Most sale contracts contain
separate clauses covering possession and occupation and for good reason. Occupation
simply means the right of the Buyer to move into the premises and to occupy it
on much the same principles as a tenant. Possession, however, gives the
occupant the right to let the property and to the rentals accruing as well as
to the benefit arising from the property, such as the right to all crops,
fruits, etc. The right here is far more like that of a usufructuary (has
the right to use the property and enjoy its fruits (fructus), but does not
acquire ownership of the property, known as the bare dominium) than a tenant.
The occupant in this case, however, also becomes responsible for all rates and
takes on himself all the risks pertaining to the property such destruction by
fire. In most sale contracts, possession only passes on registration of transfer
though in terms of deeds of sale, it invariably passes on signature
or on occupation.
Occupation an Essential Term
of a Contract?
Perhaps the first question
that should be asked here is whether occupation is an essential term of a sale
contract. This subject was the basis of a High Court case some years ago,
namely Smit v Walles 1985(2) SA 189 (T). In this case, the original sale
contract contained a clause stating that occupation could be taken by the Buyer
on a "date to be agreed upon between the Seller or his Agent and the Purchaser"
without anything further being said about the rental to be paid. A subsequent
addendum settled the determination of rental, but the Seller then tried to get
out of the whole contract, alleging that the
issue of the date of occupation was a material term of the
contract and that the ambiguity accordingly rendered the contract void and
incapable of rectification.
The learned judge disagreed
and stated that occupation did not appear to be an essential term of the sale
contract. He concluded that in some cases an agreement on the date of
occupation might be a material term of the contract whereas in others it would
not. For example, if a Buyer sent a letter saying he was prepared to purchase a
specific property, provided the date of occupation was not later than a specific
date, occupation would become one of the essential terms of your agreement. Additionally,
if the Seller, on signing a written mandate, insisted on occupation by a
certain date because he was being posted elsewhere. In such cases an occupation
clause would have to be fully and accurately completed. In other cases,
however, especially those where the parties agree that occupation will be taken
"on registration or otherwise agreed upon", the term would not be a
material term of your contract. Neither party could escape from the contract
later on the grounds that occupation had not been specifically stated.
If nothing is said about
occupation in an agreement and if there is no evidence to the contrary
elsewhere that either party had stipulated a specific date or required a date
by which occupation had to be taken, it is presumed that occupation will pass
on registration or, if the transfer is delayed, within a reasonable period. The
validity of the contract is unaffected.
Omission of Occupational Rental
It all-too-frequently happens that agents
omit to stipulate the exact amount of occupational rental to be paid, either by
the Buyer prior to registration, or by the Seller if he remains in occupation
after registration. Usually this is because occupation is set at registration
and there appears to be no need to specify occupational rental. Occasionally,
however, conveyancers are given completed contracts which specify a date of
occupation with no mention of the rent payable.
It is highly negligent to leave
occupational rental out of a contract, especially where a date other than the
date of registration has been set for occupation. Worse still is to write in: Nil,
N/A or NVT (or, in full, "Not Applicable"), in
the space provided for the rental as no rental will then be payable
by the party in occupation. In other cases the aggrieved party will have a hard
time getting the rental issue settled.
It is very important to stipulate occupational
rental even in contracts where the parties have agreed that occupation will
only be taken on registration. This is because the parties often come to
separate agreement afterwards, very often verbally, to define the date of
occupation. Without reference to either the Agent or the Conveyancer, the
Seller will allow the Buyer to take occupation prior to transfer . Always
include occupational rental in a contract no matter whether it will be
applicable or not.
CREDIT:
Property Law Publications
John Gilchrist
082 904 1300
