In the case of Tudor Hotel Brasserie & Bar Pty Ltd vs Hencetrade 15 Pty Ltd the lessee was evicted from the leased premises by the lessor as a result of failure to make payment of the rental.
The lessee admitted failing to pay rental but claimed that it had not been given vacant possession of the entire premises as a portion of the rental premises had still been used by the lessor for the storage of goods and based thereon it did not have unencumbered occupancy of the whole property and was entitled to withhold rental based on the legal principle of Reciprocity.
The last mentioned principle operates where both parties to an agreement have an obligation to each other. If one party has not yet performed its obligations, the other party may raise a defence that its obligation to perform has not yet arisen because of the party’s lack of performance.
The lessee in this instance argued that the lessor was not entitled to cancel the lease and evict the lessee as it was not required to make payment of the rental until vacant possession had been provided to it.
Ordinarily if a lessee were deprived of beneficial occupation, it would be entitled to a remission of rental or damages proportional to its reduced use and enjoyment of the property.
Unfortunately for the lessee there was a clause in the rental agreement which stated “all payments in terms of this lease shall be made on or before the 1st day of each month without demand, free of exchange, bank charges and without any deductions or set-off whatsoever.”
The aforementioned clause in the rental agreement was the only contractual term that justified the lessor’s actions and had it not been in the rental agreement it would justify the lessee’s retention of at least a portion of the rental representing the part of the rental premises of which the lessee did not have beneficial occupation.
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