Property Poser has received several questions from a reader relating to lease agreements. These range from whether the agreement should be registered, where and why it should be registered, to who would be responsible for costs incurred.
According to our property law expert, the law does not require a lease to be registered.
However, one should differentiate between short term and long term leases. Long term leases are not less than 10 years in duration, or for the natural life of the lessee.
A long term lease must be in writing and registered against the title deed of the leased premises to be binding on the lessor’s successor in title. If, however, the new owner (lessor) was aware of the lease when he or she bought the premises, the agreement is binding between the parties even if it was not registered.
Registration is required only to protect the lessee’s rights against the lessor’s successor in title who might be unaware of the existence of the long term lease. In terms of the rule ‘huur gaat voor koop’, a lessee with a short term lease acquires limited real rights in respect of the premises, provided he or she is in occupation.
A lessee under a long lease acquires a limited real right for the full duration of the lease, only if the lease was registered against the title deed of the leased land. If a long lease is not registered, the lessee acquires a limited real right for the first 10 years, if he or she occupies the property.
A lease agreement has to be registered by an attorney at the deeds office. Government announced in February this year that no stamp duties will be imposed on leases with a lease period of five years or less.
Leases with a longer term are subject to stamp duty at a flat rate of 0,5 per cent of the consideration payable. The costs of drafting and stamping the agreement can be negotiated between the parties. However, the lessee is usually responsible.
In a related matter, another reader who has put up a duplex for rent, wants to know whether the new National Credit Act will bring about a boom in the rental property market.
It is too early to determine whether the new law will lead to a growth in the rental market. However, it is possible that prospective buyers will want to wait and see what impact it has on the property market.
People might first decide to rent a property that suits their lifestyle and pay an affordable rent rather than take on the responsibility of a home loan that might cost them a lot more per month.
Many factors influence the rental market, including the degree of difficulty in obtaining a bond and the increase in the interest rate.
The new National Credit Act that came into effect on the first of this month, requires banks to establish the creditworthiness of an applicant by assessing the monthly income and expenditure, the debt repayment history, disclosure of information by the consumer, the bank’s own valuation means and information obtained from the Credit Bureau.
This can include existing bond repayments, car repayments, utilities and existing credit granted. If the bank is of the opinion that the consumer will be or can become over-committed, it could in all likelihood decline the bond application.
One must also bear in mind that with the interest rate increasing, it could be very difficult to get rental income to the equivalent of the bond repayment. One would have to subsidise a portion thereof yourself, which could mean that one could be over-committed again.
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