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WCLawyer, Attorney
Category: South Africa Law
Satisfied Customers: 15603
Experience:  L.LB (UOVS)
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Goodday, I bought a PTY Ltd in Feb 2012 there was a lease in

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Goodday, I bought a PTY Ltd in Feb 2012 there was a lease in place signed by the previous shareholder but not signed by the landlord, a month after I took over all of a sudden the landlord signed the lease and back rates was added to the account. In the lease that was send to me by there agency there was also a 6% turnover rent clause, is this lease valid? How is the turnover rent calculated? Please advise
Good day and thank you for your question. My name is XXXXX XXXXX I will try and assist you today.

In order to provide you with the most accurate answer, I may have to ask you a lot of questions. This may seem tedious and irrelevant, but trust me, there is a reason for every question. So please be patient throughout the process and if it takes a little long for me to come back to you, it is probably because I am researching your answer. I hope that is okay.

Did you physically buy the shares of this Pty Ltd?
Customer: replied 3 years ago.

Yes I did.

On what basis are "back rates" levied against the account?
Customer: replied 3 years ago.

It was just added to the April 2012 rental invoice.

Without being contractually agreed to either by you or the previous shareholder/director?

Did you sign a personal surety at the landlord for the debt of the Pty Ltd?
Customer: replied 3 years ago.

There is a clause int the lease for that the previous owner signed in July 2011 and the landlord only approved in March 2012 and the backdated the rates. Were I took over in February 2012.

What does the contract say; when will it come in effect? On a specific date, or on the signature date?

Does the contract say that it will only become legal and binding when both parties sign?

Also, can you confirm or deny whether you signed personal surety with the landlord for this debt?
Customer: replied 3 years ago.

Commencement date on the lease is 1 May 2011

I do not see any clause stating that it only will become legal or binding when both parties sign.


No I did not sign neither the lease nor the suretyship with the landlord for the debt.

1. As you may well be aware, the liabilities of a Pty Ltd survives any change of its shareholders, as does the contracts. In other words, where your predecessor entered into an agreement between the landlord and the Pty, the agreement will survive a change in directorship/shareholding.

2. It is going to be extremely difficult for me to say whether this agreement is legal and binding. There are several elements that needs to be true in order for a contract to be legal. On of those elements is that the formalities of the contract must be adhered to. For a lease agreement, it is not a formality that the contract be signed by both parties to be legal and binding. It is not even a formal requirement that it be in writing.

3. Having said that, it must however be proved that both parties agreed to the terms and conditions of the agreement. Note that this does not mean that both parties have to be 100% happy about it. Such is the nature of compromise. Even if you agree begrudgingly, that is still an agreement. So, in order to say whether this requirement has been met, you would have to go back to the previous director and find out what transpired in May of 2011.

The fact that they have only tried to enforce this agreement through their invoice in April 2012 does not bode well for them. It can be argued by you, successfully I would think, that the company never agreed to those charges and that the landlord accepted that refusal through his conduct by not calling on the company to perform in terms of the unsigned contract until there was a change of ownership. He was basically trying to sneak in an contract where there never was one.

4. Parties to a contract is also generally allowed to put whatever they want into such a contract, so long as it is not for an illegal purpose or an immoral one. A turnover rent clause would, therefore, be valid and binding, provided that both parties agreed to this. Again, this you need to take up with the previous director.

5. You also probably know that you are not liable in your personal capacity for the debts of the Pty Ltd. Once the sale is complete, let the landlord know that you have paid him what was owed and that if he wants the rest, he should sue you for it. You can then basically withdraw everything from the Pty Ltd and let him have his judgment.

I am not sure what else I can advise you on, but if you have follow up questions before you rate, feel free to ask them at no extra cost. If you are satisfied with the service, kindly rate it positively. .
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