Don’t improve a leased property without owner’s consent

Tenants and landlords finally have clarity about the rules governing claims for compensation for useful improvements to leased premises following a watershed Supreme Court of Appeal judgment last week (1 June), according to a June 7 media release.

Jennifer Finnigan of Shepstone & Wylie clarified the judgment in the case of Business Aviation vs Rand Airport Holdings.

"The bottom line of this judgment is that if you are a tenant of agricultural land, don't make useful improvements to the land without your landlord's consent and remember that even if you do so, you can only claim compensation if you give up possession of the land. Your compensation claim will also be limited.”

She adds that tenants may break down useful improvements and remove the materials during the lease but cannot do so if such action causes any damage to the leased premises.

“If you're a tenant of urban land, the case makes it clear that your position is different. You have a claim for compensation for useful improvements to the leased premises which you can enforce by retaining possession of the property.”

Regarding the question of whether the useful improvements need the landlord's prior consent, she advises that the best solution is to deal with all these issues in a proper written lease.

Finnigan explains that the common law entitled tenants who constructed "necessary" and "useful" improvements to the leased premises to keep possession of that property until the landlord compensated them for those improvements. Tenants of agricultural land in Holland saw a gap and lots of them apparently built expensive improvements on the leased property for which their landlords couldn't afford to compensate them with the result that they could stay in possession of the premises.

To sort out the situation, lawmakers in Holland published 2 "placaten" which restricted the rights of tenants. Amongst other things, those placaten stated that although a tenant could claim compensation for improvements, firstly the claim was limited to useful improvements made with the landlord's consent and secondly they lost their lien or right to retain possession of the premises pending payment of the compensation.

The placaten did allow a tenant to break down useful improvements during the lease and remove the materials (as long as they didn't damage the leased premises).

The new judgment answers once and for all the question of whether the rules contained in the placaten apply to all land or only rural land. The answer is, rural land only.
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