LACO6221

LU 9
Formation of the
Contract of Lease
I M U L D ER
 You may use the power point slides as a guideline to prepare content for
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 There are three forms of contract of letting and hiring that are recognised in South African law, i.e.
❖ letting and hiring of a thing
❖ letting and hiring of services
❖ letting and hiring of a job or contract

Our focus, however, will be on the letting and hiring of things, more specifically, immovables.

Contracts of lease are entered into on a daily basis, but what does a lease contract actually mean? What makes a lease contract different
to other contracts? And how does a court or the Rental Housing Tribunal assist in resolving any lease disputes? In order to answer these
questions, we have to look at the essential characteristics and requirements of a lease agreement and the influence of legislation on the
common law principles of lease agreements in South Africa.

In this learning unit, we will look at:

➢ the general requirements for the valid formation of a lease,
➢ the essentialia of a lease,
➢ how the CPA has influenced the inclusion of incidentalia in contracts of lease.
➢ Specific attention will also be given to the impact of the Rental Housing Act 50 of 1999 and the powers of the courts and Rental
Housing Tribunals will be considered.

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 Theme 1: Formation
of a contract of
lease
LO1: Describe the general requirements
for the valid formation of a lease;

LO2: Apply the three essentialia of the

lease agreement toa given scenario;

LO3: Analyse the influence of the CPA on

the inclusion of incidental terms
(incidentalia) in contracts of lease;

LO4: Compare the powers of the courts

and Rental Housing Tribunals (RHT) to
ensure fair terms and conditions in a
lease agreement, with reference to case
law 4
 Theme 1: Formation
of a contract of
lease
▪ PM: Chapter 16 (Pages 245 – 259)

▪ Schulze para’s 14.1 to 14.3

▪ Southern Port Developments (Pty)

Ltd v Transnet 2005 (2) SA 202 (SCA)

▪ Engen Petroleum Ltd v

Kommandonek (Pty) Ltd 2001 (2) SA
170 (W)

▪ Maphango and Others v Aengus

Lifestyle Properties (Pty) Ltd 2011 (5)
SA 19 (SCA).
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Introduction
(16.01)
Read 16.01 – 16.10

➢ Locatio conductio rei

(thing)
➢ Locatio conductio
operarum (letting of
services - employment)
➢ Locatio conductio
operis (service / job /
contract)

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 Rental Housing Act (16.02-16.10)
Rental Housing Act 50 of 1999 (the RHA):
• Came into full effect 1 August 2000.
• Regulates the rental housing market.
• With respect to the RHA, the concept of ‘unfair practice’ is NB.
o Section 13(1) – ‘any act or omission by a landlord or tenant in contravention of the Act or a practice prescribed as a
practice unreasonably prejudicing the rights or interests of a tenant or landlord’.
• Refer: Maphango and Others v Aengus Lifestyle Properties (Pty) Ltd 2012 (3) SA 531 (CC) & Maphango and Others v
Aengus Lifestyle Properties (Pty) Ltd 2011 (5) SA 19 (SCA) [both prescribed]
• The RHA also establishes Rental Housing Tribunals.
• What IS or IS NOT an unfair practice lies within the purview of the Tribunals.
• CPA may also be relevant where it applies.
o CPA, applies w.r.t. contracts between suppliers (landlords) and consumers (tenants) – both commercial AND
residential leases (but remember with CPA: contracts concluded in the ordinary course of business; at arm’s
length)
• Together these two Acts impact significantly on the RD common law of SA.

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 Definitions (16.11-16.13)
Study paragraphs 16.11-16.13:
RHA: Lease is ‘an agreement of lease concluded between a tenant and landlord in respect of a dwelling
for housing purposes’
•Owner or •‘Lessee of •Can be any
person entitled dwelling lease house, hostel,
to sub-lease by a landlord’. hut, shack,
flat,
outbuilding,
Landlord Tenant Dwelling

• CPA in §1 defines a service as INCLUDING ‘access to or use of any premises or other property in terms of rental’.
o ‘Rental’ is ‘an agreement for consideration in the ordinary course of business i.t.o. which temporary possession or
temporary right to use is delivered to the consumer’.

• But is NOT a lease within the meaning of the National Credit Act (NCA).
o These are ‘leases’ of movables under “hire-purchase” agreements.
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LO 1 - General requirements for Conclusion of the
Lease (16.14 – 16.30)
Study paragraphs 16.14-16.30
Consensus
Requirements:
Contractual
capacity
Legality
Physical
possibility of
Performances
Formalities

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 LO 1 - General requirements for
Conclusion of the Lease
(16.14 – 16.30)
Consensus
▪ CPA restricts the way in which consensus may be reached by regulating the
way in which the lessor may market services and interact with prospective
lessee’s during, e.g. negotiations.
o Sec 8 protects against discriminatory marketing and leasing practices –
such as ability to pay.
▪ RHA also prohibits unfair discrimination by a lessor against lessees on the
grounds listed in §9 of the Constitution.
▪ However, RHA admits that in certain circumstances there may be
reasonable grounds for differential treatment.
o Sec 41 of CPA prohibits false, misleading or deceptive
misrepresentations.
▪ Such as that the land being leased has certain characteristics it does not
have or that the land may be lawfully used for a purpose it may in fact not
be used for.
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LO 1 - General requirements for
Conclusion of the Lease
(16.14 – 16.30)
Consensus
▪ Sec 29 of CPA in context to leases prohibits marketing of
services that is reasonably likely to lead to
misrepresentation
▪ Sec 40 of CPA deals with unconscionable conduct on the
part of the lessors, e.g. physical force, coercion, undue
influence
▪ Sec 51 of CPA any contract brought about by
unconscionable conduct is void
➢ Common law – undue influence or duress renders
contract voidable
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LO 1 - General requirements for Conclusion
of the Lease (16.14 – 16.30)
Contractual Capacity
Ø Guardian may let minor’s property for a brief period, but must terminate within period of
minority.
Ø Long lease (≥ 10 years) – consent of court required.
Ø However, contract in violation is not invalid, but minor may repudiate upon majority.
Ø S39(1)(b) CPA provides agreement to supply services to a consumer is voidable at option of
consumer where:
a) Consumer an unemancipated minor.
b) Agreement made without consent of a responsible adult.
c) Agreement is not ratified by responsible adult or minor upon reaching majority.

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 LO 1 - General
requirements for
Conclusion of the
Lease (16.14 –
16.30)
▪ Any agreement is void where the
consumer has been declared mentally
unfit and the supplier (lessor) knew or
could have determined that the
consumer was so declared.
▪ Sec 39 does not provide protection
where the lessor was falsely induced to
believe that the consumer had capacity
▪ Executor of deceased estate may only
lease property if testator has authorised
it.
▪ An unrehabilitated insolvent requires
written consent of trustee before she
may carry on certain trades. Thus, if the
trade requires a lease agreement, then
the insolvent will have to get consent

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 LO 1 - General requirements for
Conclusion of the Lease

• Co-owner of undivided share may contract on behalf of

the others.
o But must take their interest into account.

• A fiduciary (or usufructuary) may conclude a lease i.r.o. of

fideicommissary rights.
o Lease may not be longer than period of fiduciary’s
rights.

• Nevertheless, agreement not terminated automatically on

expiry of fiduciary’s rights but only after the
fideicommissary has given the lessee proper notice.
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 LO 1 - General requirements for Conclusion
of the Lease (16.14 – 16.30)

Formalities
❖ Lease can be verbal, tacit, writing.
❖ CPA says lease may, if Minister prescribes, have to be in writing
❖ If NCA applies i.r.o. movables – lease must also be in writing.
❖ Guilty party can be fined, imprisoned, although lease remains valid
❖ Long lease (≥ 10 years) i.r.o. land needs to be in writing in order to make it binding upon successors and bona fide
creditors
[More about this later. Consider legal position of parties where long lease not registered.]

❖ If contract = in writing, must determine if writing = a requirement for validity or only for ease of proof
❖ RHA - Lessee has right to request the lessor reduce lease to writing. If in writing, the lease must include:
❖ Names; description of dwelling; $ and escalation; frequency (if not monthly); deposit; period; obligations; any
other charges.
❖ Lessor guilty? – fine and / or imprisonment for 2 years.

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 LO 1 - General requirements for
Conclusion of the Lease

▪ CPA – Lease must be in plain language.

o See Sec 22 (par 16.30) for what constitutes ‘plain language’.

▪ Should probably also be in consumer’s ‘official language’ in order

to meet plain language requirement.
o Sec 40(2) also provides that it is unconscionable for lessor
(supplier) to knowingly take advantage of lessee’s illiteracy,
ignorance, inability to understand language or any similar factor.

▪ Therefore duty on lessor to ensure lessee UNDERSTANDS lease.

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LO 2 - Essentialia of the Contract of Lease
(16.31-16.44)
Essentialia : Consensus reached on:
➢ The thing → leased property
➢ Use and enjoyment → temporarily
➢ Extent of counter performance → rent
o If these are not present, then it may be another type / class of contract, but it is not a lease.
o Court will determine true intention, not simulated agreement.
o E.g. if parties agree that lessee may mine for stone, then it is not lease.
• Naturalia of lease, e.g. lessee’s protection i.t.o. huur gaat voor koop (‘as is’) rule, will then not
apply.
• The RHA and the CPA may have introduced further essentialia.
• The leased property may be immovable, movable, corporeal or incorporeal and commercially
available to let.

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 LO 2 - Essentialia of the Contract of
Lease
Unjust determination? (See paragraph 16,42)
• Court has general power to correct.
• Parties (either / both) may then elect to continue or not.
o No valid contract if rental is in absolute discretion of either one of the parties.
o Unless objective standards have also been laid down, e.g. linked to CPI.
• If nominal rental, then courts must analyse to see if not donation.
• Conclusion: rental must be certain (‘rental between R700 and R800 per month’ is vague)
• Increases must also be determinable with certainty.
o Lessor may not increase unilaterally – unless such discretion is agreed and is linked to objective
standards.
o Mere fact that lessee remains after notice of increased rental, does not mean he has agreed to
higher rental.
o If landlord terminates lease, and informs of increase in rental, then lessee’s agreement can be
inferred if she does not give notice of termination.

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LO 3 - Incidentalia of the Contract of Lease
(16.45-16.57)
• Sec 48 & 51 – CPA - prohibit inclusion of certain incidentalia.
o i.e. terms and conditions specifically agreed to by the parties.

• Section of CPA places additional duties on the lessor.

o Sec 48 prohibits unfair, unreasonable and unjust terms.

• W.r.t terms, price, marketing & negotiation methods, require lessee (consumer) to assume any
obligation or waive any liability.
o S48(2) CPA provides indication of when an agreement will be unfair.

• E.g. excessively one-sided.

• Adverse to the lessee to a strong degree.
• Lessee relied on a false / deceptive statement.
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LO 3 - Incidentalia of the
Contract of Lease
• Reg 44 CPA - (from 1 April 2011) also prescribes an
extensive list of terms presumed not to be fair and
reasonable (“grey list of terms”)
➢ Only an indicative list.
➢ Onus on party alleging fairness to prove.

• Sec 48 and 52 CPA - apply to terms commonly found:

➢ E.g. waiving right to claim damages.
➢ Lessee assumes risk of property.
➢ Lessor excludes liability for death or damage caused
by lessors negligence or omission.

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 LO 3 - Incidentalia of the
Contract of Lease
Powers of the Court to ensure fair conduct (16.54-16.57) :
• S52 CPA allows court to make various orders under
circumstances where the lessee alleges:
o Lessor has contravened provisions of Sec 40 (unconscionable
conduct) or Sec 41 (deception) or Sec 48 (unfair +
unreasonable) AND the CPA does not otherwise make
provision for corrective remedy.
➢ Court may declare conduct unconscionable, unjust etc.
after having considered the provisions of the Act.
➢ As well as a number of specific matters set out in S52(2).
• Where a particular term is alleged void, the court may make an
order declaring the entire agreement, provision or notice void.
o And any other order which is just and reasonable.
• If any term etc. does not comply with Sec 49 of the CPA, then the
court may also order (i.t.o. S52(4)(a)(ii)) the offending provision
severed from the agreement, of no force and effect, or any other
order that is just and reasonable.
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 Prescribed cases that is
relevant to the learning unit
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 Southern Port Developments (Pty) Ltd v
Transnet 2005 (2) SA 202 (SCA)
Re: Creation of a lease - rental need not be specified as long as agreement provides for TP 2 determine it
❑ Case arose out of a contract between one TS (the predecessor in title of the appellant Southern Port ) and Transnet -
subject to a suspensive condition.
❑ Parties subsequently entered into a second agreement that if the condition was not fulfilled TS would have the option of
leasing certain properties, or the agreed portions of them, from Transnet on terms to be negotiated between them in
good faith.
❑ There was a linked arbitration clause providing that in the event of there being a dispute between the parties arising out
of the terms of the lease, it would be referred to the final and binding decision of a determinable arbitrator.
❑ It transpired that the suspensive condition was not fulfilled, but Transnet refused to enter into the contemplated good-
faith negotiations. The appellant sought an order compelling it to do so.
❑ SCA held: in deciding whether there had been agreement on the essentialia of lease, that, while the second
agreement did not specify the rental, it sufficed that it (and indeed any other term the determination of which the parties
could delegate to a third party) was determinable.
❑ Second agreement was not one to agree; it was not dependent on the absolute discretion of the parties; the final and
binding nature of the arbitrator's decision made certain and enforceable what would otherwise have been an
unenforceable preliminary agreement.

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 Maphango and Others v Aengus Lifestyle
Properties (Pty) Ltd 2012 (3) SA 531 (CC)
[FNB!]
Re: Rental Housing Act and Tribunal, Termination of lease with intention to negotiate higher rental
❑ FACTS:
▪ A number of individual residents of the Lowliebenhof apartment block in Braamfontein, Johannesburg, challenged the
cancellation of their leases by their landlord, Aengus Lifestyle Properties , a property investment company.
▪ Each of the tenants had a lease that ran for a specified period, and continued automatically unless either the landlord
or the tenant terminated it by written notice.
▪ After purchasing and upgrading the building, the landlord exercised its power to cancel the tenants' leases by giving
the required written notice.
▪ Landlord also offered each tenant an opportunity to enter into a new lease on the same terms, but at much higher
rentals (para [2]).
▪ These increases were necessary, the landlord argued, because the building's costs had long surpassed the tenants'
rentals, which were substantially below market rates (para [3]).
▪ Tenants lodged a complaint with the Tribunal - Following an unsuccessful mediation, the matter was referred to
arbitration
▪ Before the matter could be decided, the tenants withdrew their complaint so they could 'concentrate' on eviction
proceedings brought by the landlord in the South Gauteng High Court.
▪ The eviction application was granted in the High Court and an appeal to the Supreme Court of Appeal by the residents
failed (Maphango v Aengus Lifestyle Properties (Pty) Ltd 2011 (5) SA 19 (SCA)).
▪ The residents appealed to the Constitutional Court.
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 Engen Petroleum Ltd v Kommandonek
(Pty) Ltd 2001 (2) SA 170 (W)
Re: Certainty
❑ Legal question: Whether a clause in a rental agreement was void for vagueness in giving
the lessee a discretion unilaterally to decrease the amount of the rental.

❑ By analogy with the decision of the Supreme Court of Appeal in NBS Boland Bank Ltd v
One Berg River Drive CC 1999 (4) SA 928 (SCA), the High Court held that the clause was
not void for uncertainty.

❑ Refer Headnote

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 Maphango and Others v Aengus Lifestyle
Properties (Pty) Ltd 2012 (3) SA 531 (CC)
[FNB!]
Re: Rental Housing Act and Tribunal, Termination of lease with intention to
negotiate higher rental

❑ CC considered the impact of the constitutional protection against eviction on the power of
landlords to terminate lease agreements.

❑ CC had to decide whether the landlord was lawfully entitled to exercise the bare power of
termination in the leases solely to secure higher rental, and whether the termination could
constitute an unfair practice in terms of the Rental Housing ('the Act') (paras [29] and [47]).

❑ Majority's order stayed the appeal to enable the residents to have their complaint of an
unfair practice adjudicated by the Tribunal.

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 Maphango and Others v Aengus Lifestyle Properties
(Pty) Ltd 2012 (3) SA 531 (CC) [FNB!]
Re: Rental Housing Act and Tribunal, Termination of lease with intention to negotiate higher rental
❑ CONSTITUTIONAL COURT:
▪ Majority, Cameron J held: Critical question was whether the landlord was entitled to exercise the bare
power of termination in the leases for the sole purpose of securing higher rentals. The tenants relied on 3
arguments to contend that the landlord was not permitted to terminate in these circumstances: a
contractual argument, a constitutional argument and a statutory argument:
i. Contractual argument: There was a tacit term in the lease agreements that the landlord was precluded
from using the termination clauses to circumvent clauses in the agreements providing for annual rental
increases.
ii. Constitutional argument: Eviction flowing from the termination would infringe SEC 26, Constitution; AND
the termination was contrary to public policy, relying on the decision in Barkhuizen v Napier 2007 (5) SA
323 (CC).
iii.Statutory argument: Termination of the leases constituted an unfair practice in terms of the Rental
Housing Act and, accordingly, the complaint of the tenants should be resolved in the Tribunal before any
eviction proceedings. The statutory argument prevailed and the majority, accordingly, left the contractual
and constitutional issues undecided (para [55]).

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 Maphango and Others v Aengus Lifestyle Properties
(Pty) Ltd 2012 (3) SA 531 (CC) [FNB!]
Re: Rental Housing Act and Tribunal, Termination of lease with intention to negotiate higher rental
❑ CONSTITUTIONAL COURT:
▪ Cameron J provided a comprehensive account of the context and purpose of the Rental Housing Act and the role of the
Tribunal that it establishes (paras [29]–[44]). For Cameron J, while abolishing rent control, the Rental Housing Act created a
'more complex, nuanced and potentially powerful system for managing disputes between landlords and tenants' (para [49]).
Neither the landlord nor the tenants had 'fully appreciated the force of the Act's provisions in litigating their dispute' (para [48]).
The unfair practice regime of the Rental Housing Act is 'super-ordinate' to the contractual arrangements between the parties —
a landlord's action may constitute an unfair practice even though it may be permitted by the lease and the common law (paras
[51]–[52]).
▪ Cameron J overruled SCA’s finding that the term 'practice' in the Act envisages only 'incessant and systemic conduct by the
landlord which is oppressive or unfair', and does not include unacceptable conduct on an isolated occasion (para [57]).
Drawing from labour law jurisprudence relating to unfair labour practices, he held that a single act may constitute a 'practice'
(para [57]).
▪ Cameron J found that the tenants, while withdrawing their complaint from the Tribunal, never abandoned or waived their right
to pursue it (para [46]). That complaint, and any the landlord might choose to lodge about the rental rate, should therefore be
considered by the Tribunal. He concluded that the High Court erred in that it ought to have postponed the eviction proceedings
to enable the Tribunal to determine whether the termination of the leases constituted an unfair practice (para [62]).
▪ The court made an order postponing the appeal to enable the landlord and/or the tenants to lodge a complaint with the
Tribunal, failing which the appeal would be dismissed with costs. If either party did lodge a complaint, the parties could
approach the court for further directions following the disposition of the complaint by the Tribunal.

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 Maphango and Others v Aengus Lifestyle Properties
(Pty) Ltd 2012 (3) SA 531 (CC) [FNB!]
Re: Rental Housing Act and Tribunal, Termination of lease with intention to negotiate higher rental
❑ CONSTITUTIONAL COURT:
▪ In a dissenting judgment, Zondo AJ (Mogoeng CJ and Jafta J concurring) disagreed with the majority’s
conclusion that the dispute must be evaluated in the light of the Act. He reasoned that remittance to the
Tribunal would be unfair to the landlord because the tenants had not adequately pleaded the 'unfair
practice' issue.
▪ [A] case that the termination of the lease was invalid because it was resorted to in order to effect a rent
increase precluded by the terms of the lease is different from a case that says that the termination was
invalid because it constituted an unfair practice and was precluded by section 4(5)(c) of the RHA. In this
case if, in their affidavits, the applicants had put up a case to the effect that the termination of the leases
constituted an unfair practice and was in breach of section 4(5)(c) of the RHA, then they would have had to
state the grounds upon which they contended that the termination was unfair and to show that those
grounds were specified in the leases (para [104]).
▪ The minority also disagreed with the majority that the question whether conduct constitutes an unfair
practice in terms of the Rental Housing Act, is a question of law which a party is accordingly free to raise at
any time. In his view, drawing from the analogy of unfair labour practice jurisprudence = this is a value
judgement (para [105]).
▪ Thus, Zondo AJ would have dismissed the appeal with no order as to costs

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 Maphango and Others v Aengus Lifestyle Properties
(Pty) Ltd 2012 (3) SA 531 (CC) [FNB!]
Re: Rental Housing Act and Tribunal, Termination of lease with intention to negotiate higher rental
❑ CONSTITUTIONAL COURT:
▪ Froneman J (Yacoob J concurring) wrote a concurring judgement. He found that the Act must apply
because courts are obliged to consider relevant statutes when deciding whether a lease may be
cancelled. Thus, he stated that the correct interpretation of the Act is essential to addressing the dispute
between the parties. Froneman J also offered the following persuasive rejection of Zondo AJ's distinction
between 'value judgements' and 'questions of law'
▪ Interpretation of what constitutes an 'unfair practice' under the Act ... is thus inevitably a constitutional
issue, a matter of law. Interpretation and application of the law under the Constitution is never a
mechanical application of rules; it always involves a value judgment. Our Constitution and law are
infused with moral values. The days of denying the value-laden content of law are long gone (para [151]).
▪ Froneman J advocated a flexible approach to remedy that is not unduly constrained by the pleadings,
explaining that 'courts deciding constitutional matters may, and in some circumstances are obliged to,
make any order that is just and equitable. These powers are not confined by the pleadings'. (para [153])
On 2 May 2012, the occupiers lodged a complaint with the Rental Housing Tribunal in terms of the court's
order.

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 Maphango and Others v Aengus Lifestyle Properties
(Pty) Ltd 2012 (3) SA 531 (CC) [FNB!]
Re: Rental Housing Act and Tribunal, Termination of lease with intention to negotiate higher rental
❑ ANNUAL SURVEY (2012) COMMENTARY:
▪ Maphango was ultimately decided on a narrow basis in that it leaves open the circumstances in
which the termination of a lease in order to increase rental, will constitute an unfair practice; but we
know that it may do so in appropriate circumstances.

▪ Interestingly, both the majority and the dissent drew guidance from labour jurisprudence in giving
content to the concepts under the Rental Housing Act regime. In our view, the dissent reflected a
strict approach to pleading that is out of kilter with constitutional values. The suggestion that the
question of whether an unfair labour practice has been committed is a mere value judgment that
cannot be raised on appeal, is difficult to sustain. It is based on a tenuous distinction between 'value
judgments' and questions of law that, as Froneman J rightly points out, breaks down in the era of
value-laden constitutional adjudication.

▪ However, in seeking to achieve a just outcome (and perhaps craft a precedent for future matters) the
majority may have glided too easily past the evidence showing the abandonment of the Rental
Housing Act complaint by the occupiers.

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