Written for YourProperty

This week, a reader asks our Property Poser experts for assistance regarding the leasing of a commercial property, which had been jointly owned by a trust and a natural person.

At the beginning of the lease agreement, the reader made improvements to the property by installing a shower room, with the consent and knowledge of the person who co-owned the building.

It appears that the lessee did not deal with the trust, but only with the other part-owner and paid the initial deposit and all rental over to this person. It has since transpired that the trust never received its half of the rental.

About midway through the term of the lease agreement, the trust became full owner of the building.

After the transfer of the property to the trust, the reader was required to pay the rental into a different banking account and duly complied with this instruction. At the same time, she drew the trust accountant’s attention to the fact that the deposit had been paid to the former part-owner and was reassured that this had been traced.

Some time later, the reader gave notice that she was going to vacate the premises. At the beginning of the last month, she asked the landlord whether the deposit could be set off against the last rental instalment.

The landlord duly advised that the tenant should pay the rental as per usual and that the deposit would be refunded in due course, once the property was found to be in a reasonable condition.

However, the reader reports that the landlord is now demanding that some of the changes to the building be reversed before the deposit is refunded.

“We should first draw a distinction between so-called useful and luxurious improvements on the one hand and necessary improvements on the other,” says Charl Crous from Du Toit Strömbeck Attorneys in Port Elizabeth.

“While the first can be removed by the tenant – provided it can be done without causing damage – before vacating the property, the second cannot.”

Crous says, subject to the provisions of the lease, the tenant could claim compensation, which is calculated on the enhancement brought to the value of the property by the improvement or the actual expenditure, whichever is the lesser.

The reader’s situation is altered by the fact that, originally, the landlord knew about and consented to the improvements, says Crous. “The only issue may be the fact that she did not deal with both ‘partners’, before ownership was transferred to the trust alone.”

Charlotte Vermaak from Chas Everitt in PE says the burden of proof may lie with the reader to show that the partner with whom she dealt represented the joint owners and that the trust is still bound to the agreement reached regarding the improvements.

“As a side note, the doctrine of estoppel, which is beyond the scope of this article, may also be relevant,” says Vermaak. “Briefly, this is a legal principle that precludes a person from asserting or denying a fact that is contrary to his or her previous conduct or statements.”

Assuming a formal lease had been properly concluded, Vermaak says the agreement should remain valid and should be examined for provisions relating to improvements and other issues.

“Again, the importance of a comprehensive lease agreement cannot be stressed enough.”

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