How Consumer Protection Act Affects Lease of Property — Part 2

Cpa and Lease Agreements
How the CPA effects new Lease Agreements. — Photo: jimtim0505 on Flickr

South Africa’s new Consumer Protection Act comes into effect on 1 April 2011. Part 1 covered the introduction of a “Cooling-off” period and the use of “Voetstoots” clause under the new CPA legislation.

Part 2 deals with some important changes to the law governing Lease Agreements, when the new CPA comes into effect on 1st April.

Now some of my more astute readers will have noticed that this is also April Fools Day. Please people, this is purely co-incidental, however inopportune the date may seem.

Lease Agreements: The CPA introduces some far-reaching changes to Lease Agreements for immovable property. Specifically for ordinary people, the changes affect the maximum duration and grants the parties certain rights of cancellation.

Note that Leases to “Juristic Persons” fall outside the ambit of the CPA. “Juristic Persons” includes Closed Corporations, Companies, Trusts, Partnerships and Associations. No distinction is made between Commercial and Residential property.

Duration of Lease: The maximum duration of a Lease Agreement is 24 months.

Right of Cancellation: The Lessee (consumer) may terminate the Lease at any time after giving 20 (business) days notice, effectively one month. The Lessor must give 20 (business) days notice to cancel for a ‘material failure to comply with the agreement’ and must give 40-80 days notice that the agreement is coming to end.

After expiry, the lease continues on a month to month basis unless the Lessee agrees to a further fixed term.

From the above it can be concluded that the new Consumer Protection Act will bring some much-needed protection for consumers to the market place. Most think that it is also likely to result in Leases being contracted more readily with “Juristic Persons” and not the ordinary consumer. So a spike in Letting to “Juristic Persons” seems likely.

Similarly with the Selling of Property, Transfer Duty from the sale of property to “Juristic Persons” has recently been adjusted downwards to be on par with the Transfer Duty payable by an ordinary consumer. So the trend may be toward a greater number of sales to “Juristic Persons,” than would otherwise have been the case.

The Rental Housing Tribunal already administers a similar (to the CPA) scheme under the Rental Housing Act. It remains to be seen if this body will, in terms of Section 5(3) of the CPA, apply for an ‘industry-wide exemption’ to provisions of the CPA that overlap the Tribunal’s functions.

If there is anything you would like to add, please feel free to do so in the comments.

Source: Bisset Boehmke McBlain
Photo Credit: jimtim0505 on Flickr

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2,077 thoughts on “How Consumer Protection Act Affects Lease of Property — Part 2”

  1. Hi

    We have been renting this property for last nine years on a yearly lease. However the owner wants to use the property for holidays now that his children at varsity.

    We live in small town and have been looking for alternative accomidation since the beginning of the year. We have major roadworks happening over two years and there is no rental accomidation available.

    I don’t know what to do. Do we have any rights? I’m a widow and both my children still live at home, but they are over 21.

    1. Hi Jenny

      Unfortunately the owner is not obliged to renew your lease on expiry.

      On the positive side, you may be in a position to cast your net a little wider than the small town you are living in now, in your search for suitable premises. Perhaps your adult children can contribute to family finances in order to help with the lease costs and make your move viable.

      Good luck I hope you are sucessful in finding alternative accommodation.

  2. I bought a repossessed home in Ennerdale. The agency is (name redacted) Auctioneers. The (name redacted) bank approved the loan and the property was registered by (name redacted) attorney.

    It’s seven months later and I’m paying the bond but not staying in the house. I went and talked with the previous owner who told me it’s a fraudulent document from the bank. The sherrif assisted with eviction but the previous owner left kids in the home so eviction was not granted. The police won’t assist with eviction because the community are involving themselves.

    The sherrif gave me the eviction document from the the Magistrates Court to do the eviction myself. Rates and taxes, water and lights costs are accumulating on my name for a house I’m not staying in. I phoned lawyers but it’s too costly for me. The (name redacted) auctioneers gave me R10,000 to do the eviction myself.

      1. My question is how can I evict the previous owner because the sherrif gave me the eviction document for the magistrate of the high court.

        1. It’s incomprehensible to me that the sherrif would invite you to do the eviction yourself.

          Be very careful. Unless the sherrif has appointed you as a deputy, which appointment must be approved by the Board of Sherrifs, you will find yourself on the wrong side of the law if you carry out the eviction yourself.

          Why don’t you use the R10k that the auctioneer gave you to consult with an attorney?

  3. Hi John

    I’d like to ask some advice.

    The estate agent that handles my lease (I’m the tenant) is currently under investigation for fraud. They handle the contract between my landlady and I, and they hold my deposit. We’re concerned about the safety of the deposit.

    My landlady and I are in agreement that we would like to cancel the contract with the rental agency before the end of the contract, or at the very least get my deposit out, and then have the landlady hold it herself.

    She has suggested that I give notice, and then enter into a contract with her directly afterwards. Does this put me or her in a liable position (for breach, or liable for the commission)? Is there a way to make sure I don’t get surprised with higher rent, or can I sign a contract dependent on the cancellation of another?

    What are our options in this regard?

    Thank you very much.


    1. Hi David

      The Estate Agency Affairs Act, under Section 12(1), contains very strict provisions designed to protect the funds of parties involved in real estate transactions.

      When an estate agent receives a deposit, by law it must be paid into the Estate Agency’s trust account. These trust accounts are subject to mandatory annual audits conducted by independent auditors in order to ensure that the estate agency acts in the utmost good faith when dealing with monies received and held in trust.

      Should an estate agent be found guilty of fraud or other impropriety that results in the loss or theft of trust monies, the aggrieved party may be compensated from the deep coffers of the Estate Agents Fidelity Fund.

      Against this background, if you decide to cancel your lease agreement by mutual agreement with your landlord, the landlord might be held liable for the agents commission.

      Hope that helps and thanks for the question.

        1. Hi John

          I hope you don’t mind if I ask a follow-up question.

          As you suggested, we plan to contact the Estate Agents Fidelity Fund and claiming from them.

          However, I asked a friend to check the status of the fraudulant company, and she says they are still in business.

          We’ve been contacted by the agent who did the initial lease who now works for a different rental agency. She asks that we sign a new contract with her and she will then be able to instruct PayProp to pay out the deposit to them. I question how legal this is, and sounds like the landlady will then be liable to two companies for commission.

          When asked to instruct the company to pay out the deposit to either me or the landlady, the agent said PayProp will then pay it into the fraudulant agency’s account.

          What is your take on this? Any advice at this point? Can we contact PayProp directly and instruct them to pay out?

          Thank you very much.


          1. Hi David, you’re most welcome.

            My advice is essentially the same: your deposit would be covered by the Estate Agents Fidelity Fund should the estate agency help themselves to it; cancelling your contract with the agency may render you or your landlord liable to a claim for outstanding commission from the agency.

            You can easily check the status of the agency online here. You’ll see a box in the right-hand panel where you can enter in the name of an agent or agency to see what their status is with the Board.

            Best of luck

  4. Good day

    We are in the process of selling our house, however, it’s occupied by tenants. Their lease was not renewed as we were aware of the sale.

    The tenants are refusing to exit despite handing them a 3 month notice, furthermore, they are not paying their rent and keeping the property in poor condition.

    Please advise?

    1. Hi MK

      Problem tenants can only be removed by obtaining a court order, after which the sherrif of the court will carry out an eviction.

      The process, which is best handled by an attorney, can take anything up to 3 months or more. Legal fees, as well as rental arrears, can be recovered from the tenant.

      The good news, if you can call it that, is that the tenants will become your purchaser’s problem when transfer of ownership takes place. It will then be up to the new owner to sort it out.

  5. Good morning

    I have a question that I am struggling to get a clear answer to. If you could please assist me.

    My fiance and I signed (without thinking everything through and making proper calculations) a lease agreement yesterday (12 August). No money was handed over, as the landlord did not ask for anything for now, only that we pay the first month’s rent on 1 September. Then the following month we are to start paying off the deposit as well.

    After getting back home, I started to make detailed, proper calculations and found that we would not be able to afford the agreement / flat. Can we cancel that contract without any trouble? Is there a cool down period for these types of situations?
    I do have an possible replacement tenant.

    We are currently renting from people that is also renting (only a verbal agreement and no deposit paid to them), but the property has been sold now. The guy we are renting from came to us last week (I think on the 7th) and informed us of the sale and that the estate agent said that everybody on the property has one month to find alternative housing.

    Is that lawful?

    That is one of the reasons we unfortunately made a rushed not-thought-through contract signing.

    We asked the guy if he could find out if the agents or new owners could grant us extra time or if we could stay on to find new housing but up until today we are still waiting for a response.

    I am 8 months pregnant (…the other reason) as well and we are stressing badly.

    Your advice would be highly appreciated

    1. Hi Jacolene

      I doubt you’ll be very happy with anything I have to say in answer to your questions; it’s not good news.

      There’s no cooling-off period applicable to lease agreements. Once you’e entered into a binding contract, it’s not that easy to cancel without consequences. If it were not so, there wouldn’t be much point in signing a contract in the first place.

      Hopefully, it could work in your favour that you haven’t handed over any money yet; the lessor may decide that it’s not worth the effort to take legal action against you. It would perhaps be best to contact the lessor as soon as possible. You could explain your problem and then offer to help by providing a replacement tenant. While the lessor is not obliged to accept your replacement, it would be difficult to see why not if the tenant is suitable.

      With regard to your other problem, as you’re renting on a month-to-month basis, it seems reasonable for the landlord to give you a month’s notice. It may be that the new owner is not keen to grant you any extra time to find alternative accommodation. This might be the reason why you’ve heard nothing yet.

      Sorry I can’t offer anything more helpful. Perhaps you will be successful in finding a new rental in the next two weeks? Best of luck with that.

      1. Hi, thank you so much for replying.
        We spoke to the ‘new’ landlord concerning the contrat, explained everything, he understood and said that he has someone else that wants the flat.

        Concerning finding new housing….looks positive, we are getting the thumbs-up on another place -this one is atleast clean and seemingly bigger.

        Thank you so much again, now I can say I am more educated on these matters

  6. Hello

    I am renting a property from an estate agency. I had a 2 year lease contract and, after that expired, we opted to rent for another 2 years.

    What then happened is the owner (via the estate agent) sent a renewal of lease and I signed it. I did not (my fault) notice that she had changed the penalty clause fee in case of cancellation to read that the penalty fee will be R17 000 instead of R1500, as it used to be.

    She somehow sneaked that through and did not discuss the change with me. I thought that only the rental amount had changed.

    I have now bought another house and I have given 2 months notice, about 5 months early – the contract would again have expired in 5 months. What are my rights in connection with these penalty fees?

    I have signed the contract saying that the penalty fee will be that amount, but the estate agent who sold the (new) property to me said that it is not legal, and that the conduct of the owner of the rental house is not legal, and that law supersedes the agreement. We have offered to source and reinstate another lessee and to have the person credit checked at our cost.

    Our agent, who sold the house to us, has also offered to do that, but the owner of the rental house does not want to allow us to get another lessee. She wants the penalty money. We think that she wants to sell the house and she does not want to rent it out again.

    Is there anything that we can do?


    1. Hi Jan

      Whenever cancellation of a contract is on the cards it’s always best to consult with an attorney, which I’m not. Neither is your agent qualified to give a legal opinion.

      On the face of it you signed a contract without reading it, which is always a risky thing to do. In terms of the agreement you signed, you’re liable for cancellation fees if you cancel early. Your landlord is not obliged to accept your replacement tenant.

      Best consult with an attorney.

  7. I have been living in a cottage for 9 years. The property was sold and the new tenants have moved in. Before purchase they said they want me to stay.

    Now I get a lease agreement and they want to increase the rent by 15.2% and want another R2500 deposit. I had a verbal lease with my previous landlord from October to November and then an increase every February. What rights have I got?

    1. Hi Grant

      Your new landlord has the right to ask you to sign a new lease agreement and to specify the terms including the rent and the deposit required. You could try negotiating these terms. However, ultimately you must decide if you want to sign the lease or move.

      Verbal agreements, while they may be legal, often prove problematic when it comes to resolving any dispute. You are much better off with a written agreement.

      Good luck.

  8. Good Day,

    I need help.

    I have been renting a house for 2 years and 5 months. I live with my mother and 2 nephews. I have had a verbal agreement with the landlord that we can live there until we decide to leave or buy our own house. The landlord then decided to sell the house and maintained that we should relax as he is looking at other options and might not sell.

    Last week the new owner came to visit us to enquire if we have received a notice as she has bought the house and should be moving in by month end. We do not know what to do as we were not given notice and had no confirmation that the house has now been sold and we are struggling to find an alternative place to live.

    What are our rights with regards to this? We have paid a 1 months deposit and we have always maintained the house ourselves???

    1. Hi Mpho

      When a rented house is sold, according to the legal precept known as “huur gaat voor koop”, which is inherited from Roman Dutch law, the new owner must honour the terms of any existing lease agreement.

      As you don’t have a written lease agreement, you are renting on a month-to-month basis. Therefore a calendar month’s notice of termination is required. In practical terms, seeing that the new owner gave you notice a week ago, your one month notice period starts at the end of this month.

      It would be a good idea to check with the previous owner regarding your deposit refund. If you are told that the new owner will be refunding you, it would be best to confirm this in writing with both new and previous owners. Perhaps an option that you might propose is that you withhold next month’s rent in lieu of your deposit.

      Good luck.

  9. Good day

    I bought a house with a flat in the yard. I stay in the house and rent out the flat.

    At end January 2016 I made a verbal agreement with new tenants. We agreed upon rental amount, water and electricity. Agreed that if they cannot afford it they won’t move in, and 1st month of half or no payment will be considered as 30 days’ notice.

    They looked at the flat and were told what needs to be fixed and that it will be done when the money is there. They were given 2 days to decide if they want to move in or not, accepting the agreed payment and flat as is. No pressure as others were also interested in the flat. No lease was drawn up, no deposit was asked; rent on a month to month basis.

    Beginning in February, they said they’ll take the flat and paid the 1st month’s rent. Not in full! Paid the rest 2 weeks later. On 1 March 2016 I gave them a letter stating that they must give 30 days’ notice if they can’t afford the flat, and if they cannot pay rent by 2nd of each month I would give them 30 days’ notice. They informed me verbally that there is no problem.

    I gave them a notice letter (30 days) at beginning of April. Their response: we will stay for 3 months.

    Now, on 13 May 2016, I have received half the rent for April. They have not paid a cent for electricity, and have given less than half of the water’s amount from start of February. We share the water and electricity as there is only 1 electricity box and 1 water meter. I can switch of the electricity as the switch is in my house at the switch board (but did not). I can’t do anything to the water.

    End of March, I had to sell most of my belongings just to provide food on the table. Even had to get a food voucher from welfare. Things I said I would never do!

    They now owe me almost R7000. What can I do?

    Thanking you for your assistance.

    1. Hi Madeleine

      Without wishing to sound negative, there’s little advice I can offer you in this situation. At this point, you have illegal tenants that are refusing to move and you do not have the financial means to obtain an eviction order.

      You can’t switch off the electricity or water and you may not interfere with the tenants right to access the property, even if they are not paying the rent. The only way you can get rid of illegal tenants is to go the legal route and let the Sherriff of the Court physically remove them. Unfortunately, this can be an expensive and time-consuming exercise.

      When renting out a property, there are a few fundamental precausions you can take to avoid the type of situation you find yourself in. At the very least, you should do these five things:

      1. Ask for personal and professional references. This will help you assess a potential tenant’s personality and employment status;
      2. Ask for bank statements in order to verify regular income and affordability of the rent;
      3. Ask for references from previous landlords and follow up on these to check that there were no issues;
      4. You should always have a written lease agreement. Verbal agreements are perfectly legal and are fine as long as the lease is problem free. However, if there’s a dispute it can be difficult to enforce verbally agreed terms. A competent attorney can help you draw up a lease or you can use the standard residential lease agreement which is available at most leading stationers;
      5. Ask for a deposit. It’s essential to have at least one month’s rental in advance. Two or three would be much better.

      By all means, keep up the pressure on your tenants; hopefully, they will eventually catch up on the arrears or move out.

      Best of luck.

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