Lease

Exercise 1
Cheslin Kolbe lets a property situated in Lynnwood to Rassie Erasmus for residential
purposes. Rassie is required to pay rent in the sum of R 12 500 per month. Clause 7
of the written agreement of lease contains the following clause:

“The lessee shall not have the right to cede, transfer or assign the premises
without the written consent of the lessor, which consent shall not be
unreasonably withheld. Should the lessee act in breach of this provision the
lessor will be entitled to cancel this lease and retake possession of the premises
without prejudice to any claim which the lessor may have against the lessee for
rent already due or for any damage which he may suffer by reason of the
termination of the lease.”

Rassie sublets the property to Ox Nche without first obtaining the written consent of
Cheslin. When Cheslin discovers this, he sends a letter to Rassie telling him that he
is cancelling the lease as he was not entitled to sublet the property without his consent.
Rassie approaches you for legal advice. Advise him on the legal position in the above
instance.

Answer
• Lessee of urban premises has the power to sub-let those premises unless a
contrary agreement exists between the lessor and the lessee (Bryer v Teabosa
CC) (1)
• Subletting in contravention of a prohibition against sub-letting constitutes a
material breach of contract, the form of positive malperformance, and
empowers the lessor to cancel the agreement (1)
• There is no express prohibition against sub-letting in terms clause 7 of the lease
agreement (1)
• Rassie does not need the written consent of Cheslin to sub-let the premises
(1)
• There is no material breach of the lease entitling Cheslin to cancel.
Exercise 3
It transpires that Rassie has run into significant financial trouble and Cheslin is
concerned that his estate might be sequestrated. Cheslin is concerned about what will
happen to the lease under these circumstances. In particular, he is concerned that
the property might subsequently be sold and that the new purchaser might not
continue with the lease. Advise her fully on the legal position in this instance, assuming
that the property is subject to a mortgage bond in favour of Kapital Bank. (10)
Answer
Insolvency of the lessee

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 Paragraph 8 of the Ellerine case

• S 37 of the Insolvency Act 24 of 1936 stipulates that the lease is not

automatically terminated upon the lessee’s insolvency (Ellerine Brothers (Pty)
Ltd v McCarthy) (1)
• Trustee has the choice of terminating the lease by notice. (1)
• If trustee fails to exercise his choice within 3 months of his appointment, lease
is deemed to be terminated upon expiry of 3 months.
• Cancellation by the trustee has the result that the insolvent estate’s claim for
improvements is lost, but the lessor can still sue the insolvent estate for
damages.
• Huur gaat voor koop rule
• The new purchaser is bound by the lease agreement concluded between
Rassie and Cheslin.
• Huur gaat voor koop rule: Lease contract continues and enjoys priority over
sale contract. (1)
• New owner steps into shoes of previous owner; new owner is thus the new
lessor. (1)
• Personal right of lessee has the effect of a real right against new owner. (1)
• A lessee of short term is protected if he in occupation of the leased property
(Metcash Seven Eleven (Pty) Ltd v Pollev Property Holdings and Investments
CC)(1)
• Since Rassie is still in occupation, Kapital Bank is bound by the lease and the
property will be sold subject to lease) (1)
• New owner: only bound to essential terms of lease. (1)

Agency Tutorial
Exercise 4
(1) Referring to the decided cases, discuss when an estate agent is entitled to recover
his or her commission. Having done this, consider the following problems.
Siya, who wishes to sell his two-bedroom flat, telephones Sarina, an estate agent,
and requests her to ‘find a purchaser’ for the flat at a price of ‘not less than R800
000’. Sarina agrees to do this on the basis that she will be entitled to her ‘usual
commission of 10% of the purchase price’.
(a) Sarina advertises the flat extensively and eventually finds Faf, a wealthy
businessman, who is prepared to buy for R800 000 cash. However, Siya
rejects Faf’s written offer and sells the flat to someone else at a higher price.
Sarina insists that she is entitled to her commission since she ‘succeeded in
finding the buyer that Siya wanted and it was Siya himself who caused the deal
to collapse’.
Answer

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 • Guidelines have been established to determine whether an estate agent is
entitled to remuneration:
• 1. Was the estate agent the Effective cause of sale (1)
o This is relevant if more than one estate agent is involved (1)
o This was confirmed in the Gordon v Slotar case (1)
o If it is impossible to determine which agent was the effective cause then
the principal must pay both the agents (1)
• 2. The estate agent introduced a willing and able buyer
o This was confirmed in Aida Real Estate v Lipschitz (1)
o The buyer must be legally and financially able (1)
• 3. Remuneration will be contingent on the occurrence of a specific event
(1)
o Sabina was neither the effective cause of the sale nor did she introduced
the willing and able buyer. (1)

(b) Sarina contacts her friend, Venus, whom she knows has been looking for a two-
bedroom flat to buy. Venus says that the flat is ‘exactly’ what she has been
looking for and that she is ‘very interested’, but would like to ‘negotiate a little
on price’. During a meeting arranged by Sarina, Venus says she is willing to
offer R800 000 for the flat, but Siya is adamant that he will not accept anything
less than R850 000. A few weeks go by, during which Sarina telephones Siya
several times and tries to persuade him to change his mind. Another agent,
Bongi, then contacts Siya and arranges a further meeting between the parties.
At this meeting, Bongi says that he will sacrifice R25 000 of his commission, if
Siya and Venus will settle on a price of R825 000. The parties agree to this
proposal and sign a deed of sale. When Sarina learns that the property has
been sold, she claims her commission from Siya.
• Guidelines have been established to determine whether an estate agent is
entitled to remuneration:
• 1. Was the estate agent the Effective cause of sale (1)
o This is relevant if more than one estate agent is involved (1)
o This was confirmed in the Gordon v Slotar case (1)
o If it is impossible to determine which agent was the effective cause then
the principal must pay both the agents (1)
• 2. The estate agent introduced a willing and able buyer
o This was confirmed in Aida Real Estate v Lipschitz (1)
o The buyer must be legally and financially able (1)
• 3. Remuneration will be contingent on the occurrence of a specific event
(1)
• Although Sabina introduced the potential buyer deal collapsed because of the
unwillingness of Venus to pay the purchase price. The initial introduction was

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 not the effective cause of the sale. Sabina will not be entitled to remuneration
because the sale was concluded (Pritchard v Thorny Park Estates). (1)
• Here the overriding factor was the second agent’s willingness to reduce his
commission, if Siya and Venus settle on a price of R825 000. (1)
(c) At Sarina’s request, Siya signs a document granting Sarina, for a period of two
weeks, ‘sole irrevocable authority to effect the sale of the property’. During this
period Siya receives a telephone call from another agent who tells him that one
of his clients, Eben, has expressed an interest in the property. Siya immediately
goes to see Eben and, on the same day, the parties sign a deed of sale. Sarina
is adamant that she is entitled to her commission.
Answer
• Unlike scenario (a) and (b), regardless of the fact the seller concluded a private
deal with the buyer and the agent was not the effective cause of the sale, she
is intitled to her commission.
• For period of two weeks the agent has a ‘sole irrevocable authority to effect the
sale of the property’.