Can a tenant set-off rental until the landlord performs?
In the recent case of Tudor Hotel Brasserie and Bar (Pty) Ltd v Hencetrade 15 (Pty) Ltd the court addressed the issue regarding set-off where the tenant argued that vacant occupation of the entire leased premises was not received.
In this case Hencetrade (hereinafter referred to as the landlord), was the landlord in a lease agreement concluded with Tudor Hotel. Tudor Hotel fell into arrears with the rental payments and failed to rectify the breach after the landlord’s notice and demand thereof.
In an appeal to the Supreme Court, Tudor Hotel admitted that it did not pay the outstanding rental and it claimed that no rental was due, due to the fact that the landlord did not provide it with vacant occupation as stipulated in the lease agreement. When occupation was given to Tudor Hotel the landlord retained a portion of the property as storage space.
Tudor Hotel based its argument on the exeptio non adimpleti contractus. This is a defense that can be raised in cases of a reciprocal contract. This remedy allows a party to withhold its own performance until the other party has duly performed under its obligations of the contract. The court found that the lease agreement altered the reciprocal nature of this agreement when the parties concluded that the rent was payable monthly in advance. Tudor Hotel’s obligation to pay the rental was accordingly not reciprocal to the obligation of the landlord to provide vacant occupation of the premises.
The lease agreement also stated that all payments shall be made without any deductions or set-off whatsoever.
The court a quo found that when a tenant takes occupation of premises which are deficient in any way he is obliged to pay the full rental amount and the remedy available to him is to claim damages or compensation. The court further found that where set-off was specifically excluded, the tenant needs to obtain a court order that allows the set-off. The court found that Tudor Hotel was in arrears and that the landlord was entitled to evict Tudor Hotel. And thus the appeal against the order of the court a quo, failed.
This story first appeared on MC van der Berg