Withholding rental

The Supreme Court of Appeal dealt with this question in the recent case of Tudor Hotel Brasserie & Bar (Pty) Ltd v Hencetrade 15 (Pty) Ltd (793/2016). The lessee, Tudor Hotel Brasserie & Bar was evicted from the leased premises by the lessor, Hencetrade 15, as a result of Tudor’s failure to make payment of rental.

Tudor admitted failing to pay rental but claimed that it had not been given vacant possession of the entire premises as the third floor had been retained by Hencetrade for the storage of property and that this entitled it to withhold rental. In its argument, Tudor relied on the legal principal of reciprocity.

This principle operates where both parties to an agreement have an obligation to each other. In certain circumstances, if one party has not yet performed its obligations, the other may raise as a defence that its obligation to perform has not yet arisen because of the other party’s lack of performance and Tudor argued that Hencetrade was not entitled to cancel the lease and evict Tudor as it was not required to make payment of rental until vacant possession had been provided to it.

But the lease agreement also included a clause recording that “all payments in terms of this lease … shall be made on or before the first day of each month without demand, free of exchange, bank charges and without any deductions or set off whatsoever”.

The Court held that this clause of the lease imposed an obligation on Tudor to make payment of rent in advance which meant that its payment of rent was not contingent upon prior performance by Hencetrade. Tudor was therefore not entitled to withhold rental and its eviction was justified.

The agreement also included a clause recording that “the tenant shall not have any claim of any nature whatsoever against the landlord whether for damages, remission of rent or otherwise, for the failure of or interruption in the amenities and services provided by the landlord … unless such failure or interruption is caused by the negligent or wrongful act or omission by the landlord …”.

Ordinarily, if a lessee were deprived of beneficial occupation, it would be entitled to a remission of rental or damages proportional to its reduced use and enjoyment of the property, but because of the above clause, Tudor was not entitled to such claim.

Rosanne Kinder
Garlicke & Bousfield Inc

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