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A Landlord’s Guide to Spring Cleaning Commercial Lease Agreements: Part 2 – Quantify Your Claim for ‘Holding Over’

A commercial lease agreement forms the basis of the relationship between a landlord and tenant, and it is important that all terms agreed to (between the parties) are properly recorded.

Unfortunately, landlords often only realize how crucial a certain clause is when it is too late.

In Part 1 of this 3-part series, Janie Venter, Junior Associate at law firm, Barnard, highlighted the necessity of a Deed of Suretyship clause, the requirements of a valid Deed of Suretyship, and why it is an important tool for landlords.

Part 2: The importance of a clear and concise ‘Holding Over’ clause

Drastic steps are often taken by a landlord when dealing with a tenant. The most drastic of these steps is the decision to cancel a lease agreement.

On cancelling a lease agreement, the obligation for the tenant to pay rent, and the obligation of the landlord to provide occupation, vanishes but often, even after a landlord has severed all contractual ties, ‘occupants’ remain on the premises without considering the potential damage this may cause the landlord.

The law provides solace for landlords in these circumstances by allowing for a claim of financial harm from the occupant. In legalese, this is referred to as a ‘claim for holding over the premises’.

However, the extent of financial harm for holding over claims are debatable by occupants and are often utilised to secure a favourable settlement with the landlord, who has the duty of proving the extent of the damage.

Fortunately, landlords need not even enter this danger zone if they have properly scrutinised and negotiated the terms of the lease agreement, says Wilco du Toit, Associate at law firm Barnard.

A ‘Holding Over’ clause in a commercial lease agreement leaves little room for an occupant to wiggle out of,” he says.

With a concise, clear ‘Holding Over’ clause, a landlord can pinpoint the exact amount of harm done by the occupant for remaining on the premises after cancellation. The occupant is left with little room to debate as firstly, he/she agreed to the method of determination; secondly, he/she agreed that there will be financial harm to the landlord in such circumstances and lastly, the continued occupation after cancellation will be relatively easy to prove.”

The legal process to collect owed rent and the financial harm inflicted by occupants remaining on the premises is overburdensome and even more so when the occupant fights ‘tooth and nail’ to delay this. It is therefore critical that landlords ensure that their commercial lease agreements are crisp and clear for claims that are disputable and easily provable.

If your lease agreement does not make provision for quick and easy determination of claims for holding over, it might be worth your while to speak to your attorney. 

Having a well written ‘Holding Over’ clause is one of a landlord’s must-have tools to ensure the bolts are tight and cannot be loosened by occupants.

For tailored law assistance, please contact Wilco du Toit to arrange a consultation / 012 001 2739.