AN IMPORTANT CONSEQUENCE OF IMPROVEMENTS MADE TO PROPERTY: WHAT YOU NEED TO KNOW ABOUT ENRICHMENT LIENS

When attempting to regain control of property from someone who temporarily occupied it, a property owner may find that the occupier made improvements to the property and is therefore refusing to return it until they are compensated. This would be a consequence of an enrichment lien. This article examines what this legal concept is about, where it applies and what can prevent its application.

What is an enrichment lien?

Liens, otherwise known as rights of retention, are common law rights that permit a person in control of property belonging to another to refuse to return the property where money is owed by the other person for improvements or costs incurred in relation to that property. Liens may operate in relation to movable or immovable property. As an example, a car mechanic may retain control of a car for which the invoice for repairs to that car was not paid until the invoice is settled.

The example above would be a debtor-creditor lien, as it depends on the existence of a contractual obligation as the underlying debt. An enrichment lien, on the other hand, depends on the existence of a claim in terms of the law of unjustified enrichment in relation to the property.

Unjustified enrichment is a claim whereby one person was enriched at the expense of another, without any legal cause. An important situation where this claim affects property owners is where a person who resides or occupies immovable property makes improvements to the property, which benefits the owner.

In addition to the requirement that the enrichment must occur without legal cause, unjustified enrichment is a subsidiary remedy, meaning it cannot be used if a different legal avenue to claim the compensation, such as enforcing a contract or suing for damages, is available. This means that an enrichment claim will not arise where there is a rental agreement in place that provides a contractual avenue for a lessee to claim for improvements to property, as the contractual claim must be preferred over the enrichment claim.

When will an enrichment lien be enforceable?

Enrichment liens over property arise only in response to certain types of improvements to the property; those which will cause unjustified enrichment from the occupier or controller to the person who the property belongs, in other words, the owner.

If the occupier makes necessary improvements, an enrichment claim, and therefore an enrichment lien, could arise. These are improvements that are entirely necessary for the maintenance or continued existence of the property, such that if they were not done, the property would be damaged or rendered useless for its purpose. An example is building a gutter into the driveway to prevent a house from flooding, as occurred previously.

Enrichment claims and an enrichment lien can also arise from useful improvements, which are those that are not necessary but improve the property, which is usually indicated by an increase in property value. For example, installing lighting along the driveway. Generally speaking, no enrichment claim, and therefore no lien, will be permitted for luxurious improvements, which are those that increase property value but are not necessary or useful. When it comes to enforcement, the courts are generally unwilling to uphold a lien where useful improvements were made despite the express wishes of the property owner that the improvements are not to be made.

Enforcement of enrichment liens

An enrichment lien operates as a defence against the owner where they seek to have the property returned to them. It is therefore dependent on the occupier maintaining control over the property both in the physical sense and mentally, in other words, with intent to control and exercise the lien, and it falls away where occupation and control are lost. If the control is lost involuntarily due to violence or fraud, the lien may be revived upon reacquisition of control.

A lien allows the occupier or controller to refuse to return the property, and must be pleaded in defence of an attempt to take back the property. Where a lien is raised as a defence, the court will determine whether the legal requirements for the lien have been satisfied and whether it may be enforced in the circumstances.

In the context of rental arrangements, there are certain old laws, known as placaaten, which form part of the modern common law of South Africa, and which may limit the ability of tenants to rely on liens for unauthorised improvements. Generally speaking, they provide that lessees cannot rely on a lien to enforce a claim for improvements to land, where they acted without permission from the owner; however, this has been the subject of considerable judicial consideration, and there have been cases where it has been allowed.

What may be done to prevent enrichment liens

In order to guard against the enforcement of an enrichment lien, which could be used to prevent the reacquisition of property until payment is made for improvements thereto, property owners should include restrictions in their rental agreements. The agreements should provide that no improvements may be made to the property without the express written consent of the owner. Additionally, the agreement may require that any future compensation for improvements be agreed upon in writing before any physical work begins. Alternatively, the agreement may provide that no compensation is payable for alterations, additions and/or improvements unless expressly agreed to in writing.

Disclaimer: This article is intended for general informational purposes only and does not constitute legal advice. Specific legal advice should be obtained in relation to particular circumstances.

Prepared by Marc Deville from Bruno Simão Attorneys