Be sure of what the contract refers to or the conditions thereof

13 June 2014

There are occasionally instances where a tenant wants to buy the property he is renting and asks that this option be written into the lease. This is usually done to ensure that he has first option if the time comes that the property is put on the market or the tenant finds he is in the financial position that enables him to purchase it, but what needs to have careful attention paid to it is the actual wording of the contract, so that the details of the property being sold is correct, says Lanice Steward, managing director of Knight Frank Residential SA.

A case recently mentioned in a Smith Tabata Buchanan Boyes property law update, Lombaard v Droprop CC, in which the tenant wanted to buy the land he was renting in terms of an option that was written into his lease. The owner argued that the whole property was not included and that only a smaller portion would be sold to him.

Lombaard’s case was that the agreement referred to the whole of the property instead of a portion of it, and Droprop sought to rectify the agreement or, as an alternative, an order declaring the offer void because of a “unilateral error”.

While Droprop was successful in High Court, Lombaard appealed and the Supreme Court of Appeals found in Lombaard’s favour, stating that the description of the property was unambiguous and certain. The SCA could not, however, order the transfer because of the rectification defence in place.

The SCA noted that Lombaard could go ahead with a trial on the rectification matter and the onus was on Droprop to prove that there was a unanimous error in the contract.

“This illustrates the importance of a complete understanding of any additional clauses written into a lease or a sales agreement,” said Steward. “The person drafting the clause must ensure that it is accurately described and there is no ambiguity whatsoever. If there is ever any doubt, rather check with an attorney as mistakes can be very expensive ones when it comes to property.”

Another instance of a situation where problems can creep in is where a usufruct is granted for a member of a family in the case of the owner dying. What is often forgotten is whether that person actually wants to remain in the home or whether they can afford to maintain and live in that home, said Steward.

“We have come across cases where the wife is bound by a clause in the will and property deed that she has a usufruct rights on the property but never owns it, and later finds that she cannot afford to maintain the property, nor does she want to live in a large house on her own (because in some cases the usufruct falls away if she remarries),” said Steward.

Written agreements take a lot of time and money to unravel and dissolve if they are drafted incorrectly, and the writing up of a contract should always be done with an experienced attorney, if possible, one who might have knowledge of both parties’ interests, said Steward.