Harbour Arch Investment Holdings (Pty) Ltd vs. Capital Propfund 4 (Pty) Ltd - (05 Aug 2021)

Payment obligation is only applicable as long as the land lease remained valid

Civil

Appeal is against impugned order of High Court, which upheld an application brought by Capital Propfund 4 (Pty) Ltd, for an order declaring a leases assignment agreement it had concluded with Harbour Arch Investment Holdings (Pty) Ltd to be of full force and effect. Specifically, Capital Propfund sought enforcement against Harbour Arch Investment of a payment obligation provided for in that agreement.

Capital Propfund, as the lessee under the land lease, concluded tenant agreements with various tenants who occupied different portions of the property. Through a leases assignment agreement, Capital Propfund assigned to Harbour Arch Investment all its rights and obligations under both the land lease and the various tenant leases as a going concern at a purchase price of R235 million. Sub-lessee acquired immovable property previously rented by it. Sub-lessee’s contractual obligations under a leases assignment agreement is subsumed by ownership rights.

Harbour Arch denied obligation to make payment maintaining that, the payment obligation was no longer applicable since it was now the owner of the property. The payment obligation was only applicable as long as the land lease remained valid. It found that, in terms of clause 18.3 of the agreement, the obligation was limited to the sub-lessee and its successors in title to the land lease. Nothing in the wording of clause 18.3 or anywhere in the leases assignment agreement showed an intention that the payment obligation would be applicable even when the land lease terminated. Capital Propfund could not create under the leases assignment agreement a perpetual benefit, when its own rights were limited to the existence of the land lease. The order of High Court is set aside.

Tags : LEASES ASSIGNMENT AGREEMENT OWNERSHIP RIGHTS