Lease contract declared unconstitutional

Landlords need to be careful of how lease contracts are worded. Picture: Independent Newspapers.

Landlords need to be careful of how lease contracts are worded. Picture: Independent Newspapers.

Published Feb 2, 2024


Landlords need to be careful of how lease contracts are worded. Contracts are generally considered sacrosanct in law because the signatories have committed themselves to terms and conditions on which they have mutually agreed. But contracts, or clauses in contracts (and this applies to any contract), can be overruled in certain circumstances, notably when they fail to uphold the constitutional principles of dignity and equality or remove the constitutional right of a signatory to legal process in a dispute.

This was highlighted in a recent application to come before the Supreme Court of Appeal, Graceful Blessings (Pty) Ltd v Zander Burger Properties (Pty) Ltd.

Graceful Blessings (GB), the owner of a commercial property, had locked the tenant, Zander Burger Properties (ZBP), out of the premises after ZBP had fallen into arrears with its rental payments. ZBP took GB to court and obtained a spoliation order. Instead of simply following the eviction process, GB appealed the order, and the case ended up before the Supreme Court.

A spoliation order is an order of the court that reverses an act of dispossession, typically in the case of a tenant evicted from a property. It may be granted when a landlord “takes the law into his own hands” by locking a tenant out of a rented property because of non-payment of rent. This is unlawful: a landlord needs to follow the legal process to evict a tenant by obtaining an eviction order from the courts and having the eviction carried out by the sheriff of the court.

And this is where we get back to the law of contract. The application hinged on the following clause in the lease agreement:

“Should the lessee fail, neglect or refuse to pay any rent and/or other monies herein stipulated within seven days of the date on which payment is due, or if the lessee or any sub-tenant of the leased premises, … fails, neglects or refuses to comply strictly with or carry out any term or condition of this lease … the lessor shall have the right to cancel this contract by written notice sent to the lessee by the lessor or his agent or attorney … and to obtain repossession of the leased premises as against the lessee and any sub-lease, and for that purpose to take whatever action may be necessary for the immediate ejectment of the lessee … from the leased premises.”

GB argued that the lease contract had been freely and voluntarily concluded by both parties and was therefore enforceable, relying on “pacta sunt servanda”, the underlying principle of contract law which literally means “agreements must be kept”.

However, the court said such a clause meant that the landlord could bypass the legal process of eviction, violating Section 34 of the Constitution, which states: “Everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.”

The judgment concludes: “It would in my view be manifestly unfair if commercial parties/entities enter into commercial agreements regarding commercial property, which make provision for termination of possession through means other than court process, especially when it relates to failure to perform in terms of rent, to compel incursion of additional expenses. There are presently many cases where the courts have stated that, as long as the principle of pacta sunt servanda is counterbalanced with the constitutional principles of dignity and equality, the provisions in contracts to regulate extra-curial (out-of-court) process may be justified. In my view this will be determined by the precise words employed in contracts. Does the choice of words in the present contract pass the bar? I am of the view that it does not. It provides that GB may take any action for the ejectment of ZBP.”

The application was dismissed and the spoliation order granted, restoring possession to ZBP.