WHAT IS A LONG-TERM LEASE AGREEMENT AND WHEN CAN A LONG-TERM LEASE AGREEMENT APPLY TO YOU?

A long-term lease agreement is an agreement that can be created by a landlord and tenant in respect of immovable property (land) under one of the following categories:

1) A lease period of at least ten (10) years;
2) A lease period for the natural life of the tenant or any other individual that is mentioned in the lease; or
3) A lease which is renewable from time to time at the option of the tenant, indefinitely, or for periods which, together with the first period, amount in all to no less than 10 years.

It is important to note that a long-term lease agreement remains valid even if it is not reduced to writing between the landlord and the tenant. However, if the lease agreement is not in writing, it will not be capable of being registered in a deeds registry and it will be regarded as movable property.

In order for a tenant under a long-term lease agreement to acquire a real right in respect of the property for the duration of the lease agreement, it will be necessary to record the long-term lease agreement in writing. The agreement must be signed by the landlord and the tenant as well as two competent witnesses, and executed before a practising Notary Public, who will also be an admitted Attorney, and who will register the lease agreement in a deeds registry against the title deed of the land where the property is situated.

A real right, in this context, is a right which vests in a tenant and is enforceable against any subsequent purchaser or successor of the landlord. This right creates a restriction on the landlord’s right of ownership whilst affording the tenant a limited real right of ownership over the land concerned and is binding on and enforceable against the landlord and their successors in title for the duration of the long-term lease agreement. This limited real right allows the tenant to use the property as if the property were their own for the duration of the long-term lease agreement.

Another reason to register a long-term lease agreement in a deeds registry is that it protects the tenant against the landlord’s creditors and successors in title. A long-term lease agreement is valid against the landlord’s creditors and/or the landlord’s successors in title in the following cases:

1) If the long-term lease agreement was registered in a deeds registry against the title deed of the land concerned;
2) If the creditor knew that the lease agreement existed when granting credit to the landlord; or
3) If the successor in title knew that the lease agreement existed when entering into a transaction with the landlord.

It is also possible to register a long-term lease agreement over a unit in a sectional title scheme, as well as over an exclusive use area and over common property or a part thereof in a sectional title scheme.

Should a long-term lease agreement terminate before the agreement expires, a Notarial Deed of Cancellation must be entered into between the landlord and tenant, which agreement must also be executed before a practising Notary Public and registered at the deeds registry where the long-term lease agreement is registered, together with the title deed of the property for endorsement purposes.

Ultimately, a long-term lease agreement limits the rights of the landlord to a certain extent while affording the tenant a limited real right in the land concerned. A long-term lease agreement gives the landlord and the tenant more security regarding the real rights and the obligations of each party under the agreement. Although ownership of a property is considered to be the strongest right to a property, a long-term lease agreement may be a viable alternative to consider for the tenant where full ownership is not always possible, depending on the circumstances of the parties involved.

Author: Blaine Saunders

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