Government department to pursue legal action against landlord, despite reopening
Spat comes after government department decides to pay less for leases after its benchmark review found it had paid "too much".
The South African government department responsible for leasing has slammed a landlord’s recent move to shut six fellow departments out of their buildings as “illegal”.
The department also said it would continue to pursue legal action against the landlord.
This was despite the six departments – finance, police, water and sanitation, higher education, justice and defence – having since resumed operations at the buildings in question following negotiations between the Department of Public Works and Infrastructure and the landlord.
The spat came after the department’s so-called lease clean-up operation, initiated in early 2019, found that they had allegedly “over-paid” the landlord.
Under the operation, more than 10 000 current and historic leases had been captured.
Thami Mchunu, a spokesperson for the department, said a review of 98.5% of these leases was complete and the programme discovered that “there were under and overpayments in a few instances”.
He, however, warned that it was important to note that these errors were only in “a minority of cases”.
Out of more than 2 000 current active leases, 96.7% were accurately paid.
Only 2% reflected underpayments and only 1% reflected overpayments.
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“Where overpayments were discovered, we are now recovering it. Almost all landlords are co-operating with the department in this regard.”
Mchunu said affected landlords were notified that the department would use “historical overpayments” to recover overpayments.
“We are engaging with landlords where there are disputes on the records to find a resolution.”
He said the department’s lease capture and review process was followed by a benchmarking exercise that reviewed the price it was being charged per square meter. These charges were then compared charges to market rates.
The benchmarking process was done per the so-called “Rode’s Report” on the SA property market.
It was undertaken nationally, but with a particular focus on Tshwane.
“The benchmarking exercise confirmed that the Department of Public Works and Infrastructure has been overcharged on many leases.”
He said his department held a string of meetings with several landlords last year to negotiate to lower rentals on new leases “in line with current industry standards”.
In December 2021, the department reached an agreement on new pricing with most landlords and new lease agreements were signed.
Mchunu said the landlord in question had, however, not accepted the lower market-linked rentals.
This resulted in the department’s management halting any further month-to-month rental payments to the landlord.
“We have 17 leases with this landlord. Of these, nine are month-to-month payments and eight are still within an approved lease period.”
He said the department would continue negotiations with the landlord to reduce their rates and sign longer-term leases on the month-to-month leases.
“At this point, we have not reached an agreement because the landlord is asking for rates higher than those indicated as acceptable by the Rode’s Report,” said Mchunu.
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