Written for Property Poser

A holiday home on a 99-year lease is the subject of today’s Property Poser reader question.

According to her, the house was not purchased from the owner, but from a private individual. A commission was payable to the owner before transfer.

Monthly levies are being paid to the owner. However, she says, the owner has not initiated a body corporate and makes all of the decisions himself.

She says he changes the rules at any time and will evict tenants on a 30-day notice period without any prior warning.

She would like to know from our panel of experts what her rights are.

According to Warren Jack, from the Warren Jack Property Group in Port Elizabeth, leasehold agreements regarding property are common in countries where the land ownership vests with the state.

He says even though we are able to own land privately in South Africa, these agreements are becoming more popular, particularly with regard to holiday homes. “In order to understand the distinction between full ownership and leasehold title (also commonly referred to as a ‘99-year lease’), one must consider their legal nature.”

The most important distinction, according to Jack, is that ownership is the most comprehensive of all rights, giving the owner the right to use the property, to receive income generated by the property and the right to consume, dispose of or even destroy the property. It is not subject to a time limit.

He says leasehold title gives its holder a right – which is generally limited in nature – to use and enjoy the property that is being leased for a specified period. “If a lease fulfils the requirements of the Deeds Registries Act, it may be registered at the deeds office and a leasehold title may be issued to the leaseholder.”

However, says Jack, even if the lease is registered at the deeds office, leaseholders can still be deprived of their rights – for example if the lease is cancelled. For this reason, banks are often reluctant to grant mortgage bonds over leasehold title properties.

Grant Howard, from Kaplan Blumberg in PE, says the lease will contain the rights and obligations of the owner and the leaseholder for the duration of the lease. He says it is not a legal requirement that a body corporate must be formed for the leasehold property, as would have been the case if the leasehold property was a sectional title property.

“In most cases where the leasehold relates to holiday homes, the owner will draw up rules that will bind all the leaseholders and which govern the manner in which they may use the property and exercise their rights as leaseholders,” says Howard. “These rules may form part of the lease agreement and will as such bind the leaseholder to comply therewith.”

According to him, the leaseholder will not necessarily have any say in terms of the contents of the rules.

“The owner will retain the right to change the rules, within reason, and with reasonable notice to the leaseholder. As long as these changes do not materially affect the leaseholder’s rights in terms of the lease, the leaseholder will be bound to the amended rules,” says Howard.

“The reader states that she bought her right to the property from a private individual and not from the owner. In terms of our common law, both an owner and a leaseholder may cede their rights and obligations in the lease agreement to a third party.

“If it is the owner who is ceding his or her rights and obligations, it is necessary for the leaseholder to agree to the cession and vice versa. The person who then takes over the lease will have the use of the property for the remaining term of the lease.

“It can be assumed that the reader would have obtained her rights to the property from the previous leaseholder by way of a cession agreement,” says Howard.

“The owner will only be allowed to cancel the leasehold in the circumstances and manner provided for in law and in the leasehold agreement itself. It is highly unlikely that, in the cases mentioned by the reader, that the owner will be acting within his rights if he terminates the leasehold with a 30-day notice period.”

Howard suggests that the reader obtains legal advice on the extent of her rights as contained in the leasehold agreement, so that she may oppose the owner in any actions which infringe on her rights as leaseholder.

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