The enrichment lien: Terms and conditions apply

In Brooklyn House Furnishers (Pty) Ltd v Knoetze & Sons [1970] 3 All SA 332 (A), the court explained the concept of a “lien” as a right which a purchaser may have over the seller’s property to retain physical control of that property, whether movable or immovable, as a means of securing payment of a claim relating to the expenditure of money or something of monetary value by the possessor on that property, until the claim has been satisfied. This can be extended to enrichment liens, which enable a bona fide possessor to claim expenses for necessary and useful improvements and retain the property until the claim for compensation has been satisfied.

28 Feb 2023 3 min read Dispute Resolution Alert Article

At a glance

  • A lien is a right of a purchaser to retain control of the seller's property as security for a debt until the claim is satisfied, but it does not grant the right to execute on the property or occupy it indefinitely.
  • Enrichment liens allow a possessor to claim expenses for necessary and useful improvements and retain the property until compensation is paid, but the lien is dependent on an underlying enrichment claim.
  • The court ruled that a purchaser could not rely on an enrichment lien to prevent eviction after failing to make payment for a property and making alterations without a compensation agreement, emphasizing the importance of understanding contractual terms and limitations of liens.

However, it is important for purchasers to note two important aspects relating to enrichment liens: firstly, an enrichment lien is merely security for a debt and does not afford the lien holder a right to execute in respect of the property subject to the lien and, secondly, the lien is dependent on the existence of an underlying enrichment claim.

In Crystal Ball Properties 27 (Pty) Ltd and Another v Mbalati NO and Others [2022] JDR 3516 (GJ), the court was confronted with a case in which an offer to purchase a property was concluded between the seller and purchaser. The purchaser, however, failed to make payment for the property by the agreed upon dates, and further failed to rectify this breach, therefore, the seller requested that the purchaser vacate the property and approached the court to evict the occupants of the property. Refusing to vacate the property, the purchaser claimed to exercise a lien over the property as security for the payment of monies expended on repairs and improvements made to the property after they took occupation.

Prior to the transfer of the property being effected, the purchaser asked if he could make certain alterations to the property. The seller agreed to alterations which were necessary insofar as the offer to purchase was concerned, however, further alternations would be subject to the fact that should the offer to purchase fall through, the purchaser will be required to make good on any of the changes that were not acceptable to the seller. The renovations to the residence cost approximately R13 million.

In defence, the purchaser argued that section 15(1)(b) of the Alienation of Land Act 68 of 1981 preserves a purchaser’s right to claim for necessary expenditure and improvements and, therefore, a seller is not entitled to stipulate in a deed of alienation that the purchaser shall not make alterations and additions to the property before transfer takes place.

The court held that a prohibition of the nature put forward by the purchaser would amount to a drastic incursion into the freedom of parties to contract. As such, the court found that the parties’ contractual arrangements would preclude the purchaser from relying on any form of enrichment lien. Further to this, it was found that there was no agreement that the seller would be required to compensate the purchaser for the costs incurred in the alterations and additions if the offer to purchase fell through.

Due to the fact that the purchaser could not establish a right of retention over the property, and that they could not, in fact, rely on an enrichment lien, since no such provision was made in the offer to purchase, the court granted an eviction order.

The above judgment, therefore, makes it clear that when relying on an enrichment lien, even in the event where a purchaser can establish that an enrichment lien exists, the purchaser’s right of retention will be limited to exercising control over the property as security for the payment of the amounts alleged to be due in respect of the enrichment claim, and the lien does not give the purchaser the right to occupy the property indefinitely. This highlights the importance of parties knowing the terms and conditions to which they are contracting.

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