Whether it is your first or tenth time signing a lease agreement, it is always important to carefully read and understand every term of the lease agreement before you sign it. Omitting to do so can have unfortunate consequences. You will be surprised at how quickly the landlord-tenant relationship can sour. It is best that all parties are on the same page from the outset.
Before you sign a lease agreement, here are some important clauses that you should look out for:
- The monthly rental – how much is it and are there any additional hidden costs (such as water, electricity, levies, internet and the like)?
- The lease period – how long is the lease period for? Is it clearly recorded when the lease commences and terminates?
- Renewal – does the lease agreement have the option to renew once the initial lease period comes to an end? If so, for how long (often for a further 12 months) and does the landlord have a discretion to first indicate to the tenant whether they are willing to renew the lease?
- Escalation – if the lease has the option to be renewed for a further period, what is the percentage by which the rental will increase (or “escalate”)? You can expect the escalation to be somewhere between 5-10%. Anything above 10% and you have grounds to negotiate down.
- Breach – what does the breach clause say? It is not untypical to have breach clauses that are in the landlord’s favour. If you are the tenant, make sure that the landlord cannot simply cancel the agreement if you are in breach. Both parties must be afforded a notice period in which to remedy their breach first.
- Termination – to be read with the breach clause, on what basis can either party terminate the lease agreement? If you are the tenant, you want to ensure you have security of tenure.
- Rights and responsibilities – the lease agreement can have pages and pages that records what the parties’ respective duties are. Appraise yourself with what these are and ensure that you do not have an uphill row to toe.
- Rules – if the property is in a sectional title scheme, familiarise yourself with any Body Corporate and management rules. These will dictate whether you can bring your beloved dog with you or not, or whether you can braai with your friends until the early hours of the morning. Your lease agreement may touch on this too.
- Inspection – do not forget to do your incoming and outgoing inspection of the property and record that as an annexure or addendum to the lease agreement.
If you do not understand any of the terms of the lease agreement, make sure you speak with the person who presented you with the lease agreement. Preferably, get independent advice from an attorney. On another note, do not be shy to negotiate the terms of the lease!
For further assistance, you may contact me at michaelo@caf.co.za or call on 021 674 2083.
Written by Michael Owen
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).