Legislation introduced in the last few years gives residential tenants a host of rights, and landowners or landlords must follow very strict procedures to evict tenants.
However, the same is not true of commercial tenants. In some cases the Consumer Protection Act may apply, but in other cases the relationship is governed by contract law.
Unlike residential tenancies, there is no legislation specifically governing commercial leases. So a professionally prepared, written lease is essential for avoiding misunderstanding and disputes.
Cancellation of a commercial lease
Although commercial tenants do not enjoy the level of protection afforded residential tenants by the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act (PIE), the landlord must still follow due process.
If a landlord wishes to evict the tenant, they must first cancel the lease. This can be done on expiry of the lease or on the occasion of a material breach of the terms of the agreement (usually rent arrears).
In some instances, a commercial tenant may be protected by the Consumer Protection Act (CPA). If there is a fixed term lease, Section 14 of the CPA applies.
In this scenario the landlord must give 20 business days' written notice of a breach of the lease agreement. The landlord may then only cancel the lease if the tenant fails to rectify the breach after 20 days.
Section 14 does not apply in the following situations:
- If the tenant is an organ of state (municipality, state department);
- If the landlord and tenant are both juristic persons;
- Once-off leases;
- If the tenant is a juristic person with an income or turnover above R2m per year.
In these circumstances 20 business days' notice of a breach is not required before being able to cancel the lease.
Eviction process for a commercial tenant
Commercial evictions are handled either by the High Court or the Magistrate's Court. The case is brought by way of action or application proceedings in the High Court and by way of action proceedings, usually in the Magistrate's Court.
The lease agreement must first be cancelled before an eviction proceeding can be brought.
In the business context the rights of the property owner to protect commercial income take priority. But this highlights the need for a rock-solid lease to be in place as it provides the legal framework within which the eviction can take place.
Commercial evictions do not only affect the removal of the tenant. Landlords have a right to claim any damages that may apply at the time of eviction, as well as rent arrears.
A commercial tenant does not have the same attachment to a property as a residential tenant.
If a landlord is concerned that the commercial tenant might do a midnight flight, an urgent application can be brought before the court to allow the landlord to attach and secure the movable goods on the property. Then, if the tenant removes them it is a criminal offence.
The security a landlord holds over a tenant’s property is known as the hypothec and is actually the strongest form of security in South African law.
However, once the movable goods are removed from the property the landlord has no security over or rights to those goods.
Therefore, if there is reason to suspect a tenant might beat a hasty retreat, the landlord must apply for the attachment of the goods urgently.
Occasionally a landlord might not be able to commence the eviction process, even if the tenant is in breach of the lease.
A business that has fallen on hard times may enter Business Rescue. During this period there is a moratorium on all legal action, so an eviction notice may not be served.
* Simon Dippenaar is an attorney at Simon Dippenaar & Associates.