Amidst the quick advancement of the types of contractual arrangements entered into between parties, the contract of lease and the concept of rent appear to be lagging decades behind.

A contract of lease of immovable property is defined as "a reciprocal agreement between one party (the lessor) and another party (the lessee), whereby the lessor agrees to give the lessee the temporary use and enjoyment of property in return for the payment of rent" (W E Cooper Landlord and Tenant, 2nd edition 1994).

For an agreement of lease to come into effect, the following essential elements must be agreed on:

• the lessor is to give, and the lessee has the right to receive, the temporary use and enjoyment of property;
• the property to be let; and
• the rent in exchange for the use and enjoyment of the property.

The definition of the word 'rent' is important as an essential element of an agreement of lease. Rent is the consideration that the parties agree the lessee shall give the lessor for the use and enjoyment of the property. While agreement on the rent is a requirement for all contracts of lease, the fact that the word 'rent' is used in a contract does not necessarily render the agreement a contract of lease.

Although in a great majority of cases, the rent is paid in money, in certain circumstances parties may reach an agreement that the consideration payable for the right to receive the temporary use and enjoyment of a property is in something other than money or fruits of a property. The question then arises whether the agreement entered into between the parties constitutes an agreement of lease.

The traditional approaches by our courts have been that rent must be in money or a certain quantity of the fruits of a property as seen in Partridge v Adams 1904 TS 472 at 476; De Jager v Sisana130 AD 71 and Crous v Crous 1937 CPD 250. This rule has its origin in Roman law. Roman-Dutch writers adopted the principle that rent had to be in money, and in circumstances of rural leases, allowed payment to be a portion of the fruits of the land let.

There is a plethora of case law limiting the definition of rent to the exchange of money or payment of fruits.

W E Cooper, a leading author on lease agreements, considers that the three main objections to allowing rent to be something other than money appear to be:

• that it may not be possible to ascertain the identity of the lessor and the lessee;
• that it may not be possible to fix consideration with certainty; or
• that it may not be possible to apply the rule regarding remission of rent.

These three objections are considered below in relation to fungibles; non-fungibles; services; and use and enjoyment.

Fungibles

Fungible goods are those that can readily be estimated and replaced with identical things of the same, weight or amount. It is accepted that rent may be at a certain price, or a definite weight, or a measure of the fruits or a proportion of the produce of the land let.

Non-fungibles

Non- fungibles are goods that have an original value and cannot be replaced exactly. The objection to allowing rent to be a non-fungible is that it may not be possible to apply the usual rules regarding remission of rent where there is the impossibility of performance. In the case of Partridge v Adams, Solomon J said "The consideration for the cession of the lease given by Dennant (the sub-tenant), was an iron building, which cannot be treated as payment of rent, inasmuch as rent must consist either of money or of a certain quantity of the fruits of the property. The ordinary doctrine of remission of rent would appear therefore, to have no application to a case such as this".

Services

The objection to accepting rent in the form of services is that it may be difficult to ascertain which party is the lessor and which party is the lessee. In the cases of De Jager v Sisana, Crous v Crous; Black v Scheepers 1972 (1) SA 268 (E) and Rosen v Rand Townships Registrar 1939 WLD 5, it was accepted that rent cannot be paid in services.

The brief facts of the matter in Black v Scheepers are as follows: Scheepers, the owner of a house, entered into an agreement with Black where Black was permitted to occupy the house. Black was not required to pay rent but undertook to pay the water and electricity and to supply Scheepers and his wife with daily meals and tea at night. The parties had not agreed on the termination of their agreement. After several months of this continued relationship, Scheepers gave notice to Black terminating the agreement. The courts found that the agreement was not a lease and that rent must consist of money or produce, not services. The court specifically held that the definition of rent is well established and accepted and that the obligation to supply meals was therefore not considered to be rent.

Exchange and use

Cooper deals with the objection to recognise an arrangement of exchange and consider it an agreement of lease. The scenario presented by Cooper is as follows:

A contract is entered into between A and B where A allows B to occupy his home for one year and in return B permits A to occupy and use his farm for a year. In this situation and in relation to A's home, A is the lessor and B is the lessee. In relation to B's farm, B is the lessor and A is the lessee. In such a contract each party would both be lessor and lessee, and such a situation 'is incompatible with a lease'. Cooper advises that an exchange should not be regarded as a lease, but rather as one embracing reciprocal usufructs.

In the matter of Jordaan NO and Another v Verwey 2012 (1) SA643 (E), the 'alleged lessee' was given the right to utilise five orchards on the property and the 'alleged lessee' was obliged to install and commission a microjetting system on the leased premises. No money exchanged hands.
When the 'alleged lessee' failed to fulfil this obligation, the 'alleged lessor' issued summons compelling the 'alleged lessee ‘to install the microjetting system and included in this summons claim for an automatic rent interdict.

This matter relied on whether the common law rule that rent cannot consist of anything other than money or a certain quantity of the fruits of the property was still operative. The court found that the arrangement between the parties to 'lease' premises without the exchange of money did not constitute a lease. The court declined to change the position of the existing law that the definition of rent be limited to payment of money or fruit derived from a property.

Even though modern writers prefer a more liberal interpretation to the term rent, the courts adhere to the traditional rule that rent must be in money or produce of the land and with the Jordaan decision not yet being overturned; it remains the current authority on this issue.

While compelling arguments may be made that this age old principle should no longer be recognised and applied in our law, especially in view of the fact that contractual law is of a consensual nature, an equally compelling counter–argument may be made that this principle is fixed in our law, and that a party wishing to incorporate the incidents of a lease into an agreement of a non-lease are free to do so by agreement between themselves. A matter has yet to come to court in which a compelling reason is given to develop the definition of rent and alter the current law.

Written by Lucinde Rhoodie, Director,  and Nazeera Ramroop, Candidate Attorney, Dispute Resolution, Cliffe Dekker Hofmeyr