LEASES, REMISSION AND COVID: MURKY WATERS
Slabbert N O & 3 Others v Ma-Afrika Hotels t/a Rivierbos Guest House (772/2021) [2022] ZASCA 152 (4 November 2022)
This is yet another judgment dealing with the devastating effect that Covid and the lockdown provisions had on businesses. The hotel group, as tenant, failed to maintain the rental payments and the landlord validly cancelled the lease and was entitled to an order for the eviction of the tenant. Of note was the Court’s confirmation that, as far as the hotel group’s argument regarding its entitlement to remission of rent was concerned, even if it was found to be warranted, it is not for a tenant to decide the amount thereof and to withhold it. The parties must agree thereto or a Court must be asked to determine it.
In addition, and importantly, the Court re-iterated that when a lease agreement stipulates that rental is payable at the beginning of a month, this may be indicative of an intention of the parties to contract out of the principle of reciprocity that generally applies to lease agreements. This means that the obligation of the tenant to make payment of the rent is no longer reciprocal to the obligation of the lessor to grant beneficial occupation of the premises. The result? A tenant can then not argue that because it did not have beneficial occupation of the property, it is not liable for rental.
The Judgment
Summary of the Judgment
WHO IS TAXED WHEN A TRUST DISTRIBUTES GAIN TO BENEFICIARIES
CSARS v The Thistle Trust (516/2021) [2022] ZASCA 153 (7 November 2022)
A group of trusts, conducting business under a single umbrella, disposed of capital assets and then distributed the capital gains to, amongst others, Trust X. The latter Trust distributed the amounts it received to its beneficiaries and treated this distribution as taxable in the hands of its beneficiaries.
A dispute arose with SARS as to whether Trust X’s disposition to its beneficiaries was to be assessed under section 25B of the Income Tax Act, or in terms of paragraph 80 of the Schedule to the Act. The relevance is that section 25B applies to the taxation of income that accrued to a trust or its beneficiaries, while paragraph 80 applied to the taxation of capital gains that accrue to trusts or their beneficiaries. In this instance, the Court held that paragraph 80 applied and that the capital gains accrued upon the disposal to Trust X, are to be taxed in the hands of Trust X, not its beneficiaries.
