“If the tenant is not paying the rent, why should I subsidise their electricity?”
“Maybe they will move out more quickly if I cut off their water?”
“If they don’t pay, why should they receive the service?”
These are just a few of the thoughts that will cross a landlord’s mind when they are in the unfortunate position of having a tenant who in arrears for the payment of rent and/or municipal services. Landlords, desperate to find a “quick fix” to this problem, will often consider more “creative” solutions such as cutting off the supply of electricity or water to the premises concerned as a means to induce a tenant to pay up or to vacate. This practice is commonplace amongst certain landlords and agents, but is it actually permissible and legal?
The short answer to the question is “no” in cases where a property is let as a house or dwelling, but “perhaps” for defaulting tenants who occupy premises as a commercial space.
The landlord’s position is certainly unenviable and their frustration and sense of injustice completely understandable, but the situation is more nuanced.
As a starting point, it is important to consider that everyone has the right to basic essential services in South Africa. The Constitution guarantees the right to access water and the Municipal Services Act requires the provision of basic sanitation services to all. The courts have interpreted this right in recent years to also include access to electricity. The Court in Joseph v City of Johannesburg held that “the provision of basic municipal services is a cardinal function, if not the most important function, of every municipal government,” by virtue of the fact that “electricity is one of the most common and important basic municipal services and has become virtually indispensable, particularly in urban society.”
Municipalities are mandated to supply basic essential services and as a general rule, a landlord is responsible for payment to the local authority for the provision of these services to premises registered in its name. A landlord, therefore, has to pay the local authority for these services, regardless of whether the tenant has breached their lease. It is understandable that a landlord would be loathe to pay for municipal services that a tenant has failed or refused to pay for but continues to enjoy, and would be tempted to cut off the supply of these services to the premises to mitigate its loss. A landlord may even want to induce a tenant to settle their arrears quickly or to vacate the property, but the law does not operate on a “tit for tat” basis. Any act to force a tenant to leave by diminishing their quality of life or obstruct their access to essential services would be viewed as an attempt at a “passive” or “constructive” eviction, which is unlawful.
It is settled law that a landlord cannot evict a tenant, or any occupier, without a court order, be it in respect of residential or commercial premises, and that occupier would need to be shown to be on the premises unlawfully to entitle a landlord to such an order.
So, what can a landlord do in consequence of a tenant refusing to pay? If it is a material term of the agreement between the parties that a tenant pays for all municipal services provided to the premises for the duration of their occupancy, then a landlord is entitled to cancel the lease where the tenant has breached such an obligation. If the tenant refuses to vacate despite the lease having been lawfully cancelled, a landlord then has recourse to the Courts for an Eviction Order as well as a claim for any arrears owed. The landlord does not have the right to summarily remove a tenant or occupier, or to act in a manner that obstructs their access to basic essential services.
In the case of a tenant occupying premises for commercial use, as opposed to a home or dwelling, it is important to note that a business does not have the right of access to essential municipal services. Moreover, with businesses, the stakes are lower in that the lease agreement is treated as a purely a commercial transaction and it is an unfortunate economic reality that businesses can fail.
In the case of Anva Properties CC v End Street Entertainment Enterprises, a landlord sought a declaratory order as to whether it would be entitled to suspend the supply of municipal services to a tenant that was over R 300 000.00 in arrears for electricity recoveries. The tenant ran and operated a nightclub from the premises and in the circumstances, the court held that it was unfair to allow the landlord to effectively continue to subsidise the tenant’s business. The court further held that the landlord concerned was entitled to mitigate or reduce its losses by suspending the supply of electricity to the tenant. The court, however, cautioned against landlords taking the “law into (their) own hands” and also ordered that an electrician ensure that the power to other tenants in the building would not be interrupted.
It is unclear whether a decisive factor in this decision was the high amount of arrears owed in this particular case, whether the order was a punitive measure for the unscrupulous conduct of the tenant, but what is evident is that the judgment demonstrates a new approach to this type of situation and offers some relief to overburdened landlords without the danger of a spoliation order being brought against them to reinstate the supply of any interrupted municipal services.
Ultimately, the salient points from this decision by the Western Cape High Court are that the supply of electricity or any other essential service may only be suspended firstly, in the case of a commercial tenant, and secondly, only by operation of a court order.
So, the question begs, what can a landlord do to protect its interests? Here are some suggestions:
1. Install pre-paid electricity meters. This way, there are no disputes as to the correctness of charges as a prepaid meter is a definitive way for them to track their own consumption and the tenant is motivated to pay. An added advantage is that the landlord is no longer the “middleman,” thus reducing the administrative and financial burden of paying and allocating municipal accounts to tenants. A prepaid meter is a once-off expense that may deter some but can be seen as a wise long-term investment that can provide peace of mind to the landlord.
2. Consider a pre-paid water meter or water management device. This has the double effect of limiting consumption and reducing the burden on the landlord. The landlord would need to weigh up the initial outlay for installation versus the long-term savings and convenience, especially in drought-stricken provinces.
3. Allow a tenant to open a municipal account in their own name in relation to the property. The landlord is effectively removed from the equation and the tenant is responsible to the local authority for their consumption while on the premises. The potential risk however to this situation is that if the tenant leaves with an account in arrears, as the landlord, you cannot transfer the account back in your name until the arrears have been paid or a suitable payment arrangement has been made with the municipality to settle the outstanding amount. The landlord is then effectively liable for the debt and would have to pursue the former tenant to recover this debt, which will be an additional burden and expense.
4. Ensure that you have a comprehensive Lease Agreement: To be adequately protected, your lease must explicitly state the tenant’s liability for municipal services provided to the premises concerned, including all consumption charges as well as all applicable tariffs and service levies. It would also be advisable, in the case of prepaid meters, to insert a clause wherein the reading of the meter at the date of occupation and vacation is recorded and the tenant’s liability for the consumption and any fines or penalties levied on a prepaid meter during their occupancy are for their account. Otherwise, the landlord or future tenant will end up paying any outstanding penalties on the prepaid meter.
5. Cancel the lease. If it is a material term of your agreement with the tenant that they are to pay or reimburse the landlord for their consumption of municipal services, then in failing to pay this amount, the tenant has breached the lease agreement. In such a case, the landlord is entitled to cancel the lease and to demand that the tenant vacate. If the tenant refuses to vacate, the landlord is entitled to enforce this cancellation by obtaining a court order for their eviction from the premises.
6. Get professional help: Ensure that you are adequately protected by having a professional draft or review your lease agreement, and seek their advice should you be in a situation where you are unsure of your rights and responsibilities.
For any lease-related enquires, contact the experts at Rubensteins Attorneys today.