Property: Green Shoots, Agent’s Commission and Fidelity Fund Certificates

“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate” (Andrew Carnegie, billionaire industrialist)

Dollar billionaire Andrew Carnegie said it a century ago, and it still rings true – wise property investment can be hard to beat when it comes to accumulating wealth. The exciting opportunity for buyers at the moment is of course the more attainable sale prices and the lower interest rates resulting from the pandemic and the lockdown. It is, by all accounts, still very much a buyer’s market.

On the other side of the coin, sellers and estate agents are no doubt heartened by recent signs that the first green shoots of a recovery are in the offing, and so the time is ripe for a reminder that, in terms of the Estate Agency Affairs Act (“the Act”) only agents with a valid and current Fidelity Fund Certificate (FFC) can operate and earn commission. 

The challenge for agents is that when it comes to the issue of FFCs, they are at the mercy of the Estate Agency Affairs Board (EAAB), which has reportedly struggled in the past to issue certificates efficiently and on time. This problem will presumably be exacerbated by the ongoing lockdown restrictions and the risk of precautionary office evacuations. 

However there is some good news for agents (not such good news perhaps for those sellers or landlords hoping to save on commission!) in a recent Supreme Court of Appeal (SCA) judgment…

No FFC, but not the agent’s fault 
  • Two estate agencies (“S” and “A”) jointly brokered a lease agreement, but when S asked for its 50% share A refused, partially on the basis that S had no valid FFC at the time the commission was earned.
  • In fact S had done everything necessary to apply for its annual FFC, which was issued by the EAAB on 1 January 2018 in the wrong name (S had converted from a close corporation to a company). The EAAB acknowledged its error and in May 2018 issued a correct FFC to S, backdated to 1 January. 
  • However the High Court dismissed S’s commission claim, holding that mere entitlement to an FFC is not enough – a valid FFC must have been actually issued at the time the commission was earned.
  • S appealed to the SCA, which reversed that finding and awarded S its 50%. The Court held that the Act’s strict and peremptory requirement for a FFC had to be interpreted in light of both Constitutional considerations and consistency “with what the Act seeks to achieve”.
  • On that basis, and commenting that “But for the error on the part of the Board, [S] was entitled to, and would have been issued with, a valid fidelity fund certificate for the period 1 January-31 December 2018” and that “the fault lies squarely and solely with the Board”, the Court concluded that “the estate agents were rightly considered to have been in possession of a certificate”. S is therefore entitled to its commission.
Agents – don’t lose your commission!

The Court was however at pains to point out that the particular facts of this case were “in a narrow compass” and it is clear that the general rule remains – hold a valid and current FFC or almost certainly forfeit your commission. Do not even try to rely on an EAAB mistake unless you have complied strictly with all the formalities for a certificate and can prove that you are entitled to one.

And as the Court put it, if something does go wrong with the issue of your FFC “…estate agents should not adopt a supine attitude in the face of the Board’s errors. They should do what is reasonably within their power to have the situation rectified. In the meantime their compliance with the requirements should be a primary factor in the determination of disputes that arise before the error is rectified” (emphasis supplied).

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Property Subsidence: New Law, Strict Liability and Ubuntu

“…every landowner has a right to the lateral support and where subsidence or other destabilisation occurs, as a result of excavations on an adjacent property, the owner of the adjacent property will be liable in an action for damages irrespective of whether she was negligent or not.” (Extract from judgment below)

It’s every homeowner’s nightmare – your property starts subsiding and as the tell-tale cracks in the living room widen alarmingly, it begins to dawn on you that your whole house is at risk of collapse. 

The cause must, you decide, be your neighbour’s excavations for a new house/garage/swimming pool. You approach said neighbour for a friendly chat and a request to do something about it urgently. “Sorry” replies your neighbour, “not my fault, I am building exactly according to approved plans so it’s your problem.” 

So where do you stand legally?

A recent Supreme Court of Appeal (SCA) decision has broken new ground (weak pun intended!) in our law here, and all property buyers, sellers and owners would do well to take note.

A slope subsides and a neighbour sues
  • This long-running dispute between neighbours dates from 2008 and concerns the owners of two properties on a steeply sloping mountainside, one above the other.
  • The house on the upper property was built in 1994. Fourteen years later in 2008 the owner of the lower property started extensive excavations in preparation for construction of her new house.
  • The upper owner very soon noticed problems, with his garden and outside walls showing clear signs of subsidence. Eventually there was a major movement in the underlying ground and the entire slope subsided. The upper owner’s property moved laterally and downwards towards the excavation resulting in extensive structural damage to the property. It was clearly a major event, with another neighbour having to abandon his property entirely because of safety concerns.
  • The upper owner sued the lower owner for damages, and after a long fight through the courts the matter ended up with the SCA which upheld the damages claim by the upper owner.
The duty of “lateral support” 

The Court addressed several important questions, all of them vitally important to any property owner or prospective property owner –

  • Does the duty of support cover buildings, or just land “in its natural state”? Our law has long recognised a neighbour’s duty to provide physical lateral support for adjoining properties, but until now it has been unclear whether that applies only to land “in its natural state”, or whether it extends also to developed land with “artificial” structures on it. It’s an important question – few urban properties would be covered if the duty applies only to undeveloped land.

    The SCA’s final word – the duty of support applies to both land in its natural state and to “improved” and developed land (i.e. your house and other structures are covered).

    As an important side note here, the Court referred to both the fact that “in our neighbour law, fairness and equity are important considerations”, and to the fact that “in our constitutional context, the principle of lateral support must find expression in the constitutional value of Ubuntu, which ‘carries in it the ideas of humaneness, social justice and fairness’” (Emphasis supplied). Sticking to the ‘letter of the law’ may no longer be enough when dealing with your neighbours!

    Which leads us to another important thought – take legal advice immediately you realise your property is in danger. You may well be advised to urgently apply for an interdict to stop the excavations or other building work from continuing.
  • Did the excavations breach that duty? The Court was faced with competing evidence from two geo-technical experts who were agreed that there was a slope failure which caused ground movement on the affected properties, but differed on the cause and mechanism of the slope failure. In the end the Court held that “the exact mechanism which caused the removal of lateral support is unimportant” and that the claimant “succeeded in establishing that the slope mobilisation had resulted from a breach of the duty to provide lateral support due to the excavation on the first appellant’s property”.
  • Did the excavations cause the loss? On an analysis of the evidence the Court determined that the claimant had established both factual causation (“whether the relevant conduct caused or materially contributed to the harm giving rise to the claim”) and legal causation (“whether the conduct is linked to the harm sufficiently closely or directly for legal liability to ensue, or stated differently, whether the harm is too remote from the conduct.”).
  • Is negligence necessary? Normally to establish a damages claim you must prove that the person who caused your loss acted both wrongfully and negligently (or deliberately). Not so, said the Court, “the right of support is a natural right of ownership” and in subsidence cases “it is unnecessary to prove an unlawful act or negligence; the cause of action is simply damage following upon deprivation of lateral support.” 

That last finding of course means that landowners are “strictly liable” – something to bear in mind before you buy or develop any property where subsidence could possibly be an issue.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Electronic Signatures in Property and Other Transactions

“To sign a document means to authenticate that which stands for or is intended to represent the name of the person who is to authenticate” (quoted in the case below)

We all know that verbal agreements, although fully binding for most types of transaction, are a recipe for uncertainty and dispute. It’s not just a question of trust – even if no one is deliberately dishonest about what was agreed, innocent misunderstandings are common. We have a natural tendency to hear what we want to hear and to remember what we want to remember, and a properly-drawn written agreement avoids that.

So even when a written and signed document isn’t required it is always wise to insist on one. Note that the parties themselves can require a document to be in writing and signed. Or it could be required by law – the most common examples of the latter are property sale agreements, wills, suretyship agreements, ante-nuptial contracts, and credit agreements (there are other less common examples – take professional advice in doubt).

But that’s not always easy to achieve, and the COVID-19 lockdown in particular has highlighted the challenges of getting everyone together for an old-fashioned original “paper and ink” signing session. Even when social distancing is no longer required and ceases to be the norm in society, the convenience and benefits of being able to sign documents remotely (whether you and the other party/ies are in different houses, cities, countries or even different continents) are obvious.

Firstly, when is a digital agreement “in writing”; and can property sales and wills be electronic?

Fortunately our law, in the form of the ECTA (Electronic Communications and Transactions Act) recognises the general validity of digital documents. A “document or information” is “in writing” if it is –

  • “In the form of a data message; and
  • Accessible in a manner usable for subsequent reference.” 

As a result, perfectly valid and enforceable agreements are now often entered into online, by email, WhatsApp and the like. 

Note that there are some specific exceptions where a physical (“wet ink on paper”) as opposed to an electronic format is still required – most commonly property sale agreements, “long” (10 or more years) leases and wills (there are others – take advice in doubt).

Secondly, is “signature” always required?

Formal “signature” isn’t always essential as the ECTA provides that if the parties to an electronic transaction don’t specifically require an electronic signature, “an expression of intent or other statement is not without legal force and effect merely on the grounds that –

  • It is in the form of a data message; or
  • It is not evidenced by an electronic signature but is evidenced by other means from which such person’s intent or other statement can be inferred.”
Thirdly, how can you sign a document electronically?

Where “signature” is required, the ECTA recognises the concept of “electronic signatures” (defined as “data attached to, incorporated in, or logically associated with other data and which is intended by the user to serve as a signature”. They are valid except in cases where either a law (like the laws relating to property sales etc mentioned above) or the parties themselves require actual physical signatures.

An electronic signature can take many forms. Where it is required by the parties but they haven’t agreed on a particular type of electronic signature to be used, it is valid if –

  • “A method is used to identify the person and to indicate the person’s approval of the information communicated; and 
  • Having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated.”

That definition will often be wide enough to include names on email messages, scanned images of physical signatures and the like. But remember the parties can specify what formats are and aren’t allowed, plus our courts may well look at all the circumstances of a case and decide for example that an actual manuscript signature is required even when transmitted electronically (see for example the “R804k” judgment discussed below).

“Advanced” electronic signatures

This is a concept of authentication designed to make an electronic signature more reliable and it is used when a law requires signature for specified documents or transactions but doesn’t require another particular type of signature.  

For example the Deeds Registries Act requires documents like the Power of Attorney to Transfer Property to be signed, and that can be done either physically or electronically – but if electronically the electronic signature must be an advanced one. The Credit Agreements Act provides other good examples. 

Even when not specifically required, a big advantage of advanced electronic signatures is that they are presumed to be valid. That means anyone attacking one would have to prove its invalidity and not the other way round.

Security and fraud; with an R804k example

Cyber criminals are as always waiting to pounce so all the normal warnings in regard to electronic communication apply here, with the added need to ensure that electronic documents cannot be altered after completion/signature. 

A recent example of “forged electronic signatures” is an online fraud that went horribly wrong for a firm of financial advisers who were sued for R804,000 when their client’s Gmail account was hacked by fraudsters – 

  • Using the investor’s authentic email credentials, the fraudsters sent three emails to the financial advisers instructing them to transfer a total of R804,000 to the fraudster’s accounts. Two of the emails ended with the words: ‘Regards, Nick’ while the third ended with ‘Thanks, Nick’.
  • The financial advisers made the transfers and the investor sued them on the grounds that they had paid out contrary to the written mandate he had given them which stipulated that ‘All instructions must be sent by fax to [011 *** ****} or by email to [***@***.co.za] with client’s signature.’
  • The financial advisors argued that they had complied with the mandate in that the email endings “Regards, Nick” and “Thanks, Nick” were valid electronic signatures in terms of ECTA.
  • The SCA (Supreme Court of Appeal) however upheld the High Court’s ruling that the financial advisors were liable. They had not complied with the mandate which “requires a ‘signature’ which in every day and commercial context serves an authentication and verification purpose … The word ‘electronic’ is conspicuously absent from the mandate …  The court below cannot be faulted for concluding that what was required was a signature in the ordinary course, namely in manuscript form, even if transmitted electronically, for purposes of authentication and verification.”

Play it safe – have your lawyer draw and manage your agreements for you to minimise this sort of risk, and ask also about using an external service provider for secure, authenticated and verifiable electronic document signing and storage. If you do come to blows with the other party down the line, the integrity and evidential value of your electronic documents and signatures could be make-or-break.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Lockdown! Nuisance Neighbours and How to Handle Them

“You can be a good neighbour only if you have good neighbours” (Howard E. Koch)

It looks as if we will still be under “restricted movement” orders for a while – even when we finally get down to Alert Level 2 and who knows when that will be. 

Tensions between neighbours are no doubt at an all-time high, and whether you are working from home or just trying to stay sane until our “new normal” starts kicking in, you are no doubt noticing more than ever all those little irritants from next door that would normally fly below your radar or at least be tolerable. 

And of course remember it’s a vice-versa situation – your neighbour is in exactly the same position. That’s a recipe for dispute, and going to war with a neighbour is a classic lose-lose option, in court or out of it. Any short-term victory you may think you can achieve will pale against the ongoing trench warfare that will inevitably result. 

First prize: A negotiated win-win

Negotiation will always be your best path to a win-win outcome, and whether you open up dialogue with a friendly chat over WhatsApp or a socially-distanced masks-on discussion over your boundary wall, here is one bit of advice that will substantially increase your chances of a happy outcome for everyone: Understand your legal rights before you start negotiating! 

Should your negotiations come to naught, consider as your next step mediation, arbitration or official intervention (more on possible municipal or police intervention options below). Remember that if you live in a “community scheme” such as a sectional title development or a Homeowners’ Association community, the CSOS (Community Schemes Ombud Service) provides a dispute resolution service to assist with a wide range of community disputes.

Then – and this should normally be your last option only to be resorted to when all other avenues have failed – you have the legal route, normally in the form of an interdict application and/or damages claim. 

How can our law help you? It’s a balancing act…

The principles laid down by our courts in dealing with neighbour disputes over many years are firmly rooted in common sense. You are entitled to the use and enjoyment of your property – so long as you act lawfully – without unreasonable interference. “An interference” our courts have held, “will be unreasonable when it ceases to be a ‘to-be-expected-in-the-circumstances’ interference and is of a type which does not have to be tolerated under the principle of ‘give and take, live and let live’.”  

As the Supreme Court of Appeal (SCA) put it in 2016: “Nuisance involves the unreasonable use of property by one neighbour to the detriment of another.” It’s a balancing act between competing rights – yours and those of the other property owners around you. 

Peacocks, a cherry tree, and the court’s wide discretion

It is also difficult to set out too much in the way of hard and fast rules here, for as our courts have put it “modern conditions require the exercise of a wide discretion in the adjustment of neighbour relationships”. 

Thus the High Court, in a 2013 case involving nuisance peacocks, a “much loved” cherry tree on the boundary of two properties and in danger of being chopped down, and a partially-demolished boundary wall, both quoted and applied that principle with an order encapsulating a resolution of the neighbourly disputes in a detailed and pragmatic manner. The peacocks for example had made a major nuisance of themselves by being noisy, messy and destructive trespassers (they had damaged expensive vehicles by pecking at them when they saw themselves reflected in the rear-view mirrors and highly polished metal surfaces). The court order included both authority for them to be removed by either the municipality or by the SPCA (there being no municipal permit to keep them as required by the municipality’s bye-laws), and an admonition to find them “good and lawful homes”. The cherry tree on the other hand is now protected by an interdict against its removal, with detailed instructions in the court order as to the reconstruction of the boundary wall next to it.

Bear in mind therefore that what is said below is of necessity a simplified and brief summary only – every case will be different, our courts will take into account a whole range of factors in deciding a dispute, and in many instances technical questions of “wrongfulness”, “fault”, “moving to the nuisance” and so on may apply. If your dispute gravitates towards legal action, specific advice is essential!

What is a “nuisance”?

The range of potential disputes falling into the “neighbour law” and “nuisance” categories is wide. Some examples (from the SCA again – emphasis supplied) – “repulsive odours, smoke and gases drifting over the plaintiff’s property from the defendant’s land, water seeping onto the plaintiffs property, leaves from the defendant’s trees falling onto the plaintiff’s premises, slate being washed down-river onto a plaintiff’s land, causing a disturbing noise, causing a common wall to become unstable by piling soil up against it, overhanging branches and foliage, an electrified fence on top of a communal garden wall, blue wildebeest transmitting disease to cattle on neighbouring ground, and occupants of structures on neighbouring land allegedly causing a nuisance.” 

Two common areas of dispute – noise and trees

Let’s have a closer look at how those general principles have been applied to two of the more common areas of dispute –

  1. Noise: If barking dogs, power tools, loud music or the like are making your life a misery – keeping you awake at night perhaps, or (a common concern in this time of remote working) unable to concentrate on that business project or to participate in your daily Zoom “office” meeting – sooner or later you will need to take action.

    Particularly relevant here are the various national statutes and local bye-laws dealing with noise pollution. Contact your local municipality or the police for help if you need to. If you live in a complex, Body Corporate or Home Owners Association rules and regulations will probably come into play as well. SAPS should respond to serious violations of our anti-noise laws, and just a warning visit from a blue uniform might solve your problem once and for all. 

    If you end up in a legal fight, our courts will take into account factors such as “the type of noise, the degree of its persistence, the locality involved and the times when the noise is heard”. As we said above, every case will be different.  
  2. Trees: If your neighbour’s trees are damaging your property (common complaints relate to boundary walls, underground pipes, building foundations, driveways and the like), or are causing a nuisance in the form of falling leaves or branches, or are blocking your views/depriving you of light, you are once again left with no hard and fast rules. A court will look at what is “objectively reasonable” in all the circumstances. As a general rule, don’t count on much sympathy from a court if damage is minor and easily repaired, if the nuisance caused is controllable by you with regular maintenance (clearing leaves from gutters and so on) or if your only complaint is loss of your views. That last aspect is a whole separate debate with many twists and turns, but all based on the concept that you will have no automatic right to a view.   

    Where you are dealing with an “overhanging branches” issue, old common law principles will usually apply unless factors such as local bye-laws, heritage protection of older trees etc come into play. You will generally have a right to cut overhanging branches back to your property line if the neighbour refuses to do so and to keep or dispose of the branches if your neighbour declines to take them. 

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Unemployed, Can’t Pay Bond and Credit Instalments? “Credit Life Insurance” May Save You

If you are one of the many employees retrenched or put on short pay or unpaid leave as a result of the COVID-19 crisis and lockdown, you will be wondering how to cover the monthly instalments on your mortgage bond and other credit agreements. You have no doubt heard of the “payment holidays” banks are offering, but remember that although these are a lot better than losing your house, car etc, they are no free lunch. Interest and fees will still be building up.

Credit life insurance is not just death cover

That’s why you need to check right now whether or not any of your credit agreements are covered by “credit life insurance”. Many people don’t even realise they have this cover in place, and those that do may look at the “life” part of the name and think “well that’s no good to me or my family, I’m unemployed not dead”. The good news there is that most policies cover a host of other events leaving you unable to pay instalments – see below for more.

Do you have cover?

You may well have this cover in place without even realising it because it is commonly required when you take out any form of credit – think mortgage bonds, vehicle finance, credit cards, retail credit (store cards etc) and so on. 

If you aren’t sure, check your latest bond or credit statement for any sign of an insurance premium deduction (it may be called “balance protection” or the like). Then contact the bank (or whichever credit grantor you are with) and ask them to check. You may not have it for example if at the time you ceded another life policy to the credit grantor.

What are you covered for?

Check what the terms of your particular policy are, but the minimum cover required by National Credit Act Regulations (which only affect credit agreements entered into on or after 9 August 2017) is –

  • Death or permanent disability: The outstanding balance of your total obligations under the credit agreement is covered.
  • Unemployment or inability to earn an income: You are covered until you find employment or are able to earn an income, with a maximum of 12 months’ instalments. 
  • On temporary disability: You are covered until you are no longer disabled, with a maximum of 12 months’ instalments.

Exclusions – the Regulations allow a long list of exclusions to be incorporated in your policy so check which apply to you. Most of them are common sense – for example lawful dismissal, retirement or resignation from employment – but if you are told that a particular exclusion applies to you and you don’t agree ask your professional advisor for advice before conceding anything. Employers may be able to assist in this regard when structuring crisis outcomes with staff, but remember to do so only after taking your own legal advice! 

Self-employed people and pensioners should check what cover they have under their particular policy, and what terms apply to them.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Leases, Contracts and COVID-19: What is Force Majeure?

The COVID-19 crisis has changed everything. Our personal lives have been upended and our businesses hit hard. 

And with many businesses operating out of leased premises, a great many landlords and tenants are asking themselves what happens if the crisis leaves a tenant unable to pay the agreed rental. 

What follows is of necessity a general guide only – professional advice specific to your case is essential here.

Tenants – your risk

As always “With Great Change comes Great Opportunity”, but if you aren’t able to very quickly find and exploit a viable new opportunity you may well struggle to pay your rental. 

Don’t just stop paying rental! Failing to pay rental on time means breaching your lease, and if you do that you face cancellation, legal action for recovery of outstanding rental, damages claims for breach (substantial if your lease has a long time to run and your landlord struggles to re-let) and calling up of your personal suretyships (exposing you to loss of all your personal assets, house etc). 

Bottom line – take professional advice before you just stop paying!

Landlords – your balancing act

As a landlord you have a very delicate balancing act – on the one hand you won’t want to lose even half-reasonable tenants at a time when finding new ones is going to be problematic. One wonders for example how many small businesses will now either fail entirely or be forced to cut costs. And how many others, having had an enforced period of “working from home”, will now be reconsidering the whole concept of leasing separate office space at all. 

On the other hand of course you need to cover your ongoing costs, which probably means enforcing payment of rent. That in turn means understanding your legal position – for example does your tenant now have an excuse to cancel the lease without penalty? If so, you lose a tenant without recompense. But if your tenant is still bound by the lease, you are free (if you wish – long-term support of your tenant may still be your best option) to demand full payment, then to reduce your losses by cancelling, evicting, executing against the tenant’s assets and calling up personal suretyships. 

What about “force majeure” or “impossibility of performance”? 

Force majeure” (a French legal term meaning “superior force”) is an event, either due to “natural causes” (earthquakes, cyclones and so on) or to “human agency” (war, riots, legislation and the like) that makes it impossible to comply with the lease. 

We really are sailing into uncharted waters here with worldwide debate over whether or not this pandemic is indeed a case of force majeure. There is bound to be a great deal of litigation before we can be certain whether or not the crisis (particularly the declaration of a national state of disaster and the lockdown period) will be accepted by our courts as a “force majeure” event. If it is, many tenants will argue that their failure to pay rental is not a breach of lease but rather a lease-destroying “supervening impossibility of performance”. 

So where do you stand? There are two main scenarios to consider –

  1. What does the lease say? The onus of proving a force majeure is on the tenant trying to escape from the lease, and the first thing for both parties to check is what the lease says.

    Many leases have a clause that deals with a tenant’s inability to occupy premises as a result of damage to or destruction of the premises which won’t apply here, but some leases do have specific force majeure clauses. If yours has such a clause you are bound by whatever it says so check whether a pandemic or government order to cease business might fall under the clause, and if so what results and remedies are specified.
  2. What must the tenant prove if there is nothing in the lease? If there is no force majeure clause in your lease, our common law applies. Your problem here is that there are a lot of grey areas involved and every case will be different, so what follows is just a general and non-exhaustive guide.  

    A tenant would have to prove not only that the impossibility caused a loss of beneficial occupation (entitling the tenant perhaps to a rebate of rental for the lockdown period, or perhaps frustrating the lease altogether) but in all probability also that it is –
  • “Unforeseeable with reasonable foresight”. In this regard we may well hear arguments along the lines of “the emergence of the coronavirus and its impacts were neither unexpected nor improbable”. Could such an argument prevail? Only time will tell.   
  • “Unavoidable with reasonable care”. 
  • An absolute as opposed to a probable impossibility. “The mere likelihood that performance will prove impossible is not sufficient to destroy the contract.” 
  • An absolute not a relative impossibility. “If I promise to do something which, in general, can be done, but which I cannot do, I am liable on the contract”.   
  • Not the fault of either party. “A party who has caused the impossibility cannot take advantage of it and so will be liable on the contract.”   
  • The “contrary common intention of the parties” could override the defence of impossibility. Consider any representations made by either party to the other that may be relevant.

Moreover our courts have held that “In each case it is necessary to ‘look to the nature of the contract, the relation of the parties, the circumstances of the case, and the nature of the impossibility invoked by the defendant, to see whether the general rule ought, in the particular circumstances of the case, to be applied’.”

That’s all fertile ground for expensive and draining litigation, at a time when neither of you is likely to have an appetite for either. 

Which brings us to…

A practical template for negotiation

Take this advice from Roman lawyer and statesman Cicero over two millennia ago: “Agree, for the law is costly”. 

So if you are a tenant, rather than just stopping rental payments and then having to fight it out through the legal system, ask your landlord to agree to a win-win compromise that will limit both short-term and long-term damage to your respective businesses.

Draw up a checklist including matters such as –

  • Do you or your landlord have any sort of insurance cover for this sort of disaster?
  • If you want to cancel the lease entirely, consider whether, if the protections of the Consumer Protection Act are available to you (see below*) it might pay you to give your 20 business days’ notice and pay the “reasonable cancellation penalty” the landlord is entitled to demand. (*You need to take advice on this – leases between “juristic persons” such as companies and trusts in particular are excluded from this particular protection).
  • Alternatively consider what you can offer the landlord to accept your cancellation without a fight. 
  • If you want to continue in the premises, make sure that your failure to pay on time is specifically recorded as not being a breach of the lease.
  • Decide whether you will ask for a full rental holiday, or a rental reduction. For how long? The better a tenant you have been, the more incentivized your landlord is going to be to help you stay in place. Offering an extension of the lease – if it ties in with your long-term planning – could help a lot with that.
  • If you run into a brick wall there, think of proposing that the arrears not be written off but rather just be deferred until your business is back up on its feet. Specify when payment of arrears will be made, what if any interest will be charged and so on.
  • If the tenant is a corporate entity and you signed a personal suretyship for it, don’t forget to specifically cover that aspect in your agreement. 
  • Remember to include in your agreement what happens to any deposit the landlord may be holding from you.
  • If you agree on a new or amended lease, think of including a professionally-drawn force majeure clause (or check an existing clause for possible update). 
Beyond leases – force majeure and contracts generally

Although this article specifically addresses landlords and tenants, the general principles of “force majeure” and “impossibility of performance” apply to all contracts and might in some cases entitle you to delay or avoid contractual obligations beyond lease agreements. Take professional advice specific to your circumstances!

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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Property Sellers – Prepare for SPLUMA

Many factors can delay your property transfer, and all of them are likely to cost you. 

A last-minute rush to comply with statutory requirements is one such pitfall to avoid. Beware therefore of the possibility that you will soon need (in some parts of the country you may already need), to lodge before transfer a formal “SPLUMA” (Spatial Planning and Land Use Management Act) certificate of compliance.  SPLUMA, without getting too technical, provides a framework for all provinces and municipalities to pass laws governing land use and development.

There is (at date of writing) some confusion over what is actually required, and although currently a formal certificate of compliance seems to be necessary in some municipal areas only, there is a suggestion that the requirement will apply everywhere by October 2020. 

It pays to comply anyway!

The important thing however is that – regardless of statutory requirements – you won’t want any problems with your buyer down the line complaining about unlawful building work or zoning contraventions. So it makes sense to ensure that you are fully compliant well before you start any sales process. 

Take professional advice (in good time so you can take corrective action if you need to) and make sure that –

  • Building plans for all structures have been approved,
  • Your property’s use complies with its zoning, and 
  • There are no encroachments over building lines and property boundaries. 

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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