A recent High Court judgment clarified several important legal principles about what happens when a lease expires or is cancelled and the tenant remains in occupation. In Hoffmann v Smith (HC-MD-CIV-ACT-CON-2024-02632) [2025] NAHCMD 574, Judge Sibeya addressed the enforceability of rent escalation clauses after a lease’s term and the distinction between essential and collateral lease terms upon tacit renewal.

Under Namibian law, when a lease reaches its end date and the tenant continues to occupy with the landlord’s consent, a tacit relocation (implied month-to-month renewal) can arise on the same core terms as the original lease. Those core or essential terms (essentialia) include fundamental points like the property rented, the rent amount, the payment schedule, and the parties’ identities. These essential terms carry over into the hold-over period by default.

However, ancillary or collateral terms of the expired lease do not automatically continue unless the parties clearly intended to extend them. Collateral terms are additional provisions not fundamental to the landlord-tenant relationship, such as annual escalation clauses, options to purchase, or rights of first refusal. The High Court confirmed that in a tacit renewal scenario, such collateral clauses are presumed not to be included in the new periodic lease unless there is evidence (even tacit evidence from conduct) that both landlord and tenant intended to carry those terms forward.

In Hoffmann v Smith, the lease had an 8% annual rent escalation clause during the fixed term. When the two-year lease ended and the tenant remained, the lease was tacitly renewed on a month-to-month basis under the same rent, but no escalations were ever charged during the hold-over years. The court held that the escalation clause was a collateral term, not part of the essential rent agreement, and thus it did not carry into the tacit renewal absent a mutual intention to enforce it. The landlord’s consistent failure to impose any increase, even when contractually allowed, was viewed as clear evidence that both parties treated the rent as fixed, effectively waiving the escalation in the renewed arrangement. Therefore, the landlord could not retroactively claim unpaid escalation amounts once the dispute arose.

When a lease continues informally after expiry, only the basic lease terms persist by default. Any special clauses (like rent escalations or purchase options) must be expressly agreed to continue, otherwise, they lapse with the original term. Landlords should not assume that a tacitly renewed tenancy includes an escalation; if such terms are important, they should be reaffirmed in writing by both parties during the renewal or extension negotiations.

The Hoffmann v Smith judgment provides a clear affirmation of several lease law principles highly relevant to property owners and tenants alike. Rent escalations in a hold-over period are not a given, if a lease continues informally, annual increases need explicit agreement; otherwise, the rent stays at the last agreed amount. Only the basics of the lease automatically renew. The fundamental terms persist, but extra clauses (whether tenant-favourable or landlord-favourable) need fresh assent to apply in a renewal. By focusing on these principles rather than the specific facts of any one case, property stakeholders can better understand their rights and obligations. Leases should be drafted and renewed with clarity, which is an essential part of concluding a valid contract.