“Close your eyes –
Landlord knocking
On the back door”
(Jack Kerouac; Northport Haiku)
Your residential fixed-term lease expires but for whatever reason you
don’t sign a new one. Nor does the lease say anything about what will
happen on expiry. Is there still any form of valid lease in place and if
so what terms and conditions apply? What rent is payable?
To avoid confusion over the answers to those questions, the Rental
Housing Act (“the RHA” – which, as its name suggests, applies only to
residential leases) says that you are deemed “to have entered into a
periodic lease, on the same terms and conditions as the expired lease,
except that at least one month’s written notice must be given of the
intention by either party to terminate the lease.”
Your fixed-term lease is now a “month-to-month” lease. Nothing changes
except that the lease is no longer for a specific period but rather
continues indefinitely unless and until a month’s written notice is
given by either party.
Critically, the rent remains unchanged, unless…
The case of the verbal rental increase
- A tenant rented a residential property for a year at a rental of
R30,000 p.m. The written lease was extended for another year at a
rental of R32,400 p.m. When that expired, there was no written
extension, but verbally the tenant agreed to pay an increased rental of
R34,500 p.m. and in fact paid that amount for another nine months.
- When the landlord then gave notice to vacate to the tenant he
declined, only moving out four months later. The landlord sued him for
various amounts, including damages for “holding-over”. The concept with
“holding-over” is that where a tenant remains unlawfully in the property
and thereby prevents the landlord from re-letting the property, the
landlord can recover his losses from the tenant in the form of damages.
- The tenant fought back, and one of the defences he raised (the
one relevant to this article) was that the orally-agreed increase in
rental to R34,500 p.m. was invalid. In terms of the RHA, he argued, the
rental remained at the R32,400 p.m. applicable at the date of expiry.
- Not so, held the High Court (this being an appeal from a
Magistrate’s Court ruling). The subsequent oral agreement to change the
rental was valid – all the RHA says is that the terms and conditions of
the lease (including the agreed rental) are deemed to be unchanged,
which is “rebuttable”. In other words if you can show that different
terms and conditions were agreed upon, verbally or in writing, they will
be valid.
- The end result – the tenant must pay damages in the full amount of R69,000 (2 months at R34,500 p.m.) plus interest and costs.
The bottom line, and what your lease should say about expiry
Of course your lease may have been a month-to-month lease from the start
– we are talking in this article only about the concept of fixed-term
leases expiring and automatically becoming month-to-month. It is in such
a case that the upshot of this new High Court decision is that the
answer to the question “What rental must the tenant pay under a
month-to-month lease?” is that the rental remains unchanged unless – as
in this case – the evidence shows clearly that a new rental was agreed
upon.
That of course opens the door to uncertainty and dispute, and to avoid that make sure that your fixed-term lease provides clearly in writing exactly what will happen when it expires.
Some leases for example provide that they will continue automatically
on a month-to-month basis, but incorporating any changes to rental or
other terms notified in writing by the landlord to the tenant. Without
such a clause you could be in the same position as these parties,
battling your way through the courts and hoping that a magistrate or
judge (probably both in the end result) will uphold your interpretation
of whatever you think was verbally agreed.
Avoid verbal leases!
As a final note, remember that verbal leases (in fact verbal contracts
of any sort), and/or verbal amendments to them, are a recipe for
misunderstanding, duplicity and dispute.
So although our law accepts the validity of verbal leases (written
leases will be compulsory only when the latest amendments to the RHA
finally come into force), in practice you should always insist on
everything being in writing and signed by both parties, with a clause
providing that no amendments will be valid and binding unless likewise
reduced to writing and signed.
