Where the period of a lease agreement is extended, the terms of that agreement will apply during the extended period unless the context or the parties’ intention indicates otherwise. Where parties to a lease simply say that they want to extend the lease period and stipulate nothing else, then the provisions relating not only to the lease, but also to other rights included in that agreement, such as pre-emptive rights, will likewise be extended and will apply during the renewal period.
This finding in the case of Mokone v Tassos Properties CC has resulted in a change to the common law that if parties extend the lease period in a lease agreement then the collateral terms (such as pre-emptive rights) included in the lease will not apply to the extended period, unless the parties’ intention is indicated otherwise.
The case involved an agreement which contained a lease and a pre-emptive right. When the lease came to an end, the parties initially extended the period orally, and subsequently extended it by a written endorsement on the first page of the original agreement which simply read ‘Extend till 31/5/2014 monthly rent R5 500’.
The landlord sold the property to a third party during the extended period of the lease. When the tenant discovered this, she sought to exercise her pre-emptive right. The court had to decide whether the pre-emptive right was extended when the parties agreed to extend the lease.
The court disregarded the common law rule and found that the pre-emptive right had also been extended. This finding was based on the court’s interpretation of the words used to extend the lease. Parties will need to clearly specify which clauses in an agreement will not apply during the renewal period.