MyPE

Community Business Directory, Event Listings, News and Views from Gqeberha, Nelson Mandela Bay

Annual Rental Calculation Conundrum

By

This week the Property Poser expert handles a question of a more technical and specific nature regarding the calculation of rental due.

It would seem that in this case the rental is calculated on an annual basis and a single amount is payable for the entire year.

For some reason, the reader wishes to make a pro rata rental calculation for the month of February – the shortest month of the year – only.

The estate agent involved in the rental of the property has advised that the calculation is simple and that February is calculated as per any ordinary month.

Therefore the annual rental is divided by the number of months in a year – 12 – to get to a rental figure for any month.

The reader has suggested a different approach. He feels that a tenant would be on the losing end of the calculation and, with February having fewer days than the other months, the number of days should be considered.

He feels that neither party is on the losing end of such a calculation but that the landlord is clearly prejudiced in the current instance.

As usual, a good place to start is the agreement of lease between the landlord and tenant, says Sean Radue of Radue Attorneys in Port Elizabeth.

“The lease may address how pro rata rental is calculated or, at least, provide a clue as to the determination thereof.”

Radue says it may prescribe, in clear terms, that pro rata rental is calculated strictly on the number of days involved.

“This would entail merely dividing the annual rental by the number of days in the year to reach a daily rental and multiplying this daily rate by the number of days concerned.”

The lease may also contain helpful definitions of the terms, says Radue.

“The term ‘month’, for example, may be defined as a calendar month or a continuous period of, say, 30 days.”

Thus, if the pro rata calculation is for a defined period of a “month”, Radue says the calculation can be done accordingly.

“The concept is not complicated further by questioning the characteristics of that month; the number of days wrapped up in the umbrella concept of ‘month’.”

Radue says simple logic should apply in a typical rental situation.

“Rental is paid monthly and whether the month is shorter or longer, the monthly rental remains fixed.”

Although not directly applicable here, the Interpretation Act – which is generally applicable to the interpretation of statutes, regulations and by-laws – also provides some guidance as to the calculation of time, says Radue.

“A ‘month’ in this act is defined as a ‘calendar month’.”

Of course, the parties to the lease may reach agreement on the methodology they will employ in the calculation, says Radue.

“In that instance, any agreed method will suffice.”

Radue says the lease agreement may, in the absence of any other assistance, regulate any dispute resolution, perhaps by means of third party determination or arbitration.

“It would, however, probably not be cost effective to involve a third party in such a calculation dispute as the fee of that third party would probably outweigh the monetary value of the difference in days.”

The following two tabs change content below.

Fullstop

Full Stop Communications is a public relations consultancy in Port Elizabeth in the Eastern Cape of South Africa focusing on media relations and copywriting. We drive regional and national media campaigns in a number of fields, most notably in the property, legal and sports arenas. We also specialise in media monitoring, ghostwriting, editing, translation and advertising. See more articles by Full Stop.