Ensure that you protect your commercial real estate investments by covering the payment of fines during water restriction periods in your lease agreements. If you don’t, are you prepared to pay fines every time your tenants overuse water to keep the lawns green?
All the answers to your unique business lifestage questions
Last year’s drought brought some confusion within the rental market when it came to water fines and who is responsible for them. If you haven’t properly covered this in your lease agreement, you could be liable to pay for every water fine your tenants receive, which could leave you in a difficult financial position should your tenant overuse their water privileges.
Related: How to save water in your business
Regional head of rentals at Jawitz Properties Western Cape, Natalie Muller says: “If a signed lease stipulates that a tenant has the enjoyment of an irrigation system [for example] and the landlord provides garden maintenance, then it is the landlord’s responsibility to make alternate arrangements when water restrictions are in place.”
The responsibility then rests upon you to pay the water fines if it wasn’t specifically stipulated in your lease contracts. Here are a few ways to reduce risk to your business during future water restrictions:
1. Define your contractual agreements
“Should it be objectively impossible for the landlord to provide the service, or at least meet the obligation as per the lease agreement due to the restriction, he cannot be forced to comply with the lease and break the law in the process. This is called supervening impossibility of performance and the specific clause in the contract dealing with this would fall away,” explains Peter Mennen, client legal liaison at TPN Credit Bureau.
You as the building owner, can still be held responsible for maintaining the garden area, even though you can’t without providing irrigation or a watering service.
2. Renegotiate the contract if necessary
Renegotiate the terms of your lease agreements to ensure you cover this loophole. You’ll need to state in writing that the garden area is not the landlords’ responsibility.
Muller explains: “Landscaping is a costly business, which means it is very important to have this discussion and mutually agree on the way forward. The addendum on the other hand could state that the tenant not be held liable for the watering of the lawn.”
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3. Alternative options you can consider
If you’re lucky enough to have a borehole on your property, then you can negotiate around who is responsible for fines during water restrictions, to your advantage by using it as a bargaining chip to reduce or increase a stipulation in your favour.
With your borehole, you can easily circumvent the water restriction challenges, although keep in mind that it still draws from the natural water supply and shouldn’t be overused during a drought.
Keep in mind that should you already have this covered in your lease agreements, tenants can’t be held liable or expected to perform, or be held accountable for taking care of the garden area during water restrictions.
- Ensure you define who is responsible for water fines during water restrictions in your lease agreement.
- If you already have a lease agreement in place, it may be financially feasible for you to renegotiate that lease agreement.
- There are alternatives that allow you to reduce the amount of municipal water your tenants use, but be aware of the impact your tenants will be having on the natural environment should they overuse this alternative resource.