The Rights and Obligations of Tenants and Landlords in the Retail Industry

Posted On Monday, 15 June 2015 13:46 Published by
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The South African retail industry has seen significant growth with an increase in the number of shopping centres spreading rapidly across the country.  

PeriscopicMasingita

Leading commercial property development and Management Company, Periscopic Masingita advises that with careful consideration of the risks and economic pressures, it is an opportune time for potential business owners and entrepreneurs to enter the retail market.  

“When looking to rent space, it is important for tenants to make sure that they fully understand their business.  This is equally important for the landlord and property management company in order to determine whether or not the tenant’s business will be prosperous in the centre.  Understanding the needs of the business and knowing the target market is key in strategically positioning the business in the right location within the centre.  Once this has been established, the tenant will be able to ascertain if the rental is achievable,” explains Joos Engelbrecht, General Manager of Periscopic Masingita.  

The most important objective for the landlord or property management company is to ensure a strong tenant mix. “Whether you are renting a single space or tenanting an entire centre, it is imperative to screen tenants and make sure that they are able to meet the obligations of the agreement.  This is achieved by doing credit checks of the signatories and sureties.”  

“The essentialia of the agreement is another important aspect to bear in mind when signing a lease agreement.  This includes the parties to the agreement, premises description, lease term, rental, escalation rate, usage clause and domicile of the parties.  The micro and macro-economic climate plays a critical role as economic downturn or economic growth both bring different benefits and risks for both parties,” Engelbrecht says.  

FICA has been a considerable advancement in property management as it establishes control in terms of the chosen tenant which did not exist prior to the Act being promulgated.  “The purpose of FICA is to verify the identity of any natural- juristic person or trust which is supported by recorded details of the client’s profile. FICA implicates both the landlord and tenant as the landlord is now obligated to curb money laundering, requires them to maintain records of each and every entity that they receive money from and positions them to report transgression of the Act.  The tenant is not be able to conclude an enforceable agreement with the counterpart should they fail to supply their FICA documents,” states Engelbrecht.  

“Tenants need to ensure that the landlord or property management company that they are renting space from maintains the property in such a way that they can trade under acceptable standards of business.  Taking into account that the centre adheres to the Occupational Health and Safety Act by providing a safe, secure and clean environment,” advises Engelbrecht.   

It is valuable to note that the rights and obligations of tenants, landlords and property management companies exist through mutual agreement, application of specific acts and the common law in order to conduct business that is beneficial to all parties, the consumers and the economy.  “Wholesale, retail, motor trade, catering and accommodation make up 12.5% of the South African GDP; with finance, real estate and business services contributing 21.5% to the South African GDP.  Making this relationship between landlords and tenant one of the pillars of our economy.” concludes Engelbrecht.  

 

 

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