Shepherd Real Estate Investments (Pty) Ltd v Roux Le Roux Motors CC

The respondent leased commercial property from the appellant’s predecessor for use as a petrol station under a written lease concluded in 2007. The lease was for an initial five-year term with a renewal structure of “5 plus 5 years”. The first renewal was exercised and implemented on predetermined terms, including an 8% annual escalation. The clause governing the second renewal required that rental and costs be “mutually agreed upon in writing” when the option was exercised. When the second renewal period approached expiry in November 2017, the respondent sought to renew again. The parties failed to agree on the rental: the appellant demanded a substantially higher rental, while the respondent proposed continuation of the escalation formula. The appellant contended that no valid renewal came into existence and sought the respondent’s ejectment. The High Court dismissed the application, holding that the arbitration clause constituted a deadlock-breaking mechanism. The appellant appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The High Court’s order was set aside and replaced with an order confirming that the lease had expired, directing the respondent to vacate the property within 14 days, and authorising the sheriff to eject the respondent if it failed to comply.

The case reaffirms the South African law principle that an agreement to agree on an essential term, particularly rental in a lease, is void for vagueness unless the term is objectively determinable or subject to a clear deadlock‑breaking mechanism. It clarifies that a general arbitration clause does not cure vagueness in renewal options and distinguishes enforceable deadlock mechanisms from dispute-resolution clauses. The judgment provides important guidance for drafting renewal clauses in commercial leases.