EThekwini Municipality v Breakers Share Block Limited

The appellant's predecessor, the Borough of Umhlanga, entered into two lease agreements in 1975 and 1981 with Sycol Properties (Pty) Ltd for portions of property described as Lot 1066 Umhlanga Rocks Township. The respondent took cession of both leases in May 1985 and operated a share block scheme on the leased property. The leases provided for rental revision every 10 years, to be computed at 7% of the valuation of foreshore land equivalent to the floor area of buildings on the lot. The original Lease 1 (1975) provided that floor area shall be defined in the draft Town Planning Scheme. An amendment in 1981 changed the wording to provide that floor area would be "calculated in accordance with the provisions of the Umhlanga Town Planning Scheme No. 1 as it was at the date of signature". In 2008, discussions to purchase the property led to a dispute about how to calculate floor area. The respondent contended that rental should be calculated on a much smaller floor area (12,079.10 m²) by excluding public corridors, stairways and entrances under clause 5.1 of the Scheme, while the appellant argued for calculation based on the definition in clause 1.2 of the Scheme (15,594.34 m²), which measured total roofed areas including wall thickness.

• How should 'floor area' be interpreted in clause 6(b) of the lease agreements for purposes of calculating rental payable?
• Whether the amendment to the lease agreement indicated a change in the method of calculating floor area from the definition in clause 1.2 of the Town Planning Scheme to the permissible floor area calculation in clause 5.1 of the Scheme
• Whether subsequent conduct of the parties and use of terms like 'bulk' indicated a common mistake as to the meaning of floor area

The appeal succeeded with costs, including costs of two counsel. The order of the court a quo was set aside and replaced with an order dismissing the plaintiff's (respondent's) action with costs, including the costs of senior and junior counsel where employed.

Where a lease agreement provides that rental shall be calculated based on 'floor area' to be 'calculated in accordance with the provisions' of a town planning scheme, and the scheme contains a clear definition of 'floor area' in its definitions clause, that definition must be applied unless the context clearly indicates that a different provision (such as one dealing with permissible floor area for development control purposes) was intended. The use of the word 'calculated' rather than 'defined' in an amendment does not change the meaning of 'floor area' from the defined term to a different planning concept. A sensible and businesslike interpretation of commercial lease rental provisions requires applying the actual floor area definition rather than permissible floor area ratios used for planning purposes.

The court observed that correspondence between the parties showing use of terms like 'bulk' and confusion about valuation did not establish a common mistake about the meaning of floor area, particularly where one party (the appellant) consistently maintained the correct floor area measurement throughout. The court noted that Floor Area Ratio (F.A.R.) is expressed as a decimal representing a ratio, not in square meters, highlighting the fundamental difference between the concepts. The court remarked that if the drafters of the lease had intended to use Floor Area Ratio or permissible floor area for rental calculations, they could easily have said so, particularly given that clause 10(b) of the lease showed they understood the distinction between these concepts.

This case provides important guidance on the interpretation of lease agreements and town planning schemes in South Africa. It clarifies the distinction between 'floor area' as defined for measurement purposes and 'floor area ratio' or 'permissible floor area' used for town planning and development control purposes. The judgment reinforces the principle that clear definitional clauses in statutory schemes should be given their ordinary meaning unless the context clearly indicates otherwise. It also demonstrates the limits of using subsequent conduct to interpret unambiguous contractual terms and clarifies when allegations of common mistake will not succeed. The case is significant for commercial property leasing, particularly where rental calculations are tied to measurements defined in town planning schemes.