Termination of Commercial Leases in South Africa: A Comprehensive Guide

Commercial leases are a common way for businesses to secure premises for their operations. However, circumstances may arise where the lease needs to be terminated. Terminating a commercial lease in South Africa can be a complex process, and both landlords and tenants need to be aware of their legal rights and obligations. In this article, we will provide a comprehensive guide to terminating commercial leases in South Africa.

What is a Commercial Lease?

A commercial lease is a lease agreement that is entered into between at least 2 parties for the letting of commercial premises.

Commercial leases are ordinarily between two companies (as opposed to private individuals).

Does the Consumer Protection Act (“CPA”) apply to a Commercial Lease Agreements?

The answer to this question is yes, provided that certain qualifying criteria are met.

A “consumer” includes a tenant of commercial properties and would include a juristic person whose asset value or annual turnover, at the time of entering into the transaction (lease agreement), equals or exceeds R2,000,000.00 (Two Million Rand).

Where the tenant is a juristic person, then the provisions of section 14 of the CPA would not be applicable to the commercial lease agreement.

Can I legally terminate a Commercial Lease Agreement?

The answer to this question depends on a number of factors. The biggest factor being the lease agreement itself and what is provisions say. Another factor is whether the tenant is a natural person or an entity. Each case however has to be carefully assessed on its own facts and circumstances, as no two cases are alike. For this reason, you should get legal advice from attorneys who specialise in property law prior to attempting to terminate a commercial lease agreement.

Grounds for Terminating a Commercial Lease

Termination by Notice

One of the most common ways to terminate a commercial lease is by giving notice. The notice period and the requirements for giving notice are usually specified in the lease agreement. If the tenant wishes to terminate the lease, they need to give the landlord written notice within the specified period. If the landlord wishes to terminate the lease, they need to give the tenant written notice within the specified period. The notice should include the reason for termination and the date on which the lease will terminate.

Termination by Mutual Agreement

Another way to terminate a commercial lease is by mutual agreement between the landlord and the tenant. This can be done at any time during the lease period and the terms of the termination should be agreed upon by both parties. It is advisable to have the agreement in writing to avoid any misunderstandings.

Termination by Breach of Contract

If either party breaches the terms of the lease agreement, the other party may have the right to terminate the lease. For example, if the tenant fails to pay rent or breaches a term of the lease, the landlord may terminate the lease by giving notice to the tenant. Similarly, if the landlord breaches a term of the lease, the tenant may terminate the lease by giving notice to the landlord.

Legal Considerations

Terminating a commercial lease in South Africa is subject to certain legal considerations. Landlords and tenants need to be aware of their legal rights and obligations, including the notice periods, the requirements for giving notice, and the grounds for termination. It is advisable to seek legal advice to ensure that the termination is done in compliance with the relevant laws and regulations. Disputes often arise when commercial lease agreements and the most common disputes that we see disputes that arise where the lease agreement is cancelled and/or terminated early.

Risks Association with Commercial Lease Disputes

It is strongly advisable to seek legal advice from attorneys who specialise in property law disputes of this nature as if you do not follow due process, you have a court order made against you for specific performance in favour of the landlord which may include an order compelling you to, inter alia:

• return to the premises back to the landlord

• to pay the balance of the rental owing for the remainder of the lease period

• fully comply with your other obligations in terms of the commercial lease

• potentially pay the legal costs of the landlord

Conclusion

Terminating a commercial lease in South Africa can be a complex process, and both landlords and tenants need to be aware of their legal rights and obligations. By following the rules and guidelines for termination by notice, mutual agreement, or breach of contract, landlords and tenants can ensure a successful termination of the lease. Seeking legal advice is advisable to ensure compliance with relevant laws and regulations.

Barter McKellar’s property lawyers have extensive experience with commercial lease and property disputes. If you need assistance with a property dispute matter, contact our offices today to schedule a consultation with one of our specialist property law attorneys. Alternatively, you can schedule a consultation online by using the following link Book An Online Consultation.