Are you leasing or are you an owner that rents out a property? Does your lease agreement classify as a long term lease?
A lease agreement can be defined as long term lease agreement if it extends for a minimum period of ten years, or if the lease agreement has been concluded for an undetermined period and has a right of renewal upon the choice of the lessee for periods that’s make out a period of at least ten years.
It is important to note that lease agreements are not enforceable for periods exceeding 10 years if it has not been registered against the title deed of a property as a long term lease.
IS MY LONG TERM LEASE AGREEMENT VOID IF NOT REGISTERED?
Any lease agreement, whether oral or in writing is valid and enforceable for periods not exceeding 10 years if the agreement has not been reduced to writing and registered against the title deed of the property.
EFFECTIVENESS OF A LONG TERM LEASE AGREEMENT
When looking at long term lease agreements one needs to distinguish between an onerous and gratuitous successor as this influences the effectiveness of the long term lease agreement. An onerous successor can be described as a successor whom has given value for the succession e.g. a purchaser, whereas a gratuitous successor has given no value for the succession e.g. an heir or legatee.
It has to be noted that the common law maxim of “huur gaat voor koop” (in essence this means that the lease agreement remains applicable between the lessee and the new owners or of the lessor’s successors in title) only applies to leases of immovable property and is only enforceable against the lessors’ creditors and successors in title for a maximum period of 10 years if it does not classify as a long term lease agreement.
The conclusion of a long term lease agreements on or after 1 January 1970 is currently governed by Formalities in Respect of Leases of Land Act 18 of 1969 which provides that long term lease agreements must be registered against the title deed of the leased property or had the onerous creditor or successor of the lessor known about the lease agreement at the time of entering into a transaction whereby the leased property was acquired, in which event the lease agreement will be valid and enforceable against any creditor or successor of the lessor for periods even exceeding 10 years. The onus of proof rests on the lessee to prove that the onerous successor had knowledge at the time of the transaction whereby value was given for the succession.
A gratuitous successor will be bound to an unregistered lease agreement whether he had knowledge of the existence thereof or not, whereas an onerous successor without knowledge will be bound for the first ten years of the agreement.
In summary of the above a registered long term lease agreement will provide the lessee with a real right which is enforceable against the lessor and all third parties for the entire term of the agreement even exceeding the term of 10 years. An unregistered lease agreement will be enforceable against the gratuitous successor and the onerous successor for the first term of the agreement which does not exceed 10 years.
If you have thus negotiated a long term lease with beneficial terms that is not registered against the title deed of a property the chances are that the agreement may not be enforceable for the entire term of the agreement.
Barnard Incorporated is a firm of attorneys situated in Centurion, Pretoria.