Extending The Lessor’s Tacit Hypothec to Third Parties’ Property
Authors AJ van der Walt, Nzumbululo Silas Siphuma
Affiliations: Distinguished Professor and South African Research Chair in Property Law, Stellenbosch University; Mellon Early Research Career Researcher, Department of Public Law, and Doctoral Candidate, South African Research Chair in Property Law, Stellenbosch University
Source: South African Law Journal, Volume 132 Issue 3, 2015, p. 518 – 546
In case law the lessor’s tacit hypothec has been extended to cover movable property belonging to a third party. This extension of the hypothec is reasonably well established, but there is some uncertainty about the reasons or justifications for it. Two seemingly contradictory explanations for the extension have been raised in the literature, namely implied consent and estoppel. Upon closer scrutiny the former reason appears in fact to refer to (judicially) imputed rather than implied consent. Provided that the consent is judicially attributed to the third-party owner of the movables on the ground that she should have been aware of the whereabouts of her property and should have taken the necessary and reasonable steps to protect it against the landlord’s hypothec (for example by informing the landlord of her right in the property), this seems to be an acceptable explanation for the extension of the hypothec. The same can be said for estoppel in cases where the requirements for estoppel are actually proved, particularly if fault (negligence) is required and if it is proven that the owner of the movables could have disabused the landlord of the false impression that the movables belonged to the tenant, but failed to do so. From a policy perspective, it can therefore be said that the extension of the hypothec to movables that belong to a third party is justified, provided that the reasons for the extension (either imputed consent or estoppel) are understood correctly, and the accompanying requirements are applied correctly and strictly. From a constitutional property perspective, the deprivation of property that extension of the hypothec brings about when a third party’s property is affected by the landlord’s right to attach and sell the movables would be constitutionally unassailable (not arbitrary in terms of s 25(1) of the Constitution) if there is sufficient reason for the deprivation. Provided the requirements are applied correctly and strictly, in line with the policy explanations (imputed consent or estoppel) that explain the extension satisfactorily, the deprivation of a third party’s property that results from extension of the hypothec should generally speaking not be arbitrary, and thus should be constitutionally uncontroversial. This conclusion contradicts views to the contrary that have been expressed in the academic literature.