“Option to renew a Lease Agreement”
An option to renew a lease agreement allows a tenant to continue occupying a premises after the initial lease agreement has lapsed. The option to renew the lease is only available to a tenant if the clause was contained in the original lease agreement concluded between the parties.
When a tenant decides to exercise its right to renew the lease, it has the effect of entering into a new lease agreement.
The court held in Shalala and Another v Gelb [1949 AD 851] that a renewal clause cannot be separated from the lease itself, such a right to renewal is an inseparable part of the lease agreement.
In Uys & another v Sam Friedman Ltd the Supreme Court of Appeal said the following with regards to the tenant’s rights to the renewal clause:
“The right to renew is no different from any other term or condition of a lease. A renewal clause is not severable from the lease.”
In order for a renewal clause to be valid and binding, it has to contain the following:
- A Full description of the parties to the lease agreement;
- A Full description of the property being let;
- The temporary use and enjoyment of property by the tenant; and
- The rental amount
Consumer Protection Act and Lease Agreements
The enactment of the Consumer Protection Act, ensures more flexibility, but with it there are some risks and challenges.
Section 14 of the CPA makes provision for the expiry and renewal of lease agreements. Currently the fixed term contract may not exceed a maximum period as prescribed by the Minister which currently provides for 24 months. Fixed term agreements are contracts of definite duration.
Section 14 further provides that a landlord must give written notice to a tenant of the pending expiry of a fixed-term agreement not more than 80 business days and not less than 40 business days before the expiry date thereof.
The notice must include any material changes to apply in the event of renewal or continuance of the lease agreement, as well as of any other cancellation or renewal options available to the tenant. The Act does provide that the fixed-term contract can be automatically renewed. In these cases the contract will continue on a month-to-month basis. The agreement may not be automatically renewed if the consumer expressly terminated the agreement before or on the expiry date. The consumer may also agree to renew the agreement for a further fixed term.
In the event that the landlord did not give notice to the tenant of material changes in the terms and conditions of the agreement, it would seem that the new month-by-month agreement will be on the old lease agreement terms.
If fixed-term agreements do not comply, they may be rendered null and void, making them legally unenforceable.