Do you live or do business in Botswana? Then our real-life impact series is for you. In this series, we cover developments in legislation and case law, which affect every day aspects of living and doing business in Botswana.
In this episode, we deal with the impact of Puma Energy Botswana v. TZ Highway Investments in which the Court of Appeal decided to extend the concept of holding over damages to cover the period of post-lease restoration being undertaken by a lessee with the consent of a lessor.
Hold on to your hats… or rather, to your pockets!
Before we jump in, it is important that you understand that a lessor is entitled to damages for holding over if a lessee has failed to return the property let when the lease agreement terminated. Claims for holding over are founded on a breach of the contractual obligation to return vacant possession on termination of the lease.
So your lease is finally at an end. It is time for a lessor and tenant to part ways. But, whoops!! There is that small issue of the lease agreement providing that the premises should be returned to the lessor in a certain condition.
Here are are some trick questions for you. What happens:
• with lease agreements which do not specify when restoration should be done?
• where it is impossible, uneconomical or disruptive to effect restoration during the lease period?
In the Puma case, the court considered a case in which a lessee had ceased operating on the leased premises, had handed over the keys to the lessor, and had engaged in post-lease rehabilitation with the lessor’s consent. The court held that the lessee was liable for holding over charges after termination of a lease agreement.
The court held that the lessee’s presence on the site for the purpose of restoration was unlawful and thus awarded holding over damages against it.
This contrasts with the South African position which holds that where the sole object of continued occupation by a lessee is to effect restoration with the consent of the lessor, the question of unlawful holding over does not arise (Nedcor Bank Limited v. Withinshaw Properties).
This marks what may prove to be an expensive sea change in the property rental space in Botswana.
For businesses and persons whose cost outlay and budgeting process envisaged property restoration being undertaken post-termination of a lease, in the absence of risk-management measures being undertaken during the life of the lease, expenditure forecasts should be adjusted to accommodate holding over charges that will likely be claimed by lessors for the period of restoration as a consequence of the court’s judgment.
For more information on the judgment and to receive creative and practical risk management advice to the seismic shift in the rental space presented by the judgment, please contact our Mrs. Olebile Muzila at olebile@bookbinderlaw.co.bw or on 00 267 391 2397.
To access our other episodes in this series, click on the following links:
REAL-LIFE IMPACT SERIES: Road Traffic Regulations (Amendment Regulations) 2021 (S.I. NO. 74 OF 2021)