202021Jan
A Long-term Sublease Agreement, Should it be Registered?

A Long-term Sublease Agreement, Should it be Registered?

Author: Katleho David Phenduka of Webber Newdigate Attorneys

This article comments on the importance of registering long-term sublease agreements in Lesotho. A sublease agreement is an agreement between the Sublessor/Landlord and the Sublessee/Tenant. The Sublessor in essence gives the Sublessee the temporary use and enjoyment of his property in return for payment of rent.  The rights and duties of the parties are provided for by the sublease agreement. The Deeds registry Act 12 of 1967 also regulates such agreements.

Section 24(1) of the Deeds Registry Act provides that “every agreement of lease or sublease of rights in or to immovable property which when entered into was for a period of not less than three years, or for the natural life of the lessee, or any other person mentioned in the lease or sublease, or which is renewable from time to time for periods which together with the first period amount in all to not less than three years, shall be registered in the Deeds registry”.  Further to the foregoing section 24(2) provides that the registration of such sublease agreements shall be effected upon receipt of Consent from the Commissioner of Lands. Every agreement has to be lodged for registration with the Deeds registry within three months of the granting of Consent by the Commissioner of Lands. Section 24 (6) emphasises that any sublease agreement that is contrary to the provisions of section 24 shall be null and void and of no force or effect.

The importance of complying with the above-mentioned provisions of the Deeds Registry Act has recently been reiterated in a consolidated judgment by the Court of Appeal in the matter of Molomo Filing Station (Pty) Ltd & Another vs Mendi Group (Pty) Ltd C of A (CIV) 83/2019.

In this matter the parties had entered into a twelve (12) year sublease agreement which had not been registered with the Deeds registry in terms of section 24(1) of the Deeds Registry Act. The court held that the agreement was invalid for lack of compliance with the above-mentioned section. 

 It is also important to note that a registered long term Sublease agreement does not only warrant the validity and enforceability of the agreement, it further provides a Sublessee with a chance to vouch the sublease agreement as security for a mortgage bond facility. This is because Deeds Registry Act defines immovable property to include a registered Lease or Sublease of any such building, fixtures and improvements, which when entered into was for a period of not less than three years. Section 36(a) reinforces the position by providing that the hypothecation of a Lease or Sublease must be effected by means of a mortgage bond.

The registration of a mortgage bond over a sublease agreement can be very helpful in cases of development sublease agreements, where a sublessee is to develop the subleased property for a commercial purpose. This is subject to the consent of both parties to the agreement.

It is imperative in light of the above that whenever parties enter into a long-term sublease agreement, that they register the agreement in terms of Deeds Registry Act for the agreement to be valid and enforceable. This will also be for the further benefit of using the agreement as security for mortgage.

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