# Regulatory Compliance Category > National Credit Act Forum >  Arrear lease agreement problems?

## Eugene

This is an extract of questions posed to the National Credit Regulator:

Q: While a lease of immovable property is exempt what happens if the lessee is in arrears and interest is levied? Is this an incidental credit agreement? 

A. Since a lease of immovable property is excluded from the ambit of the NCA, any attempt to collect any arrear rental connected to a lease of immovable property would be outside of the ambit of the NCA.

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## Dave A

Would that include the debt rescheduling provisions of the NCA?

I think that clarification has a wider impact too. Surely this clarifies interest related questions around debts (and I'm thinking particulalry incidental credit here) involving juristic persons with assets over R1 million too.

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## Eugene

Dave, a common misperception going around is that ALL agreements can be re-scheduled or reviewed. The simple answer is that ONLY agreements falling under the ambit of the NCA can be reviewed, re-structured, be declared reckless. All other agreements (not falling under the NCA) can not be re-structured or be declared reckless.

But, one should bear in mind not to see it in isolation as it very seldom happens that a person only has agreements excluded from the NCA or visa versa - usually we all have a combination of both. Should a debtor have a combination of both and wants to go for debt-review (only for those agreeements falling under the NCA), the agreements not goverened by the NCA has to be taken into consideration when assessing over-indebtedness or debt review.

I am of the opinion that the non-NCA agreements would be advantaged in this sense as they are still entitled to their full installments whereas the credit agreements could be re-scheduled.

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## Dave A

> I am of the opinion that the non-NCA agreements would be prejudiced in this sense as they are still entitled to their full installments whereas the credit agreements could be re-scheduled.


I would have thought the non-NCA agreements would be advantaged. In theory the instalments can't be reduced under the NCA. 

But looking at this closer, does that mean the Administration Order option (which potentially could affect all manner of debt previously) has fallen away?

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## Eugene

Dave, quite right: the non-NCA agreements would be advantaged and not prejudiced (my error). The administration order option is still available and the tendency nowadays is that administrators qualify themselves as debt counsellors. They start with a debt review and end up placing the debtor under administration at the end. Real dilemma is now that even the non-NCA agreements are being included in the administration order and all creditors share in the pro rata dividends every three month.

I know that there is talk to completely remove section 74 dealing with administration orders in the Magistrate Court Act and to include it in the NCA.

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## Johan

> Dave, a common misperception going around is that ALL agreements can be re-scheduled or reviewed. The simple answer is that ONLY agreements falling under the ambit of the NCA can be reviewed, re-structured, be declared reckless. All other agreements (not falling under the NCA) can not be re-structured or be declared reckless.
> 
> But, one should bear in mind not to see it in isolation as it very seldom happens that a person only has agreements excluded from the NCA or visa versa - usually we all have a combination of both. Should a debtor have a combination of both and wants to go for debt-review (only for those agreeements falling under the NCA), the agreements not goverened by the NCA has to be taken into consideration when assessing over-indebtedness or debt review.
> 
> I am of the opinion that the non-NCA agreements would be advantaged in this sense as they are still entitled to their full installments whereas the credit agreements could be re-scheduled.


I am of the opinion that all transactions may be subjected to restructuring even those not falling withinn the ambid of the Act. Transactions not within the ambid of the Act may however not be declared recless.

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## DarrenFrittelli

Hi Guys, I have a question with regards to an administration order...

Say X goes under an administration order and at the time she has 4 creditors. After the administration order is granted then creditor 5 appears with an outstanding amount which has only happened after the administration order and is subsequently increasing monthly (arrear leviesfor immovable property) 

What would the best course of action be to get the arrear levies paid?? Section 74 of the Mag court act doesn't really answer this question? Or at least i couldn't find the answer. 

Please if you could answer this id really appreciate it.

Email me : darrenfrittelli@gmail.com

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## sterne.law@gmail.com

Dealing with restructuring and rent payments -
The rent payment is NOT a credit agreement. It is paid upfront. If the rent is in arrears, it is not now a credit agreement, hence any protection in terms of the NCA is not at issue.
As to restructuring - even if any credit can be part of re-structuring, the rent arrears is not credit granted. If this was allwoed anyone could be in breach of any contract by not paying and then go under review and re-structure. An obvious no go concept.
Furthermore, if we did allow rental payments to fall under restructuring a major flaw - 
At the end of the lease the tenant would be burdened with the payments on the old lease and his new rent, in so doing the law would be guilty of reckless lending, albeit indirectly. If the tenant then reneged on the new rental and got that restructured he could have, as an example, 2 half payments(the arrear rentals) plus the new rental, so in essence his debt would have doubled and not reduced.

As pointed out, all debt, is indeed taken into account when under debt review, but this does not mean that all debt falls under the re-structuring. I think the rent example is a good case of the practical implications.

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## sterne.law@gmail.com

Another issue with rentals -
If you are under review then judgement cannot be taken and one almost gets immunity. In term sof rental the summons would request payment of arrears, damages and eviction. If under review, technically you are not in arrears, a settlement has been reached, therefore the landlord has no remedy and would suffer great prejudice.

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