BLACKOUT BLUES
Tenants win right not to pay Sea Point mall’s ‘diesel recovery costs’ incurred during load shedding
A ‘high-end’ gym, which has operated in a Sea Point shopping mall for more than a decade, had taken the owners of the centre to court over demands for extra payment for generators used during load shedding.
The applicants – Bodies Under Construction CC, Specialised Weight Endurance and Aerobic Training CC and Fluidity Wellness CC – argued that the all-expenses-included lease they had signed with Permasolve Investments did not provide for additional payments for generator use.
In the Western Cape High Court, Judge Derek Wille granted the order with costs supporting the tenant’s right to access the alternative energy supply. Disconnecting the business pending an arbitration process had been unlawful, he noted.
Permasolve, whose directors include businessman and former trade unionist Johnny Copelyn and lawyer Raymond Berman, had installed a generator at the shopping centre which tenants used during load shedding.
Wrongful deprivation
The gym had used this alternative energy source for many years, noted Judge Wille, ruling on the application for “spoliation” or “wrongful deprivation” on 20 December.
The gym sought urgent intervention from the court when Permasolve disconnected the business from the centre’s generators during power cuts, because it had not paid a “levy”.
Earlier, Judge Wille granted relief to the gym pending the outcome of private arbitration between the parties, issuing an interim order that the matter be categorised as urgent and that Permasolve reconnect the premises immediately.
He noted that “this alternative power supply is necessary so that the applicants can offer certain specialised fitness classes to their members. Load shedding is financially and reputationally disastrous for the applicants’ business”.
The relief was immediately appealed by Permasolve.
“I can only interpret this as an adverse reaction to the injunction I had issued the previous afternoon. Or it was an attempt by the respondent not to abide by the injunction’s terms,” the judge said.
Over the past 10 years the gym had never paid Permasolve any additional levy or further financial contribution for using the alternative power supply and the lease agreement had not provided for any additional payments, he said.
Our Constitution does not limit property to ‘corporeal’ things. Our jurisprudence also has a history of protecting quasi-possession by way of spoliation.
“About two years ago, an addendum to the lease was executed in which the applicants [the gym] agreed to pay the respondent [Permasolve] an all-inclusive monthly fee for all expenses related to the lease of the premises.”
About 18 months after the addendum to the lease had been entered into, Permasolve had, “out of the blue”, demanded, under threat of disconnection, an additional amount for “diesel recovery”.
The gym owners disputed this and the matter was taken to private arbitration. The gym, noted Judge Wille, had used the alternative power supply before Permasolve disconnected them.
Possession 9/10 of the law
“The issue to be considered is ‘quasi-possession’ for a spoliation claim. Our Constitution does not limit property to ‘corporeal’ things. Our jurisprudence also has a history of protecting quasi-possession by way of spoliation,” the judge said.
The disconnection had been “undoubtedly a substantial interference with the possession of the premises by the applicants”, he said, and he had been persuaded by the gym owners.
Read more in Daily Maverick: Eskom news
“Their fate was tied to the unpredictable and ever-changing load shedding schedule experienced in this country. The impact of the respondent’s unlawful conduct was significant and the respondent did not engage with this at all despite having the full opportunity to do so.” DM
Become an Insider
This is silly law.
I realize the whole issue is civil and based on that specific lease but it’d be a damned stupid contract if it compels the landlord to supply power regardless of Eskom – an obvious force majeure.
I am a landlord. If this becomes the new normal then I will install contactors that disconnect tenants that don’t want standby power during loadshed.
How long is this lease for anyways? Just don’t sign a renewal and be rid of a parasite.
If it is not part of the contract, then it is not part of the contract. The landlord in this instance cannot unilaterally change the contract.
The problem with lawyers and contracts is this fixation with the position at a single point in time. Most landlord:tenant relationships are longterm requiring ongoing accommodations by both sides for how things (internal and external) change. If we had to run to lawyers we’d never get any real work done.
Prediction : these gym owners will battle to find a new landlord with their self-entitled attitude.
I think you missed some important bits in the article.
As I understand it, the tenant had signed a lease at a fixed rent, inclusive of all costs. If the landlord put in a generator that powers the whole complex, then I think the tenant’s case is a good one. “All in”, after all, is “all in”, and we all like, or say we like, public enterprise with risk and reward.
If the landlord had gone to each tenant and said “I can offer you, individually, power when there’s load shedding, but we have to sign an agreement about costs and up time” then that’s a different matter.
It’s not stated here, but I wonder if the diesel costs (the recurring part, since the generator is a one off cost) are offset by the amount not paid for electricity that isn’t provided.
doesn’t quite work like that
The capex is huge – around a million all told for a 500kW standby system. Before loadshed that million was a 25y view. Now more like 5y and you may have to replace.
Diesel is only part of the opex. Servicing is expensive if done well to schedules.
The diesel depends a lot on how often the system runs low load (2AM loadshed when need is 50kW not 400kW). From my stats I figure about R8 to R9 per kWh delivered.
For some businesses that decision to run at R9/kWh is a tight one if their activity is energy intensive. If the tenant uses relatively little energy in their total cost make-up then they don’t care about the cost vs keeping business going.
Even if landlord has big battery system that means run generator 20% of loadshed hours instead of always, somebody has to pay for the battery that is good for about 6000 cycles. 500kWh battery plus the rest is R5m so that capex works Back to about R2/kWh for the system plus whatever the input electricity cost is…
I think this tenant is crazy, the landlord is doing them a favour by supplying electricity outside of Eskom supply. We all know that diesel power is more expensive than eskom power. He will end up having to move or having no power.
to quote your comment “the landlord is doing them a favour by supplying electricity outside of Eskom supply” i.e. its not in the contract so they are not liable
To quote your comment “so they are not liable” : applies equally to the landlord is not compelled to provide standby power.
until a magistrate says so
Except that the landlord HAS BEEN supplying them with standby power for 10 years, FOR FREE. That created an expectation that this status quo will remain. The land lord can’t one day wake up and change his mind. How, as a business, should you plan your expenditure if your landlord one day decides to charge you extra? You ARE in a lease, you can’t leave else you are breaking the lease contract, but the landlord can suddenly charge you any extra fees that he wants? That is what lease contracts are for. To prevent one sided changing of lease terms.
1. This leech never complained about one-sided change when the landlord put in standby power :/
2. The other tenants pay :/
For a court to regard removal of a supply, that was not part of a contract, as spoliation is an error in law imho. Spoliation is usually when a landlord for example locks a tenant out of building for not paying rent instead of going the eviction route.
Why you should never rent out a building…
Sad that the Landlord is always the villain. If the LL did not make provision for an alternate supply, the tenant would’ve had to make arrangements at their own expense. Law is skewed.
Why did the LL even install the generator in the first place unless they had a contract in place with their tenants to recover costs? Dumb.
Peter, it is a pathetic tenant that reverts to technicalities for avoiding paying for a benefit he uses. It is a sad state of affairs that when one party gives something bona fide, the courts turn around and say the giver must then keep on giving that thing the giver need not have given. So you are quite correct, it seems doing the right thing is dumb in law.
We’ll end up like Australia. If an employer starts giving Friday meals (not specified in contract), after a month he is compelled to keep on giving Friday meals.
The court are not concerned with motive, are they? If the contract between the two parties just says X Rands per month for everything, then that’s pretty plain, and no matter whether we think the landlord is being nice or being mean, that’s the deal that both parties agreed to, and it can’t be unilaterally changed.
The latter, general principle is probably key here. If the landlord comes along and says that some unforeseen thing has happened and he’s had to do this and so your rent is now that and I know it’s more than the contract says, but, you know, acts of God and all that… then it would be open season on tenants.
As it is, this tenant, if they have even a small number of working brain cells, should see coming a future where the lease is up for renewal and they find either a whole lot of small print in the contract and/or a hefty increase in the rent. Those are the tools the landlord has available.
If I were the landlord I’d rather house the homeless people of SeaPoint than renew this tenant.
Long leases are never a clever idea : rather have Option To Renew clauses that introduce rental and T&C review.
Contracts are a pain – I think my standard leases are now running 70 pages long and that is not double spaced.
This is an example of how not to do business. Both parties need each other. The landlord needs tenants and the tenant needs the landlord to look after the mall to ensure the vital footfall. The higher the quality of the tenant, the better the footfall. In the end, the only winners here are the lawyers who billed for the costs. Neither party wins in the long run. The tenant is going to get a massive rent increase at renewal time and will probably relocate. The landlord will then have to find a new tenant. Both will incur additional costs. The gym owners are short sighted about this as load shedding is not going away soon. It seems incredible that they could agree to be reasonable about the unforseen additional costs of securing their business interests.
The lease should have made provision for contribution to operational costs by the tenants. Most commercial property leases provide for it. An inadequate lease agreement will always come back to haunt the landlord.
Misleading. The right that they vindicated was not to be spoliated. The main dispute has still to be adjudicated (in this case by arbitration).
The landlord is so going to nail them in the next lease renewal and that will be the end of this story. I believe the landlord could have dealt with this better, and not include a threat of disconnection in the request for the additional levy, that just rubs people the wrong way. The tenant on the other hand can’t expect the landlord to supply uinterrupted power for free. We’re all aware of the situation with Eskom, we’re all docking up additional funds for business continuity.
So much ado about the contract, the cost of the generator, the poor landlord, the damned tenant …..
How about if the government upheld its mandate….. to provide a stable and reliable electricity supply?
Had this been the case, none of this would have been an issue.
How do we hold the them liable for this economic disaster?