Court rules in favour of exorbitant rental increase

It is often said by property landlords that the best – and indeed the only – time when rental payments on a lease can be raised significantly is when one tenant leaves and another moves in. Until then the landlord has to abide by the annual rental increases that are stipulated in the lease agreement – and these are usually in the region of 10% and seldom higher than 12%.

Many landlords will take advantage of the gap between one tenant’s occupancy and another to improve a property, thereby making the higher rental possible.

What happens, however, if, after a period of two or more years the lease expires but the agreement says that the tenant has the option to renew at an unstipulated price?

This situation arose recently in a court case (Beau Investments v Maverick Trading) to which Graham Leslie, MD of Greeff Properties, has drawn attention.

The landlord decided the time had come for a substantial increase and informed the tenant, who had opted to stay on, of this. The tenant regarded the increase as exorbitant, remained in occupation but refused to pay the full amount.

“Many people,” said Leslie, “would have thought that the option clause entitled the tenant to assume that the previous rate of increases would be continued – but this was not the way the court saw it. They ruled that, in the absence of any specific agreement on this matter, the landlord was within his rights – and they ordered the eviction of the tenant, after he had continued to stay in the premises.”

This case, said Leslie, will no doubt strengthen the conviction among many people that the law is weighted in favour of landlords. However, the time taken to achieve evictions legally and the ruling under the PIE (Prohibition of Illegal Evictions) Act that alternative accommodation has to be available to evicted tenants, indicate that landlords are in fact now more regulated now than previously.

Article by: www.greeff.co.za