things beforehand.