MAIN IMAGE: Rowan Terry, TPN Legal Counsel
Persistent load shedding, at times exacerbated by transmission faults, has plunged South Africa into a power crisis with the real potential to slow growth of an already sluggish economy. Continuous power interruption impacts municipalities, making it harder to fill reservoirs and run sewerage plants. Worsening the situation is the fact that water restrictions are being applied in certain parts of the country.
Property practitioners should be able to advise their clients about the responsibilities of landlords under these circumstances. Landlords have continuous responsibilities to adhere to when managing their properties and should still provide tenants with agreed upon services, despite factors out of their control. Or do they?
Rowan Terry, TPN Legal Counsel, says tenants have in desperation been requesting that generators or invertors and water tanks be installed in rental properties, at the landlord’s cost, to ensure continuity of electricity or water supply.
“Given the utility challenges facing the property industry it’s not surprising that landlords are questioning whether they are legally obliged to provide uninterrupted utility supply if they are requested to do so by their tenants. And if they are, who is liable for these costs?
“The first thing that tenants need to understand about load shedding and water restrictions, or water cuts is that these are not due to the landlord’s fault. As a result, tenants can’t request a rental remission from their landlord. Neither are landlords legally obliged to provide generators, inverters, or water tanks,” Terry said.
The high cost of operating generators or similar devices is one of the reasons why landlords are not providing them. However, the situation does provide landlords with an opportunity to add value to their property investment and receive higher rental returns with the addition of a generator to their property. In the current environment, additions such as alternative energy solutions have the potential to make a property more attractive.
Should the tenant require a generator, inverter, or water tank to be installed at the property, but the landlord cannot provide one, then this will be for the account of the tenant. This applies to both the residential property sector as well as the commercial property sector, including retail, industrial and office tenants.
According to Terry it’s important to understand that once installed on the property, the generator, inverter, or water tank will be considered a fixture to the property and will become the property of the landlord, unless there is a prior agreement – in writing and signed by both parties – that the tenant will remove the installation upon termination of the lease agreement.
Both parties can mutually agree on who is responsible for the costs of installing, maintaining, insuring, and operating a generator, inverter, or water tank and who ownership of these fixtures ultimately resides with.
“It is strongly recommended that an addendum be drawn up to avoid any ambiguity and unnecessary costs at a later stage. The addendum should deal with issues such as generator maintenance, operating costs, and the party responsible for providing an electrical certificate of compliance with the installation, depending on which party is installing the generator.
“Should the landlord choose to provide an alternative energy supply – despite not being legally obliged to do so – the tenant can be made liable for their pro-rata use costs of a generator, including maintenance, insurance, compliance certificates and the fuel required to operate it. However, this condition must be included in the lease agreement or in a signed addendum between the parties,” argued.
It’s important to remember that unless the charges are included in the lease agreement or a subsequent signed addendum, landlords cannot pass on any costs associated to supplying an alternative energy source.