Lease agreements often contain clauses that lead to litigation after the lease has terminated as was
highlighted in Mokone v Tassos Properties CC and Another 2017 (5) SA 456 (CC).
In Mokone, the tenant entered into a written 12-month lease agreement with the landlord, which
granted the tenant a right of pre-emption. The tenant was a business owner operating out of the
leased premises.
The lease was orally renewed (the first extension) for another year and later extended for a further
8-year period (the second extension). The second extension was effected by making a written
endorsement on the front of the original lease indicating the increased rental and new expiry date of
the lease, accompanied by the sole signature of the landlord’s representative.
During the renewed lease period the landlord sold the property to a 3rd party without first offering
it to the tenant. The tenant then notified the landlord that she wished to exercise her right of pre-
emption and offered payment of the same purchase price. She asserted that her right of pre-
emption was automatically extended along with the lease during the first and second extensions and
that the sale by the landlord to the third-party buyer was, therefore, invalid and set aside.
The Constitutional Court held that the tenant’s right was valid and enforceable in that the contract in
its entirety had been extended, including the right of pre-emption, despite the fact that the renewal
of the lease was oral, as pre-emptive rights need not comply with the formalities set out in the
Alienation of Land Act.
The decision in Mokone emphasised the importance of not agreeing to a blanket renewal when a
lease terminates.
Standard form lease agreements often do not consider the implications of lease renewals or
extensions which provide for the same terms and conditions as the existing lease creating
obligations for the landlord, the tenant and their successors in title which do not reflect the
intentions of the parties. This is particularly apposite where the original lease contains a benefit for
the agent such as the agent’s entitlement to commission if the tenant purchases the property after
the termination of the original lease.
Consequence for all parties
Landlords, unaware that there is an enduring clause, might unknowingly sell the property through
another agent to the tenant and then become liable for double commission, having to pay the agent
who procured the tenant in addition to the agent who sold the property to the tenant. The landlord
may face a claim from the tenant who had the right of first refusal or the purchaser who in good
faith purchased the property only to find that the purchase agreement is set aside due to the tenant
having had the right of first refusal (as in Mokone’s case.)
The Tenant who purchases the property through a different agent from the agent who facilitated the
hire of the property and is unaware of the enduring clause which entitled the letting agent to a sale
commission if the property is purchased by the tenant and who warrants that the selling agent was
the effective cause of the sale, will be in breach of that warranty.
Executors of estates may be saddled with all the consequences of enduring clauses as the executor is
unlikely to be aware of either the tenant’s rights of first refusal or the agent’s right to a commission
where a lease is terminated.
The solution: clear and tailored agreements
To avoid these issues and potential future litigation, both landlords and tenants
are cautioned against relying solely on standard form agreements;
are advised to consult with legal professionals to ensure the lease agreement reflects their intentions and is premises specific;
should clearly define the duration of "collateral clauses" such as the right of first refusal, and the agent’s introducing role and the right to commission; and
must expressly terminate collateral clauses upon lease extension if they are not intended to continue.
