After hearing counsel, this Court was of the unanimous
decision that the appeal had no merit and consequently dismissed it with costs.
It was indicated, at the time, that the full reasons for the decision would be
made available in due course.
These are they.
The background to the dispute giving rise to the appeal is
as follows. In March 2010, the respondent entered into an agreement with the
appellants for payment of what the parties termed “a commitment fee” in respect
of premises undergoing renovations at Stand Number 151 Mbuya Nehanda Street,
Harare. It appears from the papers that a tendency has arisen in the housing
market where prospective tenants seeking rental space in buildings where there
is a high demand for such space are requested by the lessor to pay what is
variably termed “a commitment fee”, “goodwill of the rental space” or “lease
preference fees.” The purpose of such a fee is to enable the prospective tenant
to be given first priority in concluding a lease agreement in respect of the
premises once they are available for occupation. Without payment of such a fee,
a prospective tenant would stand little, if any, chance of even being
considered for possible occupation of the premises.
In terms of the agreement entered into between the parties,
the respondent agreed to pay the total sum of $35,000= as “goodwill” in respect
of the premises in question. It is common cause the premises in question were
undergoing renovations. The respondent paid the sum of US$10,000= as a deposit
to the second appellant on 11 March 2010, leaving a balance of $25,000= which
was to be paid once the renovations were complete. Once the balance of the
$25,000= was paid, the parties were then to agree on the amount of rental
payable per month.
Having formed the opinion that he had been misled, the
respondent decided to demand a refund of the sum of $10,000=. The appellant
refused to refund the money, claiming that the respondent had been in breach of
the terms of the agreement. The respondent then instituted proceedings for the
recovery of the amount in question. A joint pre-trial conference minute drafted
by the parties identified five issues for trial. At the conclusion of the trial that followed,
the court a quo found that no agreement had been reached that the sum of
$10,000= would be non-refundable. The court further found that the appellants
had been unjustly enriched at the expense of the respondent, and, consequently,
ordered the appellants to refund the sum of $10,000= together with interest and
costs of suit.
The appellants then noted an appeal against that order.
At the hearing of the appeal before us, the attention of
counsel for the appellants was drawn to the provisions of section 19 of the
Commercial Premises (Rent) Regulations S.I.676 of 1983 (“the Regulations”).
Neither counsel for the appellants nor the respondent had, it would appear,
been aware of the provision. That section provides:
“19 – Payment of
bonus, premium et cetera
No lessor shall, in respect of commercial premises let, or
to be let, by him, require or permit the lessee or prospective lessee of the
premises to pay, in consideration of the grant, continuation or renewal of the
lease concerned, any bonus, premium or other like sum in addition to the rent,
or any amount for negotiating the lease.”
Faced with the clear language in section 19 of the
Commercial Premises (Rent) Regulations S.I.676 of 1983, counsel for the
appellants was forced to concede that most of the issues raised before the
court a quo, and in heads of argument before this Court, were irrelevant and
that the payment of the sum of $10,000= to the appellants was illegal.
That concession was, in the circumstances, most proper.
The provisions of section 21 of the Commercial Premises
(Rent) Regulations S.I.676 of 1983 also re-enforce the legislative intention
that anyone who receives payment in circumstances similar to those of this case
cannot retain that payment. Section 21 of the Commercial Premises (Rent)
Regulations S.I.676 of 1983 provides, in relevant part:-
“21 – Recovery of
payments in excess of fair rent or in contravention of section 19
(1)…,.
(2) Where any payment has been made in contravention of the
provisions of section 19, the lessee who made the payment may recover from the
lessor who received the payment the amount thereof.”
In addition, section 32 of the Commercial Premises (Rent)
Regulations S.I.676 of 1983 makes it a criminal offence for anyone to
contravene section 19 of the Commercial Premises (Rent) Regulations S.I.676 of
1983 and provides for a fine or imprisonment or both. Section 34 of the
Commercial Premises (Rent) Regulations S.I.676 of 1983 allows a court to order
a refund following a conviction for a contravention of section 19.
The clear intention of the Legislature was to prohibit the
tendency on the part of some landlords to take advantage of desperate tenants
seeking to rent accommodation by demanding, over and above the amounts that a
landlord may lawfully demand from a lessee, such as rent and a security
deposit, other amounts that are not permissible in terms of the Commercial
Premises (Rent) Regulations S.I.676 of 1983. Put differently, it is
impermissible, and a breach of the law, for a landlord to demand payment of “a
commitment fee”, or “goodwill”, or “a lease consideration fee”, or any other
fee, by whatever name, which amounts to a bonus or premium or a consideration
for negotiating the lease. That this provision has been part of our law for a
long time is clear – see the decision of BEADLE CJ in S v Fraser Partners (Pvt) Ltd & Anor 1972 (1) S.A. 408, 409
(RAD) in which a similar provision
came up for consideration before the Court.
For the avoidance of doubt, it must be noted that a
security or good tenancy deposit does not constitute a prohibited payment in
terms of section 19 of the Commercial Premises (Rent) Regulations S.I.676 of 1983.
This is clearly recognized in section 20 of the Commercial Premises (Rent)
Regulations S.I.676 of 1983 which provides that only such deposit must be
refunded to the lessor within fourteen (14) days of the termination of the
lease in question….,.
In all the circumstances, therefore, the court
was satisfied that there was no merit to the appeal and accordingly dismissed
the appeal with costs.
