Understanding the Landlord’s Tacit Hypothec

The LeasePack Residential Lease makes provision for the common law remedy available to landlord’s known as the Landlord’s Tacit Hypothec. The Landlord’s Tacit Hypothec can be defined as a form of real security which secures the tenant’s obligation in respect of arrear rental due to the landlord. The landlord would be entitled to attach movable property on the leased premises equal in value to the arrear rental, together with the costs of recovering such rental. These goods can then be sold in execution and the proceeds would be utilized to satisfy the outstanding debt to the landlord.

Five common questions regarding the Landlord’s Tacit Hypothec:

1. What if the prospective tenant does not agree to the Landlord’s Tacit Hypothec clause?

It is imperative for the tenant to understand that the Landlord’s Tacit Hypothec comes into effect by operation of law and as such, the landlord would not need to specifically include this in a lease agreement because it is dictated by existing legal principles. Therefore, there does not need to be agreement between the landlord and tenant because it is an implied remedy afforded to landlords.

2. My tenant is in arrears, can I just attach the movable property on the leased premises?

No, the landlord does not automatically obtain this right. It would need to be perfected by means of a court order. It is advisable to approach an experienced attorney to institute this action on your behalf.

Unpaid rent is usually pursued by means of an automatic rental interdict summons in terms of section 31 of the Magistrates Courts Act. The landlord can, in addition to this, institute an urgent ex parte application in terms of section 32 of the Magistrates Courts Act for the attachment and removal of the Tenant’s movable property in lieu of the arrear rental. This section does require that the outstanding rent, “be demanded in writing for the space of seven days and upwards,” or “if not demanded that the landlord believes that the tenant is about to remove the movable property upon the said premises.”

3. What happens if the tenant moves the movable property off the leased premises?

The answer to this question would be dependant on whether the landlord has perfected their right by means of a court order. If, the landlord has not obtained an order then the tenant is free to remove the movable property off the premises at any time. However, if the landlord has obtained the relevant order, and if the tenant subsequently removed the movable property off the premises, the tenant’s actions could constitute a criminal offence, and they could be held in contempt of court or even charged with theft.

It is important to note that the landlord’s right to attach movable property exists so long as the movable property is on the respective premises, or the movable property has not reached its destination whilst being transferred by the tenant. The Landlord’s Tacit Hypothec automatically falls away if the movable property is not on the premises and has reached its destination or if the tenant has paid up the outstanding rent.

4. Is the Landlord’s Tacit Hypothec enforceable against a spouse?

If the parties are married by the default position of in community of property, the general position is that either spouse, may perform any juristic act with regard to the joint estate without the consent of the other spouse, subject only to the restrictions in the Matrimonial Property Act. Therefore, either spouse may enter into a lease agreement without the formal or informal consent of the other spouse. As such, the other spouse would be cited as a co-tenant in the lease agreement.

Accordingly, if the spouses fell into arrears in respect of their rent, the landlord would be entitled to attach movable property on the leased premises equal in value to the arrear rental, together with the costs of recovering such rental from the joint estate.

5. My tenant has been sequestrated, is the Landlord’s Tacit Hypothec still enforceable?

South Africa’s Insolvency Act does recognise the Landlord’s Tacit Hypothec as a remedy in securing unpaid rent. A landlord is, therefore, entitled to perfect the Tacit Hypothec regardless of whether the tenant has been sequestrated or not. In addition to this, the landlord need not have perfected the Tacit Hypothec prior to sequestration. Landlords in this instance are recognised as preferent and secured creditors and can accordingly receive payment before other creditors but only after the costs of the Administrator are accordingly paid.

It is important to note, however, that section 85(2) of the Insolvency Act places a limitation on the amount of the claim. In that, “a landlord’s legal hypothec shall confer preference with regard to any article subject to that Hypothec for any rent due in respect of any period immediately prior to and up to the date of sequestration but not exceeding (a) three months, if the rent is payable monthly or at shorter intervals than one month.”  The Insolvency Act also speaks to time periods where rent is payable in intervals exceeding one month. If the amount exceeds the limit stipulated, the remainder of the amount would be deemed unsecured.

Practically speaking, it is imperative that the landlord weighs their options as the costs associated in the application perfecting a Landlord’s Tacit Hypothec, including the costs of the sheriff and costs of the auction, can be exorbitant. Crucial factors for the landlord to consider are the circumstances of their specific matter and the amount of rent outstanding.

Discover how to easily navigate the complexities of South African rental law and safeguard your property with industry-leading lease agreements and legal advice here.

By: Ashleigh Laurent, TPN Legal Counsel