In light of the above our courts, every now and then, has had to deal with the issue of whether or not article 10 of the placaat passed by the Estates of Holland in 1658 applied to urban properties. This article, plainly stated, provides that a tenant of rural property who made improvements to the property was only entitled to compensation for such improvements if he had made the improvements with the consent of the landlord and had vacated the property.

Our Supreme Court of Appeals (“SCA”) has recently, in the case of Business Aviation Corporation v Rand Airport Holdings (“the Rand Airport case”), which went on appeal to the SCA, brought some clarity to this issue for once and for all in deciding that article 10 did not apply to urban properties.

The consequence of the SCA decision in the Rand Airport case was therefore detrimental to the recourse of Landlords, in that it provided that a tenant, who pays a rental of R7750 per month but who earns R42 000 per month from subtenants, has an enrichment lien in its favour, meaning that the tenant is entitled to remain in occupation of the leased property until the amount of its claim for improvements to the property has been determined and paid. This ultimately means that tenants who have enhanced the value of the property, may, if in good faith, retain their possession until they have been paid compensation by the owner of the property for such improvements.

Tenants of urban properties are now placed in the same position as a legal or legitimate possessor or occupier as regards compensation for improvements made by the tenant to the property during the prevalence of the lease. Except for any contrary provision in the lease, tenants, like bona fide possessors or occupiers of another person’s property, have an enrichment claim for the recovery of expenses that were necessary for the protection or preservation of the property as well as for expenses incurred in effecting useful improvements to the property.

The obvious question now arises whether or not this situation can be circumvented and avoided by inserting a provision in leases which deals with improvements made by the tenant in such a way that the tenant’s right to an enrichment lien after termination of the lease is excluded. The simple answer is yes, but it is not enough merely to provide that the tenant may not make any improvements without the landlord’s written notice, and that if the tenant does make improvements without the landlord’s consent the tenant shall not be entitled to any compensation therefor. In addition to this clause, there should be an additional clause in which the tenant should waive any right the tenant may have to an enrichment lien in respect of any improvements the tenant may make either with or without the Landlord’s consent, and to bring any claim whatsoever the tenant may have for compensation for improvements until after the tenant has vacated the leased premises.

Right, the above takes care of the contractual and practical side of the problem, but what about tax? Tax implications of improvements made to leased premises should always be borne in mind as the value of the improvements made pursuant to an agreement between the landlord and the tenant (or where no such amount is stipulated, an amount representing the fair and reasonable value of the improvements) will be deemed to be income in the hands of the landlord.

The tenant, however, may be entitled to the ‘leasehold-improvements allowance’, which is available for expenditure incurred by a tenant in pursuance of an obligation to effect improvements to the leased premises incurred under a lease agreement. The prerequisite hereto however is that the land or buildings must be used or occupied by the tenant for the production of income or income must be derived from them.

This further implies that should the lessee however voluntarily undertake to bring about improvements, the lessor will not be liable to tax and the lessee will not be able to claim the corresponding allowance.

The Minister of Trade and Industry, Mandisi Mpahlwa, published the new Standard of Training of Estate Agents Regulations, 2008 which will take effect on 15 July 2008. Compliance with the prescribed standards of training for estate agents is crucial in light of sections 34A and 34B of the Estate Agency Affairs Act, 112 of 1976, as failure to comply or to hold a fidelity fund certificate could mean that the agent may not be entitled to remuneration work done.

From the effective date of 15 July 2008 anybody wishing to become an estate agent will have to serve as an intern estate agent under a principal estate agent for one year after form the date that the intern was first issued with an intern fidelity fund certificate by the Estate Agency Affairs Board (“the Board”).

An intern estate agent may not perform any act as an estate agent without the active supervision and control of a principal estate agent (or an agent that has held a fidelity fund certificate continuously for three years) or unless the intern has disclosed the fact that he or she is an intern estate agent in all printed material relating to the intern (except authorized advertisements in the press).

Another highlight is the requirement that intern estate agents will not be allowed to complete or draft any documentation relating to a transaction negotiated by him or her, unless a principal estate agent (or an agent that has held a fidelity fund certificate continuously for three years) is present and certifies on the documentation in question that it has been completed in his or her presence.

A person will only be allowed to register as an estate agent once they have complied with the internship requirements and the educational requirements set out in the Regulations. From the abovementioned effective date all non-principal estate agents will have to obtain the NQF (“National Qualification Framework”) Level 4 qualification called the Further Education and Training Certificate: Real Estate, and the NQF Level 5 qualification called the National Certificate: Real Estate is prescribed for all principal agents. These certificates will be prerequisites for the Professional Designation Examination (“PDE”), which is needed to be registered as a full status estate agent by the Board and to obtain a fidelity fund certificate.

The good news for existing agents is that the Regulations prescribe a process of recognition of prior learning (“RPL”). This process will include the identification, assessment and acknowledgement of skills and knowledge which an estate agent may have, whether it was obtained through formal training and education or experience on the job, and will take place within the context of the abovementioned certificates.

Furthermore, agents who are registered as principal or non principal agents on the effective date and that have continuously held a full status fidelity fund certificate issued by the Board for a period of not less than 5 years will be exempted form the PDE.

In addition to the above, the Regulations provide that the Board may prescribe any reasonable Continuing Professional Development requirements as contemplated by the NQF.

The full Regulations can be viewed here: http://www.info.gov.za/view/DownloadFileAction?id=82569

The Estate Agency Affairs Board’s website (www.eaab.org.za) has further information on the new training requirements, based on the draft regulations published in January this year.