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
Hi there,
I moved into a houseshare in April, after paying two months deposit (i.e. I paid three month’s rent upfront). I signed the lease on Wednesday 3 April. That weekend, I was given the opportunity to live somewhere else for much cheaper and decided to take it. I informed my landlord on Monday the 8th April that I would be moving out at the end of the month. As per our lease agreement, I tried to find a replacement tenant and had 15 people come to see the house.
Because the landlord required so much money upfront, no-one could afford to move in although most of them loved the house. I told him that he should change the required deposit. I moved out on Sunday 5 May and said that I would continue to forward emails from interested parties to the landlord, but because I no longer lived there could not show people the room myself. The landlord only found a replacement for June and said that I am only due one month’s deposit back as the room stood empty for May.
In my situation, am I still bound to the lease agreement even though I let him know within 6 days i.e. within 7 days “cooling off period”? Was I bound to find a replacement? If not, should I contact the Rental Tribunal and fight for both month’s deposit back.
Thank you so much
Hi Sarah,
Traditionally, landlords request a deposit equal to one month rental. However, in recent times it’s increasingly more commonplace for landlords to ask for two and even three times the monthly rental, as a deposit. This is a sign of the times that we live in.
There is no applicable ‘cooling off period’ that I am aware of for a tenant who signs a lease agreement. Furthermore, the landlord is not obliged to accept any replacement tenant that you may put forward, even though the landlord may have agreed to allow you to help in this regard.
If your lease falls under the CPA, you may be liable for a ‘reasonable’ cancellation penalty if you cancel early. In the circumstances you have set out, a cancellation penalty equal to one months rental may well be ‘reasonable’. It’s doubtful that the RHT will be able to assist you in this regard.
Good luck, and thanks for the question.
Thank you for this article and also for this forum of interesting questions and answers.
I signed a lease contract yesterday to start occupy a house on 1 July. Today I saw another house and rather want that one. I haven’t paid any deposit yet and contacted the 1st Agent to ask if we could cancel the contract. He said no, I am now bound by the contract.
Is there any rights to a cool-off period of 5 days that I can rely on (according to the CPA)? The house was advertised on Gumtree and I then worked through the Agent to view it etc.
Your prompt reply would be appreciated.
Hi Arnie,
Under the CPA the 5-day cooling-off period applies to instances where direct marketing resulted in a transaction. You viewed the property with an agent. So it was probably the agent, and not direct marketing, that was most likely the effective cause of the sale. Had you seen the advert and then immediately thereafter signed the lease agreement, you may perhaps have claimed the 5-day cooling off period.
You haven’t paid a deposit yet which means that the 1st agent can’t simply make a deduction from your deposit, in lieu of the first month’s rental. Legal action is expensive, so you may get away with it. However, you might not. It may be more constructive to offer to help with finding a suitable replacement tenant.
Thanks for your contribution and your kind remarks.
Hello,
I currently have a issue and want to make sure I am taking the right steps.
My rental contract at a commercial property is over end of July. I gave notice
that I will be vacating the premises end of June. (one month before the contract end)
I am renting through Rabie. I sent my notice one month in advance (end of May).
I gave a one month notice, but they are asking me to still pay full lease for July.
Is this right or is my one month notice valid, can I still be charged for the
one month left of the contract?
I also referred them to a potential client that is willing to take the space over once we leave.
They now signed with my referral, but only from August onwards. That leaves me with the month of July
to pay.
I gave notice as I am not in the financial state to pay the extra month.
I hope to hear from you soon.
Thank you for your time.
Bianca
Hi Bianca,
Under the CPA, if a tenant cancels early, the landlord is entitled to levy a ‘reasonable’ cancellation penalty. As your landlord will be out of pocket for July’s rental, it may well be ‘reasonable’ for the landlord to hold you liable for July month’s rental.
Perhaps you could sit down with your lessor and negotiate a payment plan for the balance, in view of your financial constraints. If your proposal is reasonable, there should be no reason to turn you down. You will also preserve your credit record.
Best of luck.
I have a tenant that has decided to cancel their lease agreement through the ‘consumer act’
They can’t afford to stay and have now decided to go with the consumer act to get them out. The tenant has got an attorney involved so it is a bit tricky.
Does this still apply if we are the owner letting out the property and not a ‘supplier’
Also how does it work with the penalty fee? Does this have to be stipulated in the contract or is it decided on when the tenant cancels, as we just used the standard lease agreement which doesn’t state anything about the consumer act?
It just feels a bit unfair how a ‘bad’ tenant who can’t afford a property can get out. The consumer act should be related to ‘suppliers’ who don’t offer a good service.
Hi Noname,
Unless you are renting out properties “in the normal course of business,” you are not a supplier and the CPA does not apply to your rental agreement. A “cancellation penalty,” as envisaged by the CPA, is not applicable. Your tenant is bound by the terms of the lease agreement and may be liable for the balance of the lease period.
If the tenant has appointed an attorney, a consultation with your own attorney may be due on this matter.
Notwithstanding the above, there’s precious little point in legal action if the respondent has no money. If your tenants can no longer afford the rental it may be in your best interests to get rid of them, and find a replacement as soon as possible.
Good luck.
Hi there,
I stayed in a boarding house for two months. I gave notice in April that I was moving out at the end of April.
Then my circumstances changed and I told the owner that I would stay on one more month. He won’t return my key deposit or security deposit. On his “agreement” he stated that I have to wait three months for my deposit. When I told him I would take this is to Rental Housing Tribunal, he told me I owed him another R8000 for June and July’s rent. I moved out end of May as I said I would, when I gave them notice three times.
I have tried contacting the Rental Housing Tribunal, and their numbers don’t work. Their fax numbers don’t work. How on earth do I get my money back?
Kind regards
Margie
Hi Margie,
It’s difficult to comment with any certainty without seeing your lease agreement. For example, it’s not clear if you were entitled to give notice, or not.
Whatever the case, the The Rental Housing Act 50 of 1999 regulates deposits and refunds. Chapter 3, Section 5(3) states that deposits must be re-reimbursed:
– Within 7 days of the expiry of the lease, if there are no damages or deductions, or if the landlord failed to inspect the property together with the tenant
– Within 14 days of the finalisation of repairs, if there are repairs to be carried out
– Within 21 days of expiry of the lease if the tenant failed to inspect the premises together with the landlord.
There is no provision for making a tenant wait three months for a refund. You may consider it worthwhile to consult with an attorney about this problem. Many attorneys will happily give some basic advice, to point you in the right direction, free of charge.
Not sure why the RHT numbers are not working. Have you tried checking with Telkom?
Hi,
We got permission, via sms, from our landlord that we could put a loose standing gazebo over a deck. We wanted more covered space and had the gazebo constructed. It is not affixed to the house or deck at any point.
We are moving soon, and the landlord informed me that we couldn’t take this with because it was a fixture.
What does the law say about fixtures? Surely as the term indicates it must be “fixed” to something? This would be similar to saying we can’t take the outdoor umbrella (that we bought) with us!
Am I right?
Thanks,
Hi Susanna,
Yes, if it’s a free standing structure then it is not a fixture. It must be bolted, screwed, nailed, glued or cemented down.
When you leave, perhaps you could let the landlord know in writing that it is not a fixture and that it will be leaving with you.
Also, see this comment:
Hi John,
After a hike of 10% on the rentals, can the agent/landlord charge me more for Building premium?
Please advice.
Regards,
Bibi
Hi Bibi,
Your lease agreement should spell this out for you.
Hi there,
I have terminated a lease contract. In the lease contract there are cancellation fees.
My question: Is the cancellation fee valid if the rental agency has not lost any money? No sales commission was lost – because the new tenants moved in before my month was passed.
Can you please advise?
Hi Elvira,
It’s not possible to give you an accurate answer without sight of your lease agreement. Generally speaking, all the rights and obligations between landlord and tenant are contained in the agreement. If your contract specifies a cancellation fee, and you cancelled, then it’s likely that you are liable for the fee.
If there’s any doubt in your mind on this it would be wise to have someone, preferably an attorney, peruse your contract for you and advise you accordingly.
HI
I am signing up a 1 year lease, what happens should i need to move out before the lease expires?
Do i need to give a months notice?
Do I move out and not get my deposit back?
Hi Ross,
You can’t give notice early unless your lease falls under the CPA. For this to be the case the owner must be a ‘supplier’ letting out property ‘in the ordinary course of business’. Then you can give 20 business days (effectively one month) notice at any time. However, the landlord is entitled to levy a ‘reasonable’ cancellation penalty if you do so. This could be an amount equal to your deposit, but it could be more if it’s reasonable.
If your landlord is not a ‘supplier’ your agreement does not fall under the CPA and you can’t terminate the lease before the expiry date. In this case, if you do go ahead and cancel early, your landlord can hold you liable for the rental for the remainder of the lease period.
In either case you are likely to lose your deposit. A potential solution, if circumstances are such that you absolutely have to move, and provided that your landlord is willing, is for you to find an acceptable replacement tenant to take over the lease from you.
Hi John
Trust you well
Hope you can assist me with my problem.
I have moved in to a flat on the first of June 2013.
I just want to bring to your attention
Firstly the flat was NOT in CLEAN condition.
The walls have MOULD on it.
There were COCKROACHES running all over the kitchen.
The second morning i get up to a FLOODED bathroom, of which is not sorted out
This very same morning, i get up to no water being available to me, then later on in the day the electricity gets cut off, of which i didnt know i had to pay a deposit, if only the agent had sent me the application.
Now i need to pay R1500 for lights and electricity deposit of which i haven’t budgetted for……….
Please can you assist me, as i would like to leave and have my money fully refunded to me.
Hi Ross,
I’m not sure how it is that you wish to be helped. There’s not much likelihood that you could walk away from this and have your money fully refunded, although your optimism is to be commended.
In all probability, you signed a lease agreement and paid the first months rent and deposit — before doing a physical inspection of the premises. This is never a good idea and often leads to disappointments.
At this stage you should take colour photos of all the problem areas and arrange to inspect the property in the presence of the agent and / or landlord. Make a detailed snag list and have the agent or landlord commit to rectifying the issues raised. This will ensure, at the very least, that you can’t be held liable for the existing faults when you vacate.
If you didn’t budget for lights and water, you’ll need to stock up on bottled water and candles. Or make a loan.
Good Luck.